in union is strength

Windsor, Ontario

April 30, 1999

Index

• Introduction
  
• Our Farm
  
• The fallout from the 1980s
  
• How can farmers cope?
  
• Conclusion
  
• Footnotes
  
• Canadian Agri-Foods Exports and Realized Net Farm Income: 1970 - 98

Introduction

I sit here before you as Perry Pearce, a farmer in Essex County, Ontario. I farm along-side my wife, Julie, and daughter, Becky. For the last 21 years I have tried to do my best to contribute to the Canadian economy. Our farm involves two families, 500 acres of cropland, and a swine herd.

Julie and I are members of, and active in, the National Farmers Union as well as the Ontario Pork Producers Association, social groups, women's groups, church groups, and land-use and environmental issue organizations. The common denominator in all these organizations is a commitment to equality and cooperative action.

In church work, it is always good to listen well to the problem before suggesting action. The same problem is often seen differently by people of different interests, work experiences, ages, and proximities to the problem. Thus, I would ask the Honourable members to take five minutes and listen to what I have to say about where I started, where I am, and where I am going. I would also ask the Honourable members to sincerely attempt to understand the problems of agriculture and trade from the perspective of a farm family struggling to hold on in increasingly hostile circumstances.

Our Farm

Twenty years ago, I started farming and the world said it needed more food and farmers. So I built a barn for 100 sows and went to work. The pork moved into the marketplace in Ontario and everybody was happy. That was 1978.

My farm is in Essex county which enjoys the best climate and land in Canada. Its flat fields produce consistent high quality crops in generous quantities.

In the early 80's, the farm world came apart. High interest, high debt, and low prices bankrupted many of my neighbors and scores of farmers across Canada. Today, my wife works three part-time jobs off farm, we drive a 12-year old pickup, and we worry about our future.

The fallout from the 1980s

Out of the 1980s came the Corporate Farm Model-the simplistic assumption that bigger is better. An outgrowth of this model was the push to expand acreage, production, and exports. We are still in the midst of this expansion=prosperity euphoria. Trade agreements, beginning with the Canada-U.S. Trade Agreement (CUSTA), North American Free Trade Agreement (NAFTA), and the Uruguay Round of the World Trade Organization (WTO) talks and continuing through the Free Trade Area of the Americas (FTAA) and the upcoming round of WTO negotiations are designed to force sovereign states to grant "access" to food from wherever it may be grown. This access is an essential component of the expansion-based agriculture that has proven so devastating for Canadian farm families.

Agri-food exports today are 5= times higher than in 1975: and net farm income is 25% lower.⁽¹⁾ Despite the complete failure of increased production and exports to translate into increased net farm incomes, the government persists in making export-growth the key plank in its "agricultural" policy. In 1993, federal and provincial ministers of agriculture set a target of $20 billion in exports by 2000-double 1989's level of $10 billion. Having reached $20 billion ahead of schedule, in 1998 the Ministers set a new goal of $40 billion in exports by 2005.

Pork exports were to be the flag-ship of the push to double and redouble exports. And, despite the market uncertainty around the world, the federal government projects strong growth in pork exports, with 2000 levels 48% above 1998 levels.⁽²⁾

Today, however, hog farmers are left wondering what happened. In the fall of 1998, I sold a 100 kilograms of pork for just $35: less than half the price I received a year earlier and-despite huge cost of production increases-less then half what I was receiving in 1978 when I began farming. Honourable members, an MP's salary and allowance totaled $38,900 in 1978: Do you foresee any difficulty in making ends meet on half that ($19,450) today? You work hard for your money, but so do my family and I. We should not be asked year after year to do more for less and less.

On my farm, the break-even price is $130/100kg. We normally ship 30 pigs per week. At average prices, we make $10-$20/hog-$300-$600/week. Over the last months, however, we have been loosing up to $3000 week. As you can see, one bad week quickly wipes out several good ones.

In late 1998 and so far in 1999, packer profits have remained strong ⁽³⁾, exports have continued unaffected, retail pork prices and retail profits have remained unchanged. 100% of the economic pain resulting from "oversupply" has been borne by the farmer. How can there be over-supply and yet the wholesale and retail prices of pork do not fall? The export-oriented, expansion-based model of hog production is functioning perfectly; it just happens to be bankrupting farmers even as it heaps up profits for packers, exporters, and retailers.

