Grocers dictating farm gate prices says former ag leader

Friday, November 19, 2010

by BETTER FARMING STAFF

A highly consolidated grocery industry dictates prices paid to processors and producers. and it’s “not an exciting future for primary producers,” says a former president of the International Federation of Agricultural Producers.
 
 “Do we have to really go and challenge the concept that one grocery store is what the country really needs?” New Liskeard grain and oilseeds grower Jack Wilkinson asked during this week’s annual Christian Farmers Federation of Ontario conference in Waterloo. An increasingly consolidated retail and distributor sector is “fundamentally controlling” the Canadian food system, he charges.

The impact of retail consolidation was one of several themes that emerged from a three-speaker panel probing the future of food production at both local and international levels.  Others included the implications of foreign ownership of land in developing countries and the role of government policy.

Wilkinson says policy plays a pivotal role in shaping agricultural sectors. During his 2002-2008 tenure as an international farm leader he recalls visiting developing countries with good land and low-cost labour and wondering why they were not “blowing our socks off us when it comes to agricultural production.”

He blames bad government policy that creates “one problem after another that really discourages small-scale subsistence farmers to become small-scale commercial farmers to become commercial farmers.”

Within Canada, policies that address different scales of farm operations are necessary, he says. “We should have a system that works for everybody.”

He is skeptical of policies that encourage farmers to diversify into further processing and farmers markets. Higher prices are a result, but there’s also more work involved, he points out.

Wilkinson notes that small co-operatives and processors, which become key players in local food movements, need policy to encourage their activities. “If a consumer wants to buy meat within 100 miles, this is getting tough with the number of abattoirs we have now,” he says.

As governments impose more standards, farmers should employ these to build relationships with consumers and create a brand for their products, he adds.

Len Penner, president of Cargill Limited, says the world must double grain production by 2050 to feed burgeoning populations.

He says volatility in grain prices is here to stay and is related to small, incremental changes in stocks-to-use ratios that trigger fears demand might change. The chain reaction can create enormous price changes. He cites droughts and fires creating a shortfall in Russian wheat this year as an example. Even though only a small percentage of world production was affected, the situation “changed commodity prices by 60 to 80 per cent.”

Volatility in crop prices will affect fertilizer prices, he adds.

Access to open markets, protecting farmers’ ability to own their property and matching crops to land and climate in the developing world to give farmers a competitive advantage are critical for the success of all farmers, regardless of their operation’s size. Strategies such as developing marketing plans to manage market volatility and building knowledge among small farm holders about best management practices will help farmers obtain the best prices for their products, he says.

Penner and Wilkinson both emphasize the importance of global trade in sustaining agriculture in the future. Panel member Mike Schreiner, leader of the Green Party of Ontario, says he supports global trade but observes a correlation between declines in farm income and increases in global trade. “Some of that has to do with the levels of consolidation that’s happening in the agri-food chain.”

Three retailers, distributing food through centralized warehouses, dominate the provincial market and Schreiner says the system discourages farmers from dealing with local stores. Many can’t meet the system’s expectation of continuous supply.

Value-driven markets that deliver a local, “authentic” food experiences to consumers and a well-differentiated agriculture sector put more money in farmers’ pockets, Schreiner says. But these scenarios require policies that foster processing capacity, distribution networks and investment in rural areas as well as to address the rural and urban divide.

 “I think farmers have to start looking at working together more,” Schreiner says.

He also called on the government to commit to buying food from local growers. BF