The Rural Voice, 1981-02, Page 14AGRICULTURAL OUTLOOK CONFERENCE
Agriculture: a most uncertain industry
BY ADRIAN VOS
The good news at the recent Agricultural Outlook Conference
held in Ottawa was that the possibility of a prolonged, .1930's
type of depression is remote. The bad news, delivered by Ben
Gestrin, Canadian Imperial Bank of Commerce vice-president,
and several other keynote speakers is that the Canadian economy
will be in a slow -growth period for the next two years, at least.
Gestrin told conference delegates that agriculture has the
most uncertain economy of all industries, despite stabilization
plans, marketing boards and the like.
"Agriculture is still the most notoriously erratic and probably
the least predictable sector of the economy, with weather
conditionsand biological peculiarities compounding the fore-
casting problem."
Gestrin pointed out the pattern which emerges is that major
declines in farm income and output have coincided with
economic slowdowns. Because the costs of farm input will rise at
the rate of inflation, Gestin predicted farm incomes will improve
only marginally this year.
"The sharp escalation in farm operating expenses is a major
reason why the pattern of farm income doing less well than farm
production is likely to be repeated over the next year," he said.
The economist's news wasn't all bad however - exports of
Canadian agricultural products is rising faster than food imports.
While in 1978 Canada had an agricultural surplus of $1.3 billion,
this has increased to a surplus of S2 billion in the first eight
months of 1980.
Gestrin called this "a remarkable performance", adding our
agricultural trade surplus accounts for between 40 and 50 per
cent of Canada's overall trade surplus.
E. Jarvis, Canadian Wheat Board Commissioner, said the rich
countries get richer and the poor countries are getting the short
end of the stick.
In Canadian dollars, wheat increased 21 per cent in price in the
last six years. But in Japanese yen there has been a decrease of
29 per cert; in the Deutschmark a decrease of 20 per cent and
even in the British pound, there was a decrease of one per cent.
"Even more dramatic is the shift if we look at the price of
wheat in relation to gold. In 1974 one ounce of gold bought 3/4
tonnes of wheat. Today, in 1980, this ounce buys 2' tonnes,
which is three timer. the 1974 price."
Jarvis told the conference world population growth demands
an increase of 30 million tonnes of grain annually, just to keep
the expanding population at the same level of nutrition. There are
even some prophets, he said, who predict we need 45 million
tonnes annual increase.
Canada must increase wheat production to 50 million tonnes
by 1990 to be able to export 36 million tonnes.
Agriculture Minister Eugene Whelan said later, "we can do it
if farmers get the incentive in adequate returns on their
investments, and a profit."
Wheat Commissioner Jarvis stated US economists expect
China to go the same way as Japan, which increased wheat
imports from 20 million tonnes in 1960, to 24.5 million tonnes in
1977.
Farm bankruptcies are higher this year (1980) said R.G.
Marshall, Marketing and Economics Branch of Agriculture
Canada, particularly in Ontario and in the Atlantic provinces.
Even with a considerable increase in hog prices, he doubted that
returns are adequate.
Kenneth Lantz of Agriculture Canada said farm income is
increasing slower than the income of the general population. But
average incomes are also lower and for that reason Lantz expects
beef prices will be harder hit than pork, and meat consumption
will shift away from beef.
Al Boswell, economist with the same branch, based all his
predictions on USDA forecasts and on the future market. On that
basis he saw pork prices going as high as $100 a hundred weight
early in 1981 to level off next summer at $80 and $90. The higher
feed costs foreseen will still leave the producer with only
marginal profits, he said, and the same holds true for beef.
A USDA spokesman, George Engleman, said in 1950 there
were 2 million hog farms in the United States. In 1974 there were
only one half million left. Today, farms with 1,000 head raise 50
per cent of all hogs. He told the gathering some observers think
this trend will slow.
Engleman expects the family farm to "hang in there" because
the farmer supplies his own labour.
Half of all cattle fed in the USA are fed in 420 feedlots. This is
30,000 head per feedlot. The average remaining herds number
90 head, Engleman stated.
The selling system in the US is unsatisfactory to many beef
producers, particularly the smaller ones. In a large feedlot there
may be nine or ten buyers competing with each other, but the
small producer often has trouble getting any buyer to come to his
farm. This, they complain, shows a severe lack of competition.
Engleman thinks Canada is considerably ahead of anything
the US has. He gave the example of the Ontario Pork Producers
Marketing Board teletype system, and the Toronto stockyards,
where all cattle are sold on a grade basis.
He stressed efficiency must be maximized in moving livestock
from producer to packer. He described the US system as
"archaic", and added about eight per cent of all cattle are
graded on the hoof and then sold on weight.
The agonizing years Canadian beef producers went through
before they got protection against bankrupt packers has been
solved in the US, he noted. They have "prompt payment"
legislation. When first introduced, some financially shaky
packers were forced out of business, but there were
"amazingly" few problems.
PG. 12 THE RURAL VOICE/FEBRUARY 1981