Canadian agriculture probably the least profitable in the world

[Guest guest]

Canadian agriculture " probably the least profitable in the world "

_http://grain.org/seedling/?id=509_ (http://grain.org/seedling/?id=509)

Darrin Qualman

 

Darrin Qualman is director of research for Canada's National Farmers Union,

where he has worked for 12 years. Before that, he farmed near Saskatoon,

Saskatchewan. Darrin is the author of several reports,

including The Farm Crisis, Bigger Farms, and the Myths of Competition and

Efficiency and, with Nettie Wiebe, The Structural Adjustment of Canadian

Agriculture.

 

Q. Many farmers in the developing world think of farmers in the North as

prosperous, but that isn't the experience of Canadian farmers since the

mid-1980s, is it?

 

No, it isn't. The 1960s and 1970s were pretty good for Canadian farmers.

The crash in farm income came in 1985 concurrently with the rise of

corporate concentration and the spread of massive input dependence. Canada

adopted a

model of high-output, high-tech, high-input, high-energy-use, high-cost

farming. The US, Australia, EU, Japan, and some other parts of the world did

likewise. Canada now spends about US$4 billion per year on farm support

payments.

While some of this money goes to livestock producers, most goes to farmers

growing grains, oilseeds, or other crops.

These payments work out to roughly US$50 per acre, on a gross basis. On top

of these publicly-funded payments, farmers also support their farm losses by

working off-farm – one spouse or both take jobs in local towns or cities to

earn money to support the farm. Farmers also have utilised increased debt as a

way of keeping their farms afloat; debt today is triple its mid-1980s level.

On a per-acre basis, debt now stands at US$675 per acre – more than land

sells for in many areas. In order to stave off insolvency ,as well as using

subsidies, off-farm income and debt, farmers have also begun to draw down their

equity – not replacing machinery or fixing buildings. And many have borrowed

against their farms' intergenerational future – using for living expenses

money

that would otherwise be used to finance the entry of the next generation of

farmers.

 

What is happening in Canada is happening around the world. Those countries

that similarly use the high-tech model – the US, EU, etc. – similarly

dispense billions in subsidies. Big-acreage, big-input farming goes with big

subsidies. The former seems to require the latter, contrary to rhetoric about

" efficiency. "

 

Getting back to Canada, on a rough, per-acre basis, crop producers here are

probably losing about $50 to $100 on every acre – as reflected in subsidy and

debt levels. Canada's high-input, high-tech, high-cost food

production model is probably the least profitable in the world.

 

Peasant farmers using traditional, knowledge-intensive systems are much more

profitable. While Canadian farmers are consistently losing money, it's

certain that the same is not true in more traditional systems in Asia or Africa.

Those systems must generate positive returns or they will very soon cease –

there are no multi-billion-dollar subsidies available to paper over the losses.

Speaking generally, a peasant using traditional methods – hoe, draft animal,

or small tractor tillage, locally suited and diverse farm-saved seeds, dung

or other naturally sourced fertility – is much more profitable than a

Canadian

or US farmer racing to cover ten thousand acres in a satellite guided,

400-horsepower tractor. The latter may live in greater luxury and privilege than

the former, but that is not a reflection of the efficiency or profitability of

the food production

system each employs.

 

Q. You say that Canadian farmers are consistently losing money, but we know

that the whole industrial food system generates billions of dollars.

Who is making the profits?

 

To understand industrial agriculture, think about our food production system

as a chain, one stretching from oil fields at one end, to the drive-through

window at the other. At one end of the chain, oil is made

into tractor fuel and natural gas is made into nitrogen fertiliser. This

energy supply is the absolute basis of our food supply. In a fertiliser plant,

a

big natural gas pipe goes in one side and a big anhydrous ammonia

(nitrogen fertiliser) pipe comes out the other. Fossil fuel is our primary

source of fertility – we are, as some have pointed out, eating oil.

