The Illative Blog - A Knowledge Impact in Society Initiative tag:illativeblog.ca,2007-09-26://1 2010-04-01T17:11:45Z This blog has been developed by the KIS Project at the University of Saskatchewan to foster discussion on the future of agriculture and rural communities. Entries look at current events and issues facing agriculture to draw inferences about the future of the industry. Movable Type Publishing Platform 4.01 Exchanging and Creating Knowledge for a Local Food Emphasis tag:illativeblog.ca,2010://1.104 2010-04-01T16:47:14Z 2010-04-01T17:11:45Z Industrialization and globalization has led to major changes in agri-food systems, particularly in the way food is produced, where it is sourced and how it is distributed. There have been pros and cons to those changes. While it means we... Yvonne Hanson Industrialization and globalization has led to major changes in agri-food systems, particularly in the way food is produced, where it is sourced and how it is distributed. There have been pros and cons to those changes. While it means we have increased varieties of produce to choose from - nectarines from Chile, bananas from Ecuador, avocados from Costa Rica - we have also had increased incidences of food contamination - salmonella, E. coli, listeriosis. This has led to consumers taking a vested interest in where and how the food they eat is grown. There has been a growing emphasis on sourcing locally grown food to achieve a perceived "quality control" for consumers as well as fair pricing and treatment for producers. ]]> In the rural community of Craik, Saskatchewan, local food is becoming more than a "flash in the pan", as one locavore put it. Through the development of a local farmer's market, workshops on gardening, composting and canning, and local food challenges, Craik is widening the doors to greater producer-consumer relations and knowledge sharing.

My graduate thesis, Transformative Learning and Localizing Food: Ingredients of Knowledge Creation and Resistance, investigates how local food knowledge has been created and transmitted by local food enthusiasts in Craik and surrounding area.

Findings suggest that individuals who buy local food tend to have been exposed to learning throughout their life time about the merits of knowing where their food comes from. Most participants grew up on farms or had close connections to farming (for example, grandparents) and were intimately involved with food production processes. Only one participant indicated that the technical skills for food production (gardening, cooking, preserving) were acquired in adult life. Participants embraced a notion that local food included supporting a local economy of farming while fostering the skills involved in food processing, cooking, gardening, and so on.

Of relevancy here is the importance of local lay knowledge in management of local agriculture systems and ecosystems as well as technical skill uptake on food production. Local knowledge is declining as fewer farmers reside in rural areas leading to less focus on natural rhythms, soil and biodiversity composition.

Although challenged in some literature, local food is generally championed for travelling less from farm to fork and thereby reducing greenhouse gas emissions in transportation. Local food, when it is built on a trust relationship, can be a win-win for producers and consumers. Consumers have opportunity to purchase healthy, local food - free-range chickens, for example - while producers receive fair pricing for their production. Growing social cohesion from such local economic activity - farmers markets, farm-gate sales and community-supported agriculture (CSA)* - has also been a positive result.

In Saskatchewan, local food interests are appearing in diverse quarters. In early March, Saskatchewan Economic Development Association (SEDA) offered a two-day conference to explore aspects of local marketing, new technologies and farm stories emphasizing Saskatchewan's local food opportunities. Throughout the province and throughout Canada, farmers markets are sprouting up in many small communities, CSA is becoming a commonplace term in food circles, and the People's Food Policy, among many other groups, are advocating localizing food networks as an ethical choice to building food security and creating resilient food systems.

Local food is promoted through on-line directories, information websites, restaurants, chefs and retail outlets emphasizing local food's promise of fresher produce, fair prices for producers, economic diversification and a deeper appreciation of socio-cultural relationships to food.

In a province with a rich agricultural history it is rewarding to see that local food has found a " home. And potential is even greater. Perhaps we will see a day when city planners incorporate urban agriculture into its development plans, where community gardens enable urbanites to have an opportunity to grow part of their food locally. 

Notes:

 * Community Supported Agriculture is a partnership of mutual commitment between a farm and a community of supporters which provides a direct link between the production and consumption of food. Saskatchewan is beginning to develop a CSA network, including Etomami Organics in Hudson Bay and Pineview Farms in Osler.


This blog entry was authored by Yvonne Hanson - a Masters of Education graduate who received funding from KIS to complete her research. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca]]> Have Co-ops flown the coop? tag:illativeblog.ca,2010://1.103 2010-02-05T17:06:57Z 2010-02-05T17:14:56Z Murray Fulton and Kathy Lang

Co-ops are one of our shopping options -- Co-op Marketplace grocery stores, credit unions, Co-op Gas Bars and C-stores, Mountain Equipment Co-op -- and they are an important part of our economy. Co-ops were also once a major player in western Canada's grain handling industry. At the turn of the 21st century, however, something changed. The grain handling co-ops across the Prairies - Saskatchewan Wheat Pool (SWP), Alberta Wheat Pool, Manitoba Pool Elevators, United Grain Growers - were forced to merge or to restructure into investor-owned firms (IOFs) to salvage their existence. The grain handling co-ops were not alone. Other agricultural co-ops across western Canada (e.g., Dairyworld, Lilydale) and the United