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What Were They Thinking?



Responding to last Saturday’s federal plan to cut hog numbers, one producer made the point that cutting Canadian production wasn’t going to make much difference to the price as long as there were no cuts in the U. S.

Regardless of the merits or otherwise of the program, he’s right. But his remark brought back memories of the early 1990s, when government and industry, especially in Manitoba, were cheer-leading the hog industry as the rosy and unlimited future. One of the standard lines then was that since Manitoba represented only a fraction of North American hog production, doubling output here would have little or no effect on the price.

That would have been true as long as no one else had the same idea. As they used to say in the 1990s, “Not.” U. S. hog numbers rose from 53 million in 1991 to 68 million last year, and we all know what that’s done to the price.

Which leads to just one of a series of questions now that Canadian producers are in such a mess. “What were they thinking?” What made anyone think that others wouldn’t expand as well, especially U. S. producers with access to all that cheap, government-subsidized corn?

Perversely enough, it was partly because the prevailing view that since a large Canadian grain subsidy (the Crow rate) had been removed, grain farmers would grow more feed and sell it cheaper. Moreover, the U. S. was going to live up to the spirit (the letter didn’t require it) of the new WTO agreement and reduce grain subsidies, so feed would become more expensive there and production would drop.

Let’s review that. Reducing subsidies would make grain cheap and plentiful in Canada, but expensive and scarce in the U. S. And the Americans would actually live up to the spirit of the WTO agreement.

Again, what were they thinking?

Then there was the assumption that the Canadian dollar would stay in the 60-something U. S. range. That removing the hog board monopoly would stop weanling shipments to the U. S. That the U. S. border would remain unconditionally open. That phosphorus from liquid hog manure would not be mobile in the soil and lead to water pollution.

And as late as last year, the Manitoba Pork Council was buying billboards in Winnipeg complaining that the Manitoba government was interfering with their ability to produce more pigs.

And on it went. What were they thinking?

They were thinking that things were going to turn out how they would like them to. Things don’t always work that way.

Like producers, we’ll have to reserve judgment on the federal government’s program until we see the details. But let’s not underestimate the government’s public-policy dilemma.

It’s not as if the industry wasn’t already getting some assistance under CAIS and AgriStability. According to Public Accounts Canada, which is required to identify all payments of over $100,000 to corporations, in 2007-08, Manitoba hog farms in that category received $16.3 million for an average of $285,686. More is likely this year. As you look down that list of payments, some of which approach $900,000, you must ask the question of whether these are “farms” in the traditional sense or simply companies with investments that went bad.

All of us know longtime hog producers with a direct tie to their land and their operations, and who we would dearly like to see helped. But should the same assistance go to investors who have never seen the inside of a barn? This is a pretty hard sell to taxpayers who aren’t getting compensation for poor investments in their RRSPs.

However, there is a case for helping hog producers. Governments weren’t directly and indirectly encouraging us to invest in particular sectors. For the hog business, it was outright boosterism, especially in Manitoba, and under both the Filmon and Doer governments.

Note that the province was conspicuously absent from last Saturday’s announcement. Hog producers have a legitimate case in saying “You helped get us into this mess. You should help get us out.”

The latest program and any others to help producers should not be the end of this. There should be a formal inquiry into how and why this went wrong. The problem is who will do it. Governments will fear embarrassment. And whether it’s think-tanks, academics or producer groups, most still wear the rose-coloured glasses that contributed to the problem. They still won’t admit, or at least refuse to say publicly, that an agricultural world with open borders and no subsidies is only a dream. Someone needs to stand up and say that when dreams become the basis for a business plan, they can become a nightmare. And speaking of business plans, what were bankers thinking? They share some blame as well.

In the absence of anyone documenting and analyzing this outcome in the thorough way it deserves, we leave farmers with a reminder of what they already know, but sometimes ignore.

The next time you see a bandwagon go by with the government on board, stay off.



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