 

At the next link in the chain, still more petroleum is used, to make farm

chemicals – weed and insect killers. Then comes a farm machinery link. Next

comes the seed company link and a veterinary drug link. Then the bank link,

where we get our operating capital. In the middle of this chain is the farmer.

Past the farmer, we find grain company links, food processors and packers,

retailers and restaurants.

 

Three things stand out about this chain: first, each link is dominated by a

tiny number of companies. In Canada, four or five corporations supply farmers

with their fuel, four make most of the fertiliser, two-and-a-half

dominate machinery production. On the other side of the farmer, the numbers

are the same: two companies dominate beef packing, four make most of the

flour, a tiny number make cereals or crackers. Five companies control grocery

retail. And a declining number dominate the restaurant link. The only exception

to this observation that every link in the chain is dominated by a handful of

companies is the farmer link – there, in Canada alone, we find over two

hundred thousand family farm production units.

 

The second thing that stands out about the chain is the size of the players.

Farmers get fuel from Exxon, Shell, and similar giants. Farmers get their

fertiliser from multi-billion dollar companies, including a

division of Cargill. They get their tractors and combines from global

companies CNH and Deere. They get their seeds from Monsanto and Bayer.

Downstream

are Cargill, ADM, Tyson, Nestlé, Coca-Cola, Wal-Mart, and MacDonald's. The

food production chain is populated by some of the world's largest corporations.

Again, the sole exception is the farm link. Compared to Cargill, Nestlé, or

Wal-Mart, even the largest Canadian farms – monsters, covering tens of

thousands of acres – are one-ten-thousandth the size of the dominant players.

The

average Canadian farm is one-millionth the size.

 

The first two things you recognise about the chain is that each link is

dominated by a tiny number of firms and that the dominant firms are very large

(in both cases, the sole exception is the farm link). The third

thing you notice is that every link is characterised by massive profits …

again, however, with the sole exception of the farm link.

 

The year 2004 was one of the three worst in history for Canadian farmers in

terms of the net incomes they were able to earn from the markets – losses

were more than $2 billion. But 2004 was the most profitable year to date for

the

agribusiness corporations that make up the rest of the agri-food chain. The

vast majority of the firms posted record or near-record profits (see The Farm

Crisis and Corporate Profits). When we

look at the agri-food chain, we see record losses for family farmers at the

same time as record profits for the transnationals that dominate the rest of

the chain. Another way to characterise this data is this:

profitability correlates directly with large size and low competition. At

the link where many small firms compete vigorously – the farm link –

profits

are small, or non-existent. But where a tiny number of huge firms

dominate – where competition is, thus, more restrained – profits are

extremely large.

 

Canadian family farmers are going broke even as they form the central link

in an agri-food chain awash in billions in profits. If the profits within that

chain were distributed properly, if the market power of huge

transnationals didn't allow them to snatch away profit dollars that formerly

stayed on our family farms, there would be no farm income crisis. Profit

distribution mirrors power – the powerful players in the chain reap

profits and the less-powerful do not. Farmers are making too little because

others are taking too much.

 

But corporate power is only half the story. The other half is a set of

government policies, now globally proliferated, that have thrust family farmers

into the arms of these corporations. These policies include " free

trade " , deregulation, export-maximisation, overdependence on purchased

technology, production maximisation and the attendant input- and energy-and

cost-maximisation, and so on. Governments are not passive: they aggressively

drive

the process of corporate empowerment and farmer disempowerment when they

advance Structural Adjustment Programmes, global " free trade " deals such as the

World Trade Organisation Agreement on Agriculture, and when governments

restructure global commerce to benefit

transnational entities at the expense of the local.

 

The corporate drive for power, profit, and expansion has been supercharged

by governments' over-aggressive measures to remove all obstacles to those

corporations. Not surprisingly, corporate wealth extraction – mostly from

rural

areas and from smaller producers – has accelerated. What we call the " farm

crisis " is simply the predictable outcome of corporate instincts and government

policies that combine to bleed farm and rural wealth.

