Presentation on theme: "Chapter 1,2 Agr Policy, Rent Seeking and History What Is Policy? deliberate course of action set of programmatic actions multiple objectives change the."— Presentation transcript:
Chapter 1,2 Agr Policy, Rent Seeking and History What Is Policy? deliberate course of action set of programmatic actions multiple objectives change the normal course of events more than simply a statement of a particular goal e.g. raise farm income, full employment (goals) Agri-Food Policy Actions/programs ---> affect the Agri-Food system Every level input supply, farm, transformation and distribution, food processing retail sector consumer behaviour
Who/What is involved with Policy? Who ? Everyone is involved - directly or indirectly > (democratic) Primary stakeholders -- > politicians + bureaucrats Attitudes POLICY Preferences Background Knowledge Preferences, Background, Attitudes, and Knowledge (P-BAK) (Brinkman) What Shapes Policy ? Values Facts Beliefs Goals
Beliefs That Underpin Recent Federal Agr & Food Policy General: Support by Canadians for farmers and farm programs Farming - depends on trade for growth Globalization/trade agreements - fact of life Important for Canada to fully participate in trade negotiations Growing pre-occupation with environment and food safety issues Farmers: more competitive (bigger, technology, value added, risk management) more responsive to market signals – what the market wants more “self-reliant” – “free to manage their own operations” more diversity Government programs, relations, services: Inter-provincial trade barriers Support the role of market signals – vs direct supports Stable, predictable business environment Large regional differences; relative strengths/efficiencies Programs seen as equitable Smart regulation; C/B, environmental impact assessment, voluntary standards Food safety: important to Canadians, also for trade (traceability) Science based (evidence) regulation; defensible
How We See/Interpret the World <= Background/Knowledge Matters Facts Matter, but so does experience Determinant of policy prescriptions
Farm Sector Input Supply Transport + Handlers Processors, Retailers Trade Partners Other sectors Government Consumers NGO ’ s / INGO ’ s Major Groups Involved in the Agr & Food Policy Process
Choices - cannot please everyone Resolve beliefs about the issue Choose goals according to competing values Maximize welfare (economic welfare) choice involves everyone The Challenge for Policy Makers Different people - different values and beliefs Conflicts - good and bad policy Government intervention has to be justified
Times of Change in Agri-Food Policy Policy is made in a dynamic environment many choices to be made (provincial, federal, international) 2003 - BSE – how to respond 2012/13 Agricultural Policy Framework (Growing Forward) WTO – Doha round of agr. trade negotiations 2012 US Farm Bill Periodic trade disputes
Is this different than in the past? Long history - constantly in a state of change always new challenges; demands/expectations farm sector, or consumers Political ground is always shifting liberals vs conservatives; different policy agendas
What Motivates Policy Formulation? Two schools of thought: 1) market failure (market structure, environment) 2) rent seeking behaviour (Schmitz, Furtan & Baylis) Rent Seekers: farmers and agri-business, (PDR sector) "agri-food policy is about the extent to which governments affect the sytem and is affected by stakeholders in the system"
Some Challenges to Policy Formulation 1) Who is a farmer and who is not? Historical targeting of farmers - welfare Who receives support from who does not Influences how policy will be designed Family Farms: used to dominate Now: - (hobby farmers; corporate farms) Ownership separating from labour Defining a Farmer: difficult land base sales off farm income operator or owner?
Should farm size determine who policy is designed for? (small – large) Post WWII - fewer, larger farms - farm consolidation - capital substitutes for labour - bigger machinery – capital intensity - Economies of scale - risk US – 85% of hog farms (1970) are gone Size of farms Bigger farms have not solved "the farm problem" Post WWII productivity (2%) – real price decreases for farm commodities NFI – from market sources is unstable and declining Figure 1.3 Real Net Income 1950-1998
Real Net Income 1950 - 1998 (includes program payments)
Risks in Farming(price - output) Price Risk - unstable prices for primary commodities - international market - demand/supply elasticities (price flexibilities) - storable commodities - perishable commodities - bargaining power Supply coordination (domestic and international) Motivation for marketing boards Canadian Wheat Board International Wheat Agreement 2008 food crisis – international stocks
- problem for individual farmers – output determined by weather - open markets: large international disturbance => world wide price impacts - hard to insure (public vs private system) - motivation for government crop insurance Output Risk Farmer can influence outcome moral hazard + adverse selection
Boom - mid-1970's (Great Grain Robbery) prices good - acquire more land, bid up land prices land important collateral asset land prices increase + capacity to borrow renew equipment - larger machines - more land Boom and Bust Cycles: Good times - Bad times - design of policy difficult Bust - 1980 - 1986 prices decreased (grain wars EU/US) interest rates high service long-term debt credit crunch - bankruptcy - farm crisis
large numbers of farmers homogeneous product perishable commodities declining delivery points (grain and livestock) Cargill/ADM - 70% of Canadian beef slaughter Market Structure: farmers – lack of countervailing power contract farming quality and supply reliability farmer owns fixed assets limited alternative marketing outlets
Why is there a persistent farm problem? Why has it not been fixed ? How should policy makers address the problem? The Farm Problem Boom & Bust Cycles – low returns to labour & capital Willard Cochrane: treadmill theory - technology Glenn Johnson: asset fixity, adjustment Don Paarlberg - government programs are the problem Susan Offutt - what is the problem anyway ?