Murray Fulton
on
The Loss of the WGTA
Fundamental Changes in Agriculture
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The transformation described above has significant ramifications for farmers. The most immediate impact of the WGTA removal
and the loss of government support programs is an expectation of less
income from grain and oilseed production. Although the development of
new value-added processing opportunities on the Prairies (e.g.,
canola-crushing plants and hog production) will provide some economic
activity in rural Saskatchewan, these activities will not enhance the
price of grain at the farm gate, which will continue to be set by the
world price, less transportation costs. At the same time, the loss of
government support means that farmers will have to deal with the full
impact of future downturns in agricultural commodity prices.
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Murray Fulton on The Loss of the WGTA |
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The changing structure of agriculture also has implications. In
traditional agriculture, farm production was a distinct stage in the
product chain and farmers could concentrate on it exclusively. The
movement towards specialized production and much greater integration
with input suppliers or processors means farmers can no longer view
themselves as independent. The emergence of niche markets, for
instance, not only creates a need for specialized inputs, both by
processors and by farmers, but it also demands that decisions at the
farm input level, farm production level, and processing level be
co-ordinated to achieve economies of scale. As long as these activities
remain independent, all players fail to achieve an optimal scale. The
result is that farmers can expect increasing levels of contracting and
vertical integration.
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Fundamental Changes in Agriculture |
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| The emergence of greater contracting and vertical integration, however, raises questions about control and power. Farmers can expect increasingly to give up control over farm-level production decisions. Because of the information agribusiness firms possess about product quality and its importance, these firms are likely to have the power to set contract terms. With greater contracting, farmers also face new risks, such as the possibility that a processor, for instance, will change the contract terms once farm production has occurred. This risk increases as the assets needed for agricultural production become more and more specific to a particular product. | ||
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