Particularly in the early days of the COVID-19 pandemic, food supply chains struggled to adapt to changing consumption patterns and processors shut down due to virus outbreaks.

“Into that void of uncertainty came a lot of voices on suggestions and policies,” said Ryan Cardwell, an economist and professor from the University of Manitoba. He spoke during a University of Manitoba online webinar on April 14.

Cardwell saw two common themes from commenters: food production and security were seriously threatened and must be transformed, and that farm incomes and production were in jeopardy.

“I felt that a lot of the commentary that I was reading was perhaps unwarranted, and even worse, perhaps misguided and may have resulted, had it been followed, in policies that made things even worse,” he said.

There were several short-term shocks like the shift of food expenditures from food service to retail, said Jill Hobbs, an agriculture economist from the University of Saskatchewan. This required realignment of supply chains.

However, she called these short-run issues.

In broad strokes, however, food production was up, said Cardwell. Ag exports were “at or near a record,” he said.

The food consumer price index showed that in most months, the rate of food price inflation was below the rate of food price inflation in 2019.

“Food prices were very stable in 2020 relative to history,” said Cardwell.

Statistics for farm income in 2020 are not available but Cardwell said Agriculture and Agri-Food Canada is forecasting that farm incomes will approach record levels.

Cardwell said even economists who were confident the food system would adapt were surprised how well it held up. This data suggests that early calls for transformational change were unwarranted, he said.

“There were sort of often ulterior motives to these things,” Cardwell said. “You know, people who had preferences for smaller scale, or whatever, were sort of capitalizing on this as an avenue forward for change.”

There’s no evidence that a more localized or regional food system would have fared any better if faced by the same shocks, Hobbs said.

Small meat processors, for instance, would be vulnerable to the same labour issues as large packers, she said. Several large packers had to shut down as COVID-19 spread among workers.

Initial calls for huge sums of money for farm risk management programs also proved to be unwarranted, said Alan Ker, director of the Institute for the Advanced Study of Food and Agricultural Policy at the University of Guelph.

“There was a lot of talk, rhetoric out there about that these programs would fall apart or farms would fall apart without sufficient funds going into these programs,” said Ker.

In April the Canadian Federation of Agriculture called for $2.6 billion in emergency funding for impacts not covered by existing risk management programs. The Grain Farmers of Ontario ran an ad which said “the food supply chain is breaking.”

The government put aside $125 million through its AgriRecovery framework for additional expenses caused by processing delays; however, Ker said he can’t tell that many farmers have capitalized on those funds.

FCC was given additional lending capacity, but there’s no evidence that a lot of it was used, said Ker. “These programs amounted to very little,” said Ker.

Cardwell and Ker agreed the suite of risk management programs would have held up, even if things went worse than they did.

The markets were nimble and responded quickly, said Cardwell. Government policies aren’t nimble so if considering a big change in policy, he said; we need good evidence to support it.

Last spring Ker, Hobbs and Cardwell wrote articles for a special issue of the Canadian Journal of Agriculture Economics in which they predicted how the food system would hold up during the pandemic. This spring they’re revisiting their predictions in another special issue of the journal.

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Other grievances remain. The carbon tax is an irritant, but the now-futile campaign against it has lost steam throughout the pandemic. Lack of labour and access to foreign trade markets are issues that can only be influenced to a degree by a democratic government. Bad weather is beyond Ottawa’s control, and political factors limit a governing party’s willingness to act on rail blockages or strikes.

But commodity groups and sector advocates recognize business risk management can realistically be changed.

They are worth complaining about, if only because consistently arguing the programs are ineffective for farmers has gained legitimate momentum.

Politicians recognize the need for reform.

Prior to the pandemic suspending Parliament, members from each federal party were actively taking part in a study on how to best do just that. At the provincial level, agriculture ministers were working with federal officials, with hints of grand plans for major modifications by this summer.

Then the COVID-19 pandemic hit, prompting more complaints the existing suite of programs didn’t work.

This narrative of ineffective programs is running parallel with federal Minister of Agriculture Marie-Claude Bibeau encouraging producers to enrol in the programs, in part because they are set up to be the basis of support for the sector during difficult times, such as right now.

It’s worth remembering in this context that year over year, the federal government budgets a whole pile of money for business risk management programs that doesn’t get spent.