To double and redouble exports requires market access. To gain access to foreign markets, we must first give access to ours. As we focus on export markets we are often, at the same time, giving up domestic markets at an equal or greater pace. The result is often that we "trade" stable, high-priced Canadian markets for volatile, low-priced foreign markets. Since the packers make nearly the same money per pig no matter where it goes, this does not affect them. Since retailers face so little competition that they can constantly raise grocery store prices despite declining farmgate prices, this does not affect them. But because farmers must survive on what is left after everyone else is paid costs and profits, it does affect them. And the results are some of the lowest net farm incomes since the 1930s.

I recommend that this government craft a strong domestic policy that helps ensure that farmers will have a positive net income so they can productively contribute to Canadian society.

How can farmers cope?

So what happens when farmers cannot meet their living costs for their families? They have two choices:

• Find an off-farm job; or
  
• Expand their farm business - more pigs, cows, land etc.

On many family farms, one or both spouses have been forced to take off-farm jobs. Figure 1, below, demonstrates that in 1996, the average Ontario farm family earned just 28% of its income from its farm.

Figure 1: Average farm family income, by province, 1996

Reprinted from Saskatchewan Agriculture and Food, StatFacts, March 5, 1999. (1996 is the last year for which data is available. Data taken from taxfiler data for farms with operating revenues of $10,000 or more.)

The average Ontario farm has assets of $882,300 and equity of $737,490. Into this, the farm family adds thousands of hours of labour and management. They are rewarded with just $8,200 as total return on equity, labour, and management.

The other method of coping with constantly-declining prices and rising expenses is to expand. Under the corporate model, this is commonplace-cover more acres, build bigger barns, produce more animals, hire more people, invest more shareholders' funds, etc.

In the hog "industry", the logical extreme of expansion is corporate hog mega-barns producing 50,000 or 100,000 hogs per year. Going further, the logical extreme becomes a string of 10 or 20 such barns. And looking across the border into the United States, we see single corporate producers cranking out 6 million+ hogs per year and others merging with packing corporations. Expansion is billed as a survival strategy for family farms. Note however, in this scenario, that the family farms do not survive. They are replaced with a corporate barn.

The U.S. hog production model is one of huge corporate farms seemlessly integrated into packing companies and grocery-store chains. These mega-producers are not more efficient than I am on my farm. Their advantage lies in their intimate relations with processors and retailers. When a corporation owns the barn, the packing plant, and the pork in the store, if it doesn't make a profit in the barn, it simply makes a little more at the plant. Given a choice to buy pigs from its own barn (and capture the profit, if any) or to buy from a local farmer, a vertically-integrated corporation will buy from its own barn. In the presence of vertically-integrated mega-producers, the question: "Can a farmer compete?" becomes meaningless.

Few family farms can assemble the capital needed to produce 6,000 hogs per year, let alone 6 million. And even if I could expand production ten-fold, it would merely mean that I survived and nine other family farm hog producers did not. In the expansion model, for one to gain, a great many must lose.

I recommend that this government institute policies that support the family farm. Export-expansion and other expansion-based policies do not do so. Instead, they pave the way for corporate-scale production and undermine the very markets upon which family farms depend.

Conclusion

The negative effects on my farm which I have outlined occurred during a time of unprecedented growth, both in agri-food and in pork. That growth continues. It is not that this government has failed in its export strategy, it is that strategy has failed farmers.

And be not deceived that this is merely growing pains, that after an initial painful period that prosperity will return to the land. The future for Canadian hog farmers is clearly visible in the U.S. and, increasingly, in western Canada. That future is one in which farm families do not produce hogs.

Free trade policies facilitate the growth of ever-larger production/ processing/ retailing entities. Production and export-expansion promote the growth of such entities. Free trade policies have devastated my farm in the short term and will displace it in the medium term. I am sorry that I don't have better news, but it is important that as you head into the upcoming WTO and FTAA talks that you do so without illusions. Expand trade if you must. But do not do so in the mistaken belief that this will help my wife, myself, or our daughter.

I thank the Honourable members for their time.