 

Q. Farmers in the South often complain about facing unfair competition from

the North. For example, small farmers in Mexico say they are being ruined by

cheap corn/maize dumped by US farmers. So isn't this the case?

 

Our corporate and government leaders are eager to marginalise analyses like

the preceding. So, these leaders foster a discourse of distraction that seeks

to pit one set of farmers against another. Canadian farmers have long heard,

and many believed, that the cause of our farm income crisis was subsidies in

the EU – " those farmers are getting rich on subsidies and it's hurting us. "

US farmers were similarly encouraged to look to the EU countryside, and not

to the Monsanto balance sheet, to find the source of their hard times.

Similarly, farmers in Mexico are encouraged to see US farmers and their

government

as the problem. But are

US taxpayers (who fund the subsidies) or farmers (who receive them) the real

winners in the global food game? Cui bono? Who benefits?

 

Sure, millions of tonnes of cheap food sloshing around the world is the

immediate cause of a lot of economic pain and dislocation for farmers – cheap

corn and tortillas pouring into Mexico cause economic hardship. But

behind that cause is a more important, underlying cause. A loss by a Mexican

farmer is not a gain for the US farmer – that farmer requires tens of

thousands of dollars in subsidies simply to continue. No, the losses of

Mexican

and American farmers collectively are the gains of the transnational

agribusiness giants who have positioned themselves (with governments as their

willing

accomplices) to be the primary beneficiaries

of the global food production system.

 

Q. What is your position on GMOs? Aren't a lot of farmers growing GMOs in

areas where the NFU is active?

 

Genetically modified (GM) seeds are a key part of the maximum-production,

max-technology, max-input, max-energy-use, max-cost system outlined above.

Canadian net farm income over the past 20 years has been falling. Today, it

stands at its lowest level ever. Were it not for massive taxpayer-funded

support

programmes, off-farm income, access to credit, etc., farming in Canada would

have to cease. The transnationals that dominate the rest of the chain –

energy, chemicals, seeds, processing, retailing – have managed to set

themselves

up to reap 110 per cent of the profits that would normally remain on our far

ms. Let me explain it this way. The price of wheat is now about $5. Let's say

the cost of production

is $7. If the selling price were to rise to $7, the input suppliers would

use their market power to increase input prices to capture all the profit from

that $7 wheat. Thus, the cost of production would rise to $8 or $9.

If the world price rose to those levels, we'd see another round of input

price increases. This is not true for all price levels – Monsanto et al. could

not raise input prices high enough to capture all the profits from,

say, $20 wheat. But the situation holds for nearly every price level we can

reasonably expect. There is a structural aspect to the current system wherein

it becomes nearly impossible for farmers to meet costs of

production because companies can use market power to ensure that costs rise

with prices. So, as technology use has gone up, profitability has gone down.

 

The preceding paragraph seems at odds with the reality that many, many

farmers are adopting GM seeds. Let's look at that. First, the data clearly

shows

that GM seeds do not increase yields or profitability (see, for

instance, GM Crops: Not Needed on the Island). If there is any correlation

between farmers' expenditures on high-tech seeds and profitability (net farm

income), it is an inverse one – over the past 20 years, as farmers'

seed purchases have tripled their incomes have crashed. GM seeds do not

increase profitability. They do not increase yield. They do not decrease costs.

 

So why do farmers use them? GM seeds allow you to farm massive acreage.

Direct seeding and rapid application of weed-control chemicals allows farmers

to

cover thousands of acres where previously they could only cover hundreds. So

one of the primary effects of GM seeds and the type of farming they

facilitate is to reduce dramatically the number of farmers. And farmers have to

increase their acreage to survive. As input suppliers raise the price of their

products such that per-acre profits drop from $100 to $50 to $5, these same

companies, conveniently, provide the technology to allow individual farmers to

farm 10 or 20 times the acreage. Per-acre profit drops. Per-farmer profit can

be

maintained only by farming many more acres. And even then, profitability is

elusive, witness the massive subsidies, rising debt, and the growing

necessity of off-farm income, mentioned above.