Different commodity groups offer different solutions to different programs, but the majority focus of producers is a call to reform AgriStability in particular. The program is meant to provide support for farmers when they experience large declines in farm income.

What should be considered a ‘large decline’ is at the heart of much of the back and forth between producers and government.

Many producers say they don’t attempt to access the money because it just isn’t worth accessing.

During the aforementioned parliamentary study on business risk management, MPs even heard an accountant claim the program wasn’t worth the hassle of applying.

In the midst of the pandemic, the same narrative has largely continued.

Producers don’t want to enrol because it isn’t worth enrolling in. Bibeau says producers need to enrol in order to qualify for the support being offered to help them through COVID-19.

That all made MNP’s recent submission to the parliamentary agriculture committee rather interesting.

In the submission from one of Canada’s leading chartered accounting firms, Stuart Person, MNP senior vice-president of agriculture outlines business risk management “modifications and considerations” to leverage the programs in a way that would “get the support to Canadian farmers right away as they face this crisis.”

The report says AgriStability is “well established, functional, scalable and is flexible enough to meet the needs of all sectors of agriculture,” but “in order to be more responsive and more effective to address the significant circumstances that arise when COVID-19-related factors compound upon ongoing farm risks, urgent changes are required.”

Producers should recognize a leading accounting firm’s assertion the program can work, and reconsider any reluctance to enrol.

MNP also suggests removing the limit that is used to trigger payments, as well as temporarily lifting the $3-million cap put on payments and eliminating the participation fee. They say producers should be able to repay any overpayments interest free and over five years.

Bibeau should recognize there is a strong need for support and at least temporary changes to programs are required to ensure that support is sufficient and reaching farmers.

There are other suggestions and the report is worth reading in full.

Given the pandemic circumstances, it is especially valuable to read in full if you are a concerned producer… or a federal agriculture minister.

The post Comment: Risk management reform possible appeared first on Manitoba Co-operator.

This has included concerns about food production, distribution, and food security (for example “Canada’s food supply at risk as pandemic tightens borders to farm workers”; The Globe and Mail).

The Canadian Journal of Agricultural Economics has published a special issue with several articles about how the COVID-19 pandemic could affect food and agricultural markets in Canada. The articles are written by economists from universities across Canada (including Derek Brewin, Ryan Cardwell, and Chad Lawley from the University of Manitoba) and the United States who have expertise in issues ranging from livestock markets to international trade agreements to agricultural land values. All articles are now available at no cost on the CJAE website.

Beyond the human-health issues associated with the pandemic, there are several concerns that transcend Canadian food and agricultural markets. These include reduced incomes and vulnerable populations, reactionary trade restrictions in some countries, and the availability of labour.

Before discussing each of these, it is worth highlighting that Canada will not experience a shortage of food, and that food security for most Canadians is not threatened by current events. There will be market disruptions for some products (temporary stock outs and price fluctuations), but production continues, markets are operating, and borders remain relatively open to trade in food and agricultural products.

Concerns about widespread food shortages and food insecurity in Canada – concerns that are often stoked by irresponsible statements in the media – are unfounded. Most Canadian households spend a small share (approximately 10 per cent) of their incomes on food, so even significant price increases or incomes declines will not trigger widespread food insecurity.

Income and vulnerable populations

The global recession that lays ahead will have significant negative effects on incomes. Layoffs due to business closures and due to new restrictions implemented to manage the spread of the SARS-CoV-2 virus are generating economic hardship and uncertainty for many families. Some government policies, such as the expanded Child Tax Benefit and emergency cash benefits for displaced workers, are already in place to temper the negative effects of these disruptions. Most Canadians spend small shares of their incomes on food, however, and should be able to manage temporary disruptions to incomes and food prices.

Some groups are more vulnerable, however, because they cannot access these programmes, or do not qualify. In addition, very low-income people spend large shares of their incomes on food, so higher food prices and lower incomes have disproportionately large effects on their access to food. These groups are also more reliant on public transit to access food stores, and have less in-home food storage (e.g. cupboard space and freezers) which necessitates more-frequent shopping trips. Access to food is also being affected by funding shortfalls at food banks and logistical problems in serving and delivering food to vulnerable populations.

Trade policies

Governments in some countries may introduce measures that impede international trade in food and agricultural products as a response to current events. There may be pressure in some food-exporting countries to restrict exports in efforts to keep domestic supplies high and domestic prices low. These types of policies were common during the 2008 world food crisis, and worsened conditions for consumers in food-importing countries.

There may also be pressure for governments to restrict food imports in an attempt to foster domestic production and become less dependent on foreign sources. New restrictions on food trade would have significant effects on closely-linked international food supply chains, particularly for countries like Canada that import and export a lot of food.

Labour

There are concerns that the health and availability of workers may be compromised by the COVID-19 pandemic. The production and distribution of food has been deemed essential by most governments, but requirements for social distancing has affected working conditions in food processing and distribution facilities. Workers have taken ill at some facilities, resulting in the closure of some processing plants. These disruptions are significant, but are expected to be temporary. Also, large segments of the food supply chain (e.g. farming, long-haul trucking, rail transportation) naturally facilitate social distancing, so are less affected than supply chains in other industries.

The availability of temporary foreign workers has been delayed by quarantine restrictions, but workers continue to arrive in Canada. It is possible that governments in some countries will introduce new restrictions international workers, but this has not been the Canadian experience.

The COVID-19 pandemic is an unprecedented event, and it is difficult to predict its effects with any confidence. However, Canadian food and agricultural markets are relatively well positioned to manage the storm. Canadian consumers have high incomes (relative to global averages), so temporary disruptions to food prices and incomes will be manageable for most people. There should be focused efforts to assist more vulnerable populations who are at higher risk of experiencing worsened food security.

Canadian producers are well positioned to manage current disruptions. Canadian farms are in strong financial positions (high incomes and high net worth) relative to average Canadian households. Also, government risk management and subsidy programmes provide insurance against declines in farm incomes. These programmes are solvent if farm incomes are significantly affected by current events.

The stages of supply chains between famers and consumers are likely to experience the most significant impacts of the pandemic. Food processing, distributing, foodservice (restaurants), and retailing are having to adjust rapidly to a number of factors. Food processors and distributors are trying to transition away from now-closed foodservice outlets and toward retailers; restaurants are either closed, or are trying to adapt to take-out and delivery options; and grocery stores are managing stock outs for some products, restricted access for consumers, and exploding demand for online purchasing. The long-term effects at these stages of the food supply chain are difficult to predict.

Impacts in developing countries

The situation may be different in developing countries. We have little information on the spread of the SARS-CoV-2 virus in many low-income countries – they have neither the capacity to monitor public health statistics, nor the capacity to deal with direct medical consequences of a large outbreak of COVID-19. Governments in many of these countries also lack the fiscal and administrative capacity to offset income losses for displaced workers.

Many of the concerns discussed in the context of Canadian markets also apply to developing-country markets, but the potential negative effects are more severe. People in low-income countries spend larger shares of their incomes on food (as high as 60 per cent in some countries), so any disruptions to income or to food prices can have significant negative effects. Also, most farmers and consumers in developing countries now rely on formal markets for selling and buying food (as opposed to being self sufficient at the farm level). This means that farm families in developing countries are not insulated from supply chain disruptions caused by the pandemic.

The need for food aid among the most-vulnerable groups in developing countries could spike as economic opportunities are negatively affected by the pandemic and the associated global recession. The World Food Programme and Winnipeg’s Canadian Foodgrains Bank have appealed for increased funding to cope with increased needs, and are facing new logistical problems delivering food through disrupted supply chains. It is likely that there will be significant negative effects of the pandemic on food and agricultural markets in developing countries, with important impacts on incomes and food security.

For more information on these issues, please visit the website for the Canadian Journal of Agricultural Economics where these special issues can be accessed.

Ryan Cardwell is an associate professor in the department of Agribusiness and Agricultural Economics at the University of Manitoba.

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Several top U.S. indoor farms say they are boosting production to a level where they can now supply hundreds of grocery stores.

Plenty, Bowery, Aerofarms and 80 Acres Farms are among young companies that see a future in salad greens and other produce grown in what are called vertical farms that rely on robotics and artificial intelligence, along with LED lights.

While the first versions of modern vertical farms sprouted about a decade ago, in recent years the introduction of automation and the tracking of data to regulate light and water has allowed them to get out of lab mode and into stores. Now they are trying to scale up.

