The Rural Voice, 1990-01, Page 42NEWS
EXPERTS LOOK AT "THE DECADE AHEAD"
There wasn't much good news in
store for "The Decade Ahead" at a
meeting of the same name sponsored by
the Royal Bank in Hanover last month.
The 1990s, said George Brinkman,
professor of agricultural economics at
the University of Guelph, are "going to
take people who really understand fi-
nances — not just good producers."
Robert Mercer
"They're going to be operating on
accrual accounts, and believe me, if you
can't tell me right now what each of your
enterprises is making on an accrual
basis, you're not managing as good as
you should be."
But the hardest news was for beef
producers. "The beef industry is going
to get very tough in Ontario," said
Robert Mercer, editor of the Broadwater
newsletter. "Cattle, packers, and poli-
tics arc moving west. The trend will
accelerate."
"Although the Ontario cattle indus-
try has come up with their Blueprint for
the Future," he added, "I don't think it's
got a chance in hell of saving the indus-
try. I'm sorry."
"The greatest and most devastating
change — and unfortunately I don't
think you're going to read about it in the
Ontario farm press ... is the debate over
the Crow levy," Mercer said.
If the subsidy of grain transportation
through the Crow benefit is made the
responsibility of farmers as is being
discussed, he said, export grains would
have to carry the cost of freight. That
means lower export grain prices for
farmers, and ultimately lower feed grain
prices. "The economic advantage that
40 THE RURAL VOICE
southern Alberta has in terms of raising
cattle will be improved even further."
Global warming was another con-
cern raised by Mercer. "I'm a strong
believer in the facts — the facts — of
global warming," he said. "Farmers and
suppliers must adjust to this, and be
prepared for hotter summers, more ex-
tensive droughts, higher sea levels, and
genetic engineering that can take advan-
tage of higher levels of CO, ..."
"What we are saying is that you must
be certain of your water supply. You
will possibly experience drought twice
as severe as any you have in recent
memory."
But the results of living beyond our
environmental means was only one
aspect of the problems ahead. "In the
next two to three years," Mercer said,
"cash will be king. We're living, I think,
beyond our economic means."
"Unless there is rapid inflation,
those farms with a strong balance sheet
will do well, and you will be able to
bargain with cash ... for tractors, land,
and home appliances."
In terms of cash, Royal Bank man-
ager of agricultural services George
Arnold told the audience that"total farm
cash receipts [are] expected to remain
George Brinkman
fairly steady for the next five to six
years." But, he said, "some cost in-
creases [arc] expected in wages, inter-
est, machinery, feed and fertilizer."
Farm debt, however, he said, has
decreased. Three or four years ago,
Arnold said, non-performing loans were
6.7 per cent of the Royal's total portfo-
lio. Today the figure is 1.4 per cent.
The family farm will remain the pri-
mary unit of production, he added, but
there will probably be more part-time
farmers and more "megafarms."
As Brinkman said, "I know this isn't
the kind of thing that many people like to
hear. But one of the very best diversifi-
cation programs we had in the 1980s
was an off -farm job. Some of the part-
time farms that we have today are far
larger than the full-time farms we had 10
years ago."
"But not everybody who wants to
farm can expect to be able to farm."
Brinkman, also commenting on the
debt issue, remarked that "In the 1980s
it was very clear that the fastest growing
sector in agriculture was govemment
assistance."
In the next decade, he added, if farm-
ers get more from the market, they will
get less from the govemment, so it will
be "very hard" to see increases in farm
income.
"The good news," he said, "is that in
Ontario we've had a turnaround in .. .
falling land values" — which means
equity for farmers to build on. "I see us
turning the corner, but slowly."
Brinkman concentrated on trade is-
sues at the meeting, noting Canada's
reliance on exports — about 50 per cent
of our agricultural dollars, he noted,
comes from exports (compared to only
about 25 per cent in the U.S. and EEC).
The impact of the Canada -U.S.
Trade Agreement (CUSTA), he said,
will be softer than the impact of GATT
(General Agreement on Tariffs and
Trade) could be. But the basic message
about GATT at this point, he added, is
"We don't know yet."
Because of the drought that boosted
grain prices, thus saving governments
"billions and billions" of dollars, it's
been easier for governments to keep
subsidy programs. The drought, Brink-
man said, "may go down in history as
one of the most ill-timed natural occur-
rences from the standpoint of trade re-
form that we have ever seen."
So the wholesale changes via GATT
projected a few years ago are not likely,
but there will be some compromises.
"From that standpoint," Brinkman said,
"I think Canada has a lot to gain and we
will also ... likely preserve a major
component of supply management sys-
tems with perhaps some built-in mecha-
nisms to increase the flexibility."0