Farmers' growing prosperity provides room for policy change: report

Friday, September 14, 2012

by SUSAN MANN

Canada’s federal and provincial governments should shift some money away from farm income support programs to focused investments modernizing the food industry and raising the agricultural industry’s productivity, says a University of Western Ontario professor.

David Sparling, chair of Agri-Food Innovation and Regulation at the university’s Richard Ivey School of Business in London, made the comments in a new policy brief released Thursday. Co-authored by Nicoleta Uzea, also from Ivey, the brief is called: A Different Future for Agriculture – Six Years that Changed Agriculture, 2005-2010.

Sparling and Uzea argue that federal, provincial and territorial governments are at a pivotal juncture as they work to develop the next five-year agricultural policy framework called Growing Forward 2. The agriculture ministers are currently meeting in Whitehorse, Yukon. Discussing options for Growing Forward 2 is part of their annual meeting.

The global agriculture and food system has changed dramatically since 2005 with farmers doing better and the industry’s future looking promising. From 2005 to 2010, Canadian farmers’ sales rose 41 per cent, their net incomes rose 126 per cent and the average net worth of a Canadian farm rose by $486,000, an increase of 47 per cent, Sparling says. Net worth increases ranged from $190,000 for farms selling less than $100,000 per year to more than $1.9 million for farms selling more than $2.5 million per year.

Despite farmers’ improved financial position, direct support payments to growers totaled almost $2.5 billion in 2011, whereas funding for research and market development in the same year was slightly more than $275 million.

But income support for farmers won’t make Canada more productive nor will it open new and profitable markets around the world, Sparling says, noting it’s impossible to favour the position that the industry’s future is best assured by governments continuing to spend the majority of program payments on farm income supports, particularly when farm incomes and net worth continue rising.

Canadian Federation of Agriculture president Ron Bonnett agrees most sectors of agriculture are in a pretty good position economically but with some exceptions, such as the hog industry.

Shifting some money to ensure there’s investment in innovation, research and modern technology on farms and the agricultural industry “is something that has to be done,” Bonnett says, noting he and most farm groups would agree with that too. But farmers still need some programming in place to carry them through “if everything goes south.”

Sparling says he isn’t advocating governments get rid of farm income support programs entirely but just move some money from them toward industry modernization and increasing productivity.

One program where changes could be made is AgriInvest, which allows farmers to deposit 1.5 per cent of sales into an account to a maximum of $22,500 per year with government matching this contribution dollar for dollar. Last year, governments paid out $425 million for AgriInvest -- $97 million more than in 2010.

It’s a completely universal program with no caps on the entire allotment, other than the farmers’ annual maximum. There are farmers making millions and worth millions and still receiving the government matching contribution but they don’t really need it, Sparling says, adding that’s not the best use of government funds.

“Now when things are really good there’s an opportunity to move some of the money out of farm income supports and really invest in things that will make a difference,” he says.

Bonnett says the Canadian federation has been suggesting triggers be put on AgriInvest accounts to encourage some investment in innovation.

Sparling says despite the improved financial situation and the outlook for agriculture, farm organizations seem unwilling to support a shift from income support programs to investing for the future. Agricultural policy today looks largely as it did in 2005 and 2000 – focused on supplementing farm income through business risk management programs.

Concerning the statement about farm organizations being unwilling to support a shift in funding for the future, Bonnett says “that’s B.S.” BF