Plenty and others say their customized, controlled lighting — some more blue light here, some more red light there — makes for tastier plants compared to sun-grown leaves and that they use 95 per cent less water than conventional farms, require very little land, and use no pesticides, making them competitive with organic farms.

And because vertical farms exist in windowless buildings that can be located in the heart of urban areas, produce does not have to travel far by fossil fuel-guzzling trucks to reach stores.

The companies’ expansion comes as plant-based burger makers Beyond Meat Inc. and Impossible Foods captivate investors and make inroads in high-end restaurants and fast-food chains.

But whether the sunless farms can compete financially with their field-grown brethren, given big upfront investments and electric bills, remains a question.

“We’re competitive with organic today and we’re working very hard to continue to make more and more crops grocery store competitive,” said Matt Barnard, chief executive and co-founder of Plenty, which is based in Silicon Valley.

Plenty’s salads sell on organic grocery delivery site Good Eggs for 99 cents an ounce, while a leading brand, Organic Girl, on grocery chain Safeway’s online site was priced at 80 cents an ounce.

Plenty said its new farm, dubbed “Tigris,” can produce enough leafy greens to supply over 100 stores, compared with its previous farm that could only supply three stores and some restaurants.

Bowery said its third farm coming online soon will help it supply hundreds of stores from dozens today, and Aerofarms, in New Jersey, said it is doubling its space to meet demand.

None of the three companies would give details about costs.

Former Vertical Farm CEO Matt Matros is skeptical that sunless farms can make economic sense. He invested in and ran Chicago-based FarmedHere in 2015, but changed its business into food processing.

“The issue with indoor farming was that you could really only grow a couple of things efficiently — namely basil and microgreens” Matros said. “But the problem is the world just doesn’t need that much basil and microgreens.”

80 Acres Farms in Cincinnati says it already grows and sells tomatoes and cucumbers, and Plenty is testing cherry tomatoes and strawberries in the lab.

Agriculture technology investor Michael Rose says vertical sunless farms are more expensive to run than modern greenhouses that rely on sunlight, supplemented by LED lights. He sees limited areas where it makes sense, such as the Middle East, where much of the food is imported, or China’s mega-cities where pollution and urban sprawl limit the availability of premium fresh food.

At Plenty’s new farm, robots put seedlings in tall, vertically hung planters. The planters move along a wall of LED lights for 10 days, and are then put through a harvesting machine that shaves off the leafy greens.

The machines minimize labour needs, and Plenty says the speed of production also helps control pests.

“We use no pesticides,” said Nate Storey, co-founder and chief scientist at Plenty. “We don’t even have to use things like ladybugs, because we go so fast in our production that we out-race the pests themselves.”

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Canadian farmers receive less government support than producers in many other countries, according to the latest report by the Organization for Economic Cooperation and Development. However, the organization remains critical of supply management in the dairy and poultry sector.

With the introduction of business risk management programs and shift of government support to research and innovation, Canada’s Producer Support Equivalents (PSE) is a “at nine per cent of gross farm receipts in 2016-18, compared to 36 per cent in 1986-88 and 18 per cent in 2000-02. Canada’s PSE has been consistently below the OECD average over the period.”

The decline in PSE would be even greater but for supply management especially in the dairy sector, the OECD said. While it has long been critical of supply management because of the tariffs used to limit imports of dairy and poultry products, the OECD hasn’t acknowledged the high level of government support American and European dairy producers receive, which enables them to take lower prices from processors. Canadian dairy and poultry farmers aren’t eligible for many government financial supports.

In the report, the OECD noted, “Lower levels of disaster payments in recent years and a shift of budgetary expenditures towards general service support (GGSE) to the sector have resulted in lower farm income support. Support to the agricultural innovation system and the inspection system each account for about 40 per cent of the GSSE.

“Over time, there has been an increasing emphasis on general service support to the sector through programs that target industry-led research and development, adoption of innovation in food and agriculture, and marketing initiatives,” it said.

The existing Canadian Agriculture Partnership provides “budgetary support to mitigate farm income fluctuations, and adds a new element to facilitate safety management along the food chain, thus accompanying market demand.”

Canada should institute stricter protocols and disciplines “to reduce potential pressure for additional support in situations where existing programs suffice, stimulate the development of market-based tools, and encourage farmers to find better ways to manage risk at the farm level,” the report said.

Canadian farmers are also eligible for some funding under federal programs to reduce carbon emissions and that has supported a number of agri-food-related projects with a focus on energy efficiency, soil health and carbon sequestration, manure management, and waste treatment and processing, the report noted

“In the future, the policy focus should continue to shift towards facilitating the adoption of innovation by targeting industry-led research and development, and marketing initiatives,” the report said. “This would contribute to the long-term objectives of improving the competitiveness and sustainability of the sector.”

Productivity growth “averaged 0.9 per cent per year between 2006 and 2015, below the world average,” the report said. At 1.1 per cent per year, output growth was also below the world average, but was achieved with “reduced or minimal increased pressure on natural resources in most cases. Nitrogen surplus intensities have, however, risen significantly at the national level and are now close to the average for OECD countries, as are greenhouse gas (GHG) emissions, but the national phosphorus surplus intensity is well below the average for OECD countries.”

The federal and provincial governments support “research, development and adoption of clean technologies for the agri-food sector, specifically precision agriculture and agri-based bioproducts. The new Living Laboratories Initiative will facilitate knowledge transfer on sustainable farming practices using an integrated approach to agricultural research that brings farmers, scientists and other stakeholders together to co-develop, test and monitor new practices and technologies on farms,” the report said.

Animal welfare and public trust issues have become more important in Canada and the agri-food sector is in the process of establishing Plant and Animal health councils.

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A free market idealist who favours letting the invisible hand sort it all out might think less support to producers is a good thing. But a grain farmer competing against better-supported producers in other jurisdictions might find it tough to remain a true believer.

No matter how you approach it, the numbers are stark, as contributor Alex Binkley reports from Ottawa in this issue. He details a recent OECD report on producer supports that confirms Canada remains a global Boy Scout when it comes to agriculture subsidies.

From 2016 to 2018, the last period full numbers are available, Canada saw “producer subsidy equivalents” average nine per cent of gross farm receipts, down from 18 per cent in 2000 to 2002 and 36 per cent in 1986 to 1988.

The report went on to note that “Canada’s PSE has been consistently below the OECD average over the period.”

Despite these numbers the organization couldn’t help but chide Canada for its supply-managed agriculture commodities, noting the decline “would be even greater” were it not for this indirect producer support.

It shouldn’t be surprising that the OECD takes this approach, as promoting and extending the long-running market consensus is its reason for being since its inception. But it and other free market advocates are becoming a bit harder to take seriously as the winds shift.

Much like the market consensus swept away the postwar liberal consensus in the 1980s, the new paradigm itself is starting to look a bit shop worn after close to 40 years at the centre of virtually every significant international policy consideration. It also now finds itself increasingly under siege internationally.

In the United Kingdom, the entire postwar project of uniting Europe has been repudiated with the Brexit vote. On the other side of the Atlantic Trump’s election has cast doubt on the willingness of the former champion of market liberalism to take things further. As a new player, China, who signed on to the WTO to access western markets while furiously foot-dragging on its own reforms, casts even further doubt.

Against this backdrop, one must wonder exactly how long it’s going to take our domestic policy-makers to cotton on to the fact things have changed, and they’ll need to govern themselves accordingly.

The prevailing wisdom is that Canada, as a trading nation, must rely on a rules-based system to iron out disputes, which would allow our prowess as a producer to shine. More colloquially, we were hoping to become the global agriculture Wayne Gretzky, skating rings around our opposition and putting the puck into the back of the net while they were flat footed.

But that only works for a relative lightweight like Gretzky (and Canada) when you’ve got a Marty McSorley waiting in the wings to flatten Doug Gilmour at the blue line then take on Wendell Clark when he skates to the rescue.

Today’s trading environment, led by Donald Trump, is more like professional wrestling than hockey. Somehow the referee is always distracted and the folding chairs and brass knuckles have, metaphorically, come out.

Canada must grasp this reality if it is to fight the coming fight. We won’t likely hit any export growth targets unless our government, regardless the party leading it, is willing to understand this and formulate policy for it.

That policy isn’t likely to be a blank cheque, but it should include real support for producers when necessary, and it shouldn’t involve agriculture groups trekking to Ottawa, hat in hand, seeking ad hoc payments.

The Grain Farmers of Ontario has, for example, advocated for a smarter policy that includes a “trade war chest” that would see farmers through market volatility.

