Let Canadian pork production sink
August 17, 2009 · By Charles Anthony
The Canadian pork industry should either sink or swim on its own. This is nonsense:
The federal package is a three-part plan: launch a $17-million marketing venture to sell Canadian pork internationally; offer government-backed loans to farmers with viable hog operations; and set aside $75-million to buy the worst-off farmers out of the business.
Spending money on an international advertizing campaign???? Good heavens! The stupidity continues! The only thing that international customers need to know is the price. If the price is right, people will buy. There is more than enough evidence and a track record to realize that Canadian pork producers can not meet the right price. The time to jump ship was long ago.
Ordinarily, I would have sympathy for many of them because the government encouraged them to invest in the pork industry. Many farmers were deceived by the government. However, by now, it is obvious that the farmers are displaying a sense of entitlement. Their work is just a form of work-fare and it needs to come to an end.
People do not want Canadian pork any more.
I read this in the paper this morning, and knew you’d be all over this, Charles. I agree completely, particularly with the $75M buy-out to not raise pigs.
If they are losing $40 per pig raised, then there is an obvious answer to their dilemma: stop raising pigs! If they’re spending all this time and effort raising these pigs, only to sell them at a loss, this is not a viable source of income. it is a hobby. If and when some producers get out of the market, bringing the price of pork up to more sustainable levels, then some fewer number of farmers will be able to do so at profit. This kind of funding only encourages wasteful businesses to continue to exist.
The advertising campaign, I’m not so sure that’s such a waste, particularly given the negative impressions some parts of the world have over the safety of Canadian pork (i.e. swine flu). The fears are baseless, and an advertising campaign might do wonders to restore some health to the industry, but certainly not the amount of farmers we have right now.
But it is OK to bail out the auto industry???
RobC,
No. It is not OK to bail out the auto industry. You raise a good point: the Conservatives are selective in the socialism they support. They are just playing favorites and I believe this will be their downfall. There is no objective reason why taxes should be funnelled to the auto industry and not to any other industry. The Liberals or the NDPs can turn to the farmers and promise pork barrel bailouts to win votes.
Abatt,
Kudos. I really like your qualification that this is a hobby. I wish I had thought of that label. I hope you do not mind me using it in the future!
Aren’t tehse the same pork producers that were given 50 million recently to cull 150K of their inventory? I thought they got piles of money to start operations a few years before that too . . . what the heck is going on?
“offer government-backed loans to farmers with viable hog operations;”
Umm… I assume I’m not the only one to see the irony in this statement.
Good post, Mr. Anthony.
I’m not an expert but from what I’ve heard it goes something like this,
It is a real catch 22 for the farmers. Simply quitting raising pigs is not really an option because it would mean complete banruptcy, loss of their farm and home (which may have been in their family for generations) Hog farmers were tricked into putting up huge pig barns and investing into them heavily with promise of huge paybacks and are now left getting nothing for the pigs they raise on contract to the same people that told them to put the barns up in the first place. The problem really seems to be the the same people that set the prices that the farmers get paid for each pig and actually the ones that buy the pigs from the farmers (if you can belive that) and then put them in the stores for a high price at a huge profit. The farmers are left with no choice but to keep selling them at a loss and hope things get better, or walk away and lose everything. If the government can end this scam and help them get into a different business then I see nothing wrong with that. This isn’t simply a lack of demand issue .
Charles,
Glad you liked the label. It seemed appropriate to me in this situation. Feel free to use it again. :)
nothing like porkbarrel spending on pork products eh? farmers have bitched for two thousand years and for two thousand years the problems are the same and for two thousand years governments have created the same programs to deal with them. the only one not tried is to actually subject the BUSINESS of farming with the freemarket and let those that cant do it, fail. a good example in my area here is a pig farmer putting up RIGHT NOW an expansion on his barns and is also one of the people asking for a bailout, lives in a half million dollar home and drives nothing but new trucks every two years. some people can see reality eventually, others need to be clubbed on the head by it.
Good article, generally very insightful.
Being a free-market minded individual, I highly dislike government internvention and “bail out” of any industry.
The thing I disagree with is the idea that these farmers should, or should have, simply cut their losses and left the industry.
As someone else pointed out, large (often highly leveraged) capital investements were made in these farms. It’s very difficult for people to let them go.
On top of that, farming is a very unique industry. It’s tends to be generational and deeply involved. For many farm families I have met, it’s all they have ever known and it’s deeply ingrained.
Imagine waking up tomorrow as a different race or gender and you’ll get some sense as to impact that “jumping ship” would have.
I would be interested to read if anyone has some insight into exactly what the problem seems to be. Are these farms mismanaged? Is there simply not enough consumption or demand? or are they facing market prices that are inconsistent with input costs for Canadian farmers?
Thanks for the post, great stuff.
SJH,
Businesses fail all the time, including family businesses. Some go bankrupt. It’s part of living in a capitalistic country. Even families that have handed down these traditions throughout the generations must eventually change their ways when situations change.
My own family comes from a long line of German bathtub makers on one side, and New England shoe makers on the other. We don’t do those things anymore.
Your second and third points are one and the same. Not enough consumption/demand = lower market prices. The solution is to have lower supply, which will happen naturally if we stop meddling with the economy.
We operate in a free-market economy, however, food production is not exactly the same as other industries. Affordable and safe food is vital to the health of the country – both economically and physically. In Canada, we adhere to high standards of production and use programs such as Canadian Quality Assurance, Nutrient Management Plan and Environmental Farm Plan to ensure that we are producing food that is not only safe, but is also promoting a healthy, sustainable environment. Farmers are not able to demand higher payment for their products in spite of the fact that these extra measures increase our costs of production. Canada currently imports meat that has been treated with drugs that are illegal for use by Canadian producers. So yeah.. hey.. we can all quit – Ontario can kiss 33,000 jobs goodbye (the national figure is 1 in 8, by the way) and we can import all our food from China and Brazil. Good luck knowing how it was produced and what is in it!
pigfarmer, I understand why the food industry responds the way it does, but I don’t think that actually justifies rent-seeking. I’ve responded in full here.
Regarding the point that we can kiss 33 000 jobs goodbye, that’s certainly not anything anyone wants to see, but grasping desperately to unprofitable jobs will do no one any good. If certain farms fail, it will be sad, but not the end of the world. If these farms were led astray by the government, inducing them to undertake unprofitable activities (which, clearly, the government has done), then we owe them help to transition to more productive employment.
In the long run, assisting farmers through this disruption will cost less than maintaining the ridiculous agriculture and food policies that we currently have in place.