 

Q. It is clear to us in GRAIN that industrial farming causes a lot of

problems – it destroys biodiversity, ravages rural communities, contributes

to

greenhouse gases, depletes soil, and so on. What do you

believe will be the future of industrial farming?

 

Our global food system is unsustainable. In seven of the past eight years,

the world consumed more food than it produced. We are in the fastest

food-supply drawdown in a generation. Most global fisheries have collapsed or

will do

so in the next 30 years. The primary feedstock for our fertility, natural

gas, has peaked in production in North America and it will peak worldwide in

about a generation. We are adding the equivalent of a North American population

to the world every six years, on a static cropland base. We are trying to

proliferate throughout the world our meat-based diet, one that inefficiently

turns pounds of plant protein into

ounces of meat protein. And we're intent on diverting ever-larger portions

of our food supply into fuelling our cars. If you trace current trends into

the future, you quickly see that that future, the one seen by agribusiness and

our elected leaders, is impossible.

 

Solutions? Solutions to all the problems described above are close at hand.

They are mutually reinforcing, and, to a significant extent, they are the

same solutions. Solving problems for Mexican corn producers,

problems of greenhouse gas emissions from food production, and the farm

income crisis, all those problems have a set of solutions that share a common

pivot.

 

We need to re-imagine our food supply, not as source of profit, but as a

source of nutrition and sustenance. We have to re-link it to place, to water

and

soil and kitchen table and to traditional knowledge. These

concepts may sound alien, fuzzy-headed to Nestle Board members or World

Bankers, but such concepts are the root and ground of sustainability. The

starting point is to see limits as a form of wisdom and to end the headlong

race

for increased production. The starting point is to re-localise production, to

reconnect circular loops of fertility, knowledge, seeds, labour, and community

that have been severed by our max-production, max-input, max-cost,

max-profit system. We need to remember that food production is biology, not

just

economics. And while economics can bend biology for a while, examples such as

the

cod stock

collapse show that biology eventually trumps.

 

Solutions are already visible, bursting out like plants through cracks. Farm

families across Canada are marketing locally, reducing and optimising energy

and input use, producing organically, marketing into

" non-conventional " channels, and pursuing sustainability. On the other side,

non-farming Canadians are shopping at farmers' markets, seeking out local

flavours and local suppliers, eating " in season " , thinking about food miles,

looking into a 100-mile diet, and asking questions about how and where their

families' food was produced. Citizens are pushing ahead, but politicians are

lagging behind. Our political leaders are spending too much time listening to

supermarket, food processor, and agribusiness lobbyists.

 

The solutions to problems of farmer profitability and food-system

sustainability are, like most solutions, part personal and part political. We

need

changes in our parliaments, in our boardrooms, and at our tables. Farmers and

non-farmers need to set up mutually reinforcing systems of supply and demand

–

creating both push and pull for good food. And we need to work collectively,

politically, and publicly to dethrone a too cosy

cabal of agribiz-ni-crats in Ottawa, Washington, Chicago, Brussels, and

elsewhere.

 

Food is the most intimate of commodities. It enters into us and becomes us.

Its production, preparation, and enjoyment define large parts of our

civilisation and society, and our family homes. It is at the same time

both the largest and the smallest parts of our lives.

 

Food is central to our economy. Its production affects our environment. Food

is root and core. If we get our food policies wrong, it is very, very hard

to get the rest of our policies right. And we have got those food

policies badly, badly wrong. It is time for humility, to cease striving to

" feed the world, " to cease claiming we have " the most efficient food

production system in the world. " It is time to stop thinking we can re-engineer

life.

It is time to begin relearning, from land and water, from traditional

producers, from farm families. It is time to restore some balance.