That would be an excellent start, but it should only be the start. What’s needed is a complete reconsideration of the paradigm behind our current agriculture policy.

Do we in fact remain on a ‘team of rivals’ that’s at least working toward a shared goal of greater trade? Or has the world quietly slipped back into a ‘beggar thy neighbour’ model where only the domestic effects enter the minds of those making the decisions? It may be this is just a passing phase and in fact things will eventually revert to the old normal. But it could also be the start of the new normal and if that’s so, the faster we’re ready for that, the better.

Otherwise we may find ourselves laid out on the ice, wondering if anyone caught the number of that truck.

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“Price volatility, higher input costs and weather-related challenges in many parts of the country over the past year took a toll on Canadian net cash income in 2018,” Gervais said in releasing forecasts for various farm sectors.

“With little chance of real growth in commodity prices this year and possibly higher farm input costs, Canadian farmers will need to properly evaluate the outlook for profitability along with the associated risks,” he said. “Risk management will become an even more significant component of success.”

Even with the uncertainty, Gervais remains upbeat.

“If there’s a silver lining to the cloud of uncertainty that hung over the sector last year, it’s that this coming year may be the start of something bigger and better.”

As a result, producers need to find ways of reducing costs while increasing productivity from their existing operations, whether that means increasing the yield per acre or getting more butterfat from a litre of milk, he said.

Overall, the long-term outlook for Canadian agriculture remains positive since consumer demand for food at home and abroad is still robust, he said. The Canadian agri-food sector has shown resilience in the face of adversity.

Gervais said it’s likely there will be fast-changing circumstances, some good and some bad.

“However, I’m confident that Canadian producers, manufacturers and agri-food operators can quickly adjust to this dynamic operating environment,” he said.

He also tipped adding value as another avenue to grow farm revenues, especially as consumers continue to look for food products that are both healthy and convenient.

“Investments in innovation and technology will go a long way in ensuring Canadian agriculture remains competitive,” Gervais said.

While the European, North American and Pacific trade agreements should benefit some parts of agri-food, ongoing trade disruptions between the U.S. and China could possibly open new markets at the same time.

“While the markets generally don’t react well to trade uncertainty, it also opens the door to opportunities for new trade relationships,” he said. “Disruptions can pave the way for new trade flows, which could be positive. But global trade tensions also have the potential to slow growth in the world economy. They can upset the status quo, and potentially impact the demand for Canadian ag commodities and food, and that’s never comfortable.”

While the world is better positioned than a decade ago to absorb potential weather-related supply shocks, higher production is still needed to meet rising food demands, he said.

“Producers who want to see what’s coming should actively monitor global weather patterns, and production updates as the South American crop year wraps up,” Gervais said.

“Canadian producers of both animal and plant-based protein stand to gain buyers both at home and abroad as markets around the world are embracing a wide variety of protein products. This trend will continue in 2019 and beyond, as plant and animal proteins serve different segments of the global market.

“Slowdowns in major economies as a result of trade disruptions could well ripple out to dampen emerging markets’ economies, disrupting expected growth of global demand,” he said. “Commodity prices will shift, hitting producer revenues.

“This year’s quality trade relationships may be shown to be more successful in the long run than those that are merely close,” he said. “In 2019, importers have options. Exporters do, too.”

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Simone de Beauvoir, a French novelist and existentialist, turned that optimistic truism into a darker one: “If you live long enough,” she wrote, “you’ll see every victory turned into defeat.”

Again, not always true. Unless, of course, you’re Congress and have a Farm Bill to write. Then, every four or five years, happy chatter about bipartisanship victory will regularly turn into bitter partisanship defeat.

Past Farm Bill fights confirm it. The 2002 Farm Bill finally passed two weeks after the 1996 law expired. The 2008 law drew two presidential vetoes before Congress voted to override both to finally finish it.

The 2014 bill was written in 2012 and 2013, then rewritten by a new Congress in 2014 before it limped out of Congress two years late.

This recent streak of legislative lateness — that may be added to again this year — has, in fact, a long history. “The longest continuing drama in Congress,” noted the Dec. 19, 1981 New York Times, “the Farm Act of 1981, ended with more losers than winners and with nobody really satisfied… ”

That Farm Bill was delayed because a new president, Ronald Reagan, demanded that the four-year cost of the law’s commodity price supports be held below — get this — US$11 billion. After five months of fighting, Reagan got what he wanted, a commodity title only US$400 million overweight.

But “‘It’s a bummer of a bill for the farmers,’ said Representative Neal Smith, Democrat of Iowa,” reported the Times. “‘It accomplished just what David Stockman,’” Reagan’s budget director, “‘wanted: Divide each commodity group from the others and then beat them down, one at a time.’” Smith was soon proven correct.

By late 1982, record interest rates were clobbering farmers and near-record crops were clobbering prices. Widespread drought in 1983 then clobbered net farm income; nationwide it fell from US$23.8 billion in 1982 to US$14.3 billion in 1983. Farm equity, based on 1970s-inflated land prices, drained away and the rural economy spiralled downward with it.

The 1981 Farm Bill, however, had no tools to repair the damage and it took time for Congress to act. In 1983, Congress created the Payment-in-Kind Program (PIK), a grain-for-acres swap that quickly cost U.S. taxpayers US$25 billion. Then, in 1985, Congress created the Conservation Reserve Program, a long-term resource protection program that slowly removed 25 million acres from crop production to, hopefully, boost prices.

Even then, the cost of the 1981 Farm Bill’s failure was high. From 1982 through 1989, federal farm payments totalled US$83 billion; the high water mark was 1987’s US$16.7 billion (US$32.4 billion in 2018 dollars), almost five times 1982’s program expense of $3.5 billion.

The toll on rural America was even higher. Local institutions like schools, hospitals, grocery stores, and banks saw their once-solid foundations crack as farms began to consolidate and rural communities began to empty. It’s an exodus that continues today.

Why the history lesson?

Because Congress, the White House, and most commodity groups are positioning U.S. agriculture to repeat that colossal Farm Bill failure. In fact, today’s Farm Bill delay — just as in 1981 — is largely over how cheap Congress can get federal farm and food aid spending in the coming decade to better pay for a massive tax cut that, like the massive 1981 cut, will never pay for itself.

It would be one thing if the delay was due to debate over policy questions like, ‘Will continuing the policies that delivered today’s depressed prices ever bring higher prices? If not, what’s in the bill to stem the red ink?’

Or maybe, ‘Should Congress restrict a president’s authority to impose income-cracking tariffs, then stick taxpayers with the cost of his whim?’

Farm Bill players are not asking these questions. That’s unwise because, if history is any teacher, we may need those answers soon.

Maybe very soon.

The Farm and Food File is published weekly throughout the U.S. and Canada.

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The well-established trend to fewer farms will continue in the coming years as smaller operations focus on supplying local markets and the larger ones concentrate on export sales, says Ron Bonnett, president of the Canadian Federation of Agriculture.

Small farms will be operating in a niche role in meeting a growing demand for locally grown foods while the larger operations will be driven by lowering their cost of production to remain internationally competitive, he told a recent Canadian Agri-Food Policy Institute conference.

The result is that farmers will have to decide whether to become larger or locally focused, he said. “People will have to make a decision on which way they’re going.”

With that trend will come a shift in how farmers view markets, he said.

“Now we have a lot of product grown with the expectation that someone will buy it,” he said.

In the future, producers will have “to be more directed to the retail market and able to meet sustainability goals and food safety requirements.”

Whether farms are large or small, they will need to become technologically sophisticated, which will create job opportunities that could only add to the labour shortages facing agriculture, he said. While he doubts technology will replace all manual labour on farms, “we’ll need innovations or we won’t hit the $75-billion agri-food export goal.”

Agriculture economist Douglas Hedley says that Statistics Canada doesn’t define what a farmer is and Business Risk Management (BRM) programs are not well geared to the needs of small farms.

At this year’s Canadian Agriculture Economics Society conference, Hedley asked during a panel discussion on BRM programming about what was being done to accommodate the growing number of small and commercially viable farms. His main point was that the BRM programs have a “one-size-fits-all approach” that was oblivious to the growing split into small and large farms. No one on the panel had an answer, even with the review of BRM programs underway as part of the introduction of the Canadian Agriculture Partnership in March.

When CAPI held its workshops across the country on the steps needed to fully implement the Barton report, it found a lot of interest in ensuring government farm programs accommodated larger and small operations. That’s expected to be included in a report on its consultations due out in mid-June.

