The Rural Voice, 1988-03, Page 40Make every dollar of investment work —
and work hard! Zetor invites you to com-
pare model for model, feature for feature
before you buy I
Zetor tractors are available in two or four
wheel drive from 50 to 160 horsepower.
Model
5211, 50 H.P., $11,580
7245, 4WD, 65 H.P., $10,170
8145, 4WD, 80 H.P., $27,410
See Dealers for Cash Discounts
G & B Farm Equipment
R R. 1, Ayton 519-799-5584
Chatsworth 519-794-2181
Scone Service Centre
PRESSURE WASHER
SHOP LTD.
.................:...........
Dynablasr e p p s
Propane Fired 011 Fired
Energy Efficient
Cleaning Machines
Ontario Pork Industry
Improvement Plan Approved
For FREE Demonstration, Call:
RON
STEMMLER
R.R.1, Elmira, Ontario N3B 2Z1
519-669-2150
38 THE RURAL VOICE
MARKET UPDATE
EC FARM POLICY OUTLOOK
With normal weather conditions,
the European statistics office is fore-
casting a 1988 European Economic
Community (EC) grain harvest of
162.5 -million tonnes. This would be
an increase from the 1987 output of
157 -million tonnes and it would mean
yet another year of surplus supplies.
In the face of this outlook, EC
negotiators have still not agreed on
their price and output policies for the
coming crop. This item was discussed
at an EC summit meeting on February
11, but Brian and the Netherlands
were expected to disagree with the
proposal brought forward by the EC
Farm Council.
Nevertheless, in spite of these
problems, there are increasing signs
that the EC grain policy is in the
process of turning around. Although
internal EC grain prices remain sharp-
ly above world levels, support prices
are being worked lower. And produc-
tion controls and acreage set -asides
are being actively discussed.
CURRENT SITUATION
In normal years, the EC can expect
to dispose of 155 -million tonnes of
grain: 130 million are consumed
internally and 25 million are exported
with large subsidies. Under GATT
protection, 15 -million tonnes of grain
substitutes are imported, so EC grain
is unable to replace those products.
The difference between EC and
world prices can be gauged by the
level of EC export subsidies. The sub-
sidy reflects the difference between
what it costs to buy the grain and what
the exporter can be expected to receive
on world markets. This subsidy is
currently close to 120 ECUs per tonne.
A European Currency Unit (ECU) is
equal to 1.60 Canadian dollars and
1.26 U.S. dollars. Barley exported
from the EC is thus receiving an ex-
port subsidy of $192 Canadian per
tonne (U.S.$151). The export market
price for barley at Thunder Bay is cur-
rently near $60 Canadian per tonne.
As long as EC grain prices are in
the range of $250 to $300 per tonne,
the EC grain surplus problem will
remain. But as these high grain prices
hove been incorporated into land and
other costs, a sharp cut in prices would
bankrupt many EC farmers. On the
other hand, keeping prices high has
resulted in an extremely expensive
Common Agricultural Policy (CAP).
POLICY OUTLOOK
At this late date, it appears unlike-
ly that a substantive change in policy
will occur for 1988 crops. But some
important principles will be estab-
lished concerning price, output levels,
and output restrictions. Once estab-
lished, these principles can be used
more aggressively in the years ahead.
For prices, it is well understood
that current levels are too high. Sup-
port prices will be worked lower, but
only gradually. Given the extremely
wide price gap between world prices
and EC prices, for the forseeable
future EC internal grain prices will
remain significantly above world
levels. For output levels, it appears
that there will be a target ceiling level
of 160 -million tonnes. Though this is
too high, at least the principle of out-
put restrictions will be set. If the ceil-
ing level is exceeded, producer levies
are to be imposed and price guarantees
for the next crop year reduced. If EC
grain surpluses continue, as appears
inevitable, the ouput ceiling could be
reduced gradually. Britain, for
example, would like to set it at 155 -
million tonnes. At the very least, the
ceiling will restrain further EC output
increases in the future.
Only with great reluctance are the
French and West Germans willing to
look at output restrictions. Britain,
however, has tabled a proposal to take
land out of beef and grain production.
Participating producers would be ex-
pected to reduce their production by
20 per cent for five years. This is the
first of a series of extensification
schemes to be drawn up by EC mem-
ber states to reduce surplus produc-
tion. Unfortunately, Britain will not
act unilaterally and other member
states would need to implement sim-
ilar programs.
NORTH AMERICAN IMPLICATIONS
Making significant changes in the
CAP is about as easy as the restructur-