There are still a lot of farms across Canada that depend on off-farm income to supplement earnings from sales of farm products, Hedley said in an interview.

While he thinks they should be fully covered under BRM programs, the government attitude seems to be ‘they have off-farm income so why should we worry about them.’

Hedley pointed to research done by Alfons Weersink of the University of Guelph’s department of food, agriculture and resources economics on the changes in farm sector. In an article published last December in the Canadian Journal of Agriculture Economics, Weersink concluded Canada is transitioning from a farm sector “that was very homogeneous to one with significant differences in size and/or orientation. The decline in the number of ‘average-size’ farms and the growth in the number of large farms are due primarily to technological innovations that push operations producing commodities to grow as a means of capturing economies of size.

“The increase in the relative number of small farms is also due partially to technical advances that allow for the production of food goods with the desired quality attributes to be delivered to the appropriate market,” he said. “This market is continually being differentiated due to demographic and income shifts. The growing heterogeneity in farm structure complicates the assessment and design of farm policy.”

When the farm sector was homogeneous, it could be encouraged through support and extension programs, he said. “The policy objective has shifted toward improving the competitiveness of the sector, but for which of its components? The trend toward greater heterogeneity is likely to continue.”

Weersink’s analysis found that 30.7 per cent of farms had sales of more than $2 million in 2016 compared to 5.9 per cent in 1981. The largest sales category was between $100,000 and $250,000 which nearly one-third of the farms achieved in 2016. Just over 20 per cent of farms had sales between $500,000 and $1 million and just over 22 per cent had sales between $1 million and $2 million.

However, the largest number of farms were between 10 and 69 acres.

In 1981, “the bulk of the census farms were in the 240–399 acres category and the distribution was approximately normal.” About half the farms sold less than $25,000 and around five per cent sold more than $250,000.” By 2016, the average size nationally was 820 acres.

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“I do believe now there are more options for young producers in terms of getting involved in different supply chains that don’t necessarily require a large scale to be competitive,” Gervais told reporters April 18 during a briefing on FCC’s 2017 Farmland Values Report.

Gervais was responding to questions stemming from the Senate Committee on Agriculture and Forestry’s report concluding rising farmland prices jeopardize Canadian agriculture.

“Rising farmland prices threaten the viability of the family farm, the future of Canada’s agriculture sector and a traditional way of life for thousands of Canadian families,” the committee said in a March 20 news release announcing the release of its study: A Growing Concern: How to Keep Farmland in the Hands of Canadian Farmers.

Another option is to lease land instead of buying it, he said.

Farmland values in Manitoba and Saskatchewan are close to the historical ratio of land values over farm income, Gervais said.

“History has proven that it’s always been a good thing to work towards building equity in farms,” he said. “To own land has been a good thing for Canadian agriculture.”

The Senate report says “basic economics” is driving up land prices making it attractive for established farmers to sell and discouraging young farmers from buying it.

“Good farmland is being converted for residential and commercial development, Canada’s growing population needs more places to live and farmers are cashing in on their land to support their retirement plans,” the committee’s release says.

The report makes five recommendations to address the issue, including tax reforms and land-use planning changes.

“If the government increased the amount of money established farmers could receive from the sale of their property without having to pay capital gains tax on it, it could make it easier for new farmers to buy land,” the release says.

The current capital gains exemption on farmland is $1 million.

“Also, because many of the reasons for the increasing cost of farmland are related to land-use planning policies, the committee urges the federal and provincial governments to provide funding for research on farmland protection and to enhance the tools used to track land transactions.”

Here’s a summary of the recommendations:

• Explore increasing the amount of the lifetime capital gains exemption for qualified farm property to make it easier for new farmers to acquire farmland.
• Continue the co-operation between Agriculture and Agri-Food Canada, Statistics Canada and Natural Resources Canada to improve the data on farmland classification and use of farmland.
• Better co-operation between the federal and provincial governments on technological advances on soil maps to assist provincial land-use planning.
• Renew funding on farmland protection to encourage co-operation between provincial land-use planning experts to harmonize land-use planning data for all provinces.
• The federal government should work with provinces to better track land transactions.
• The federal and provincial governments should work together to protect and promote the use of land for agricultural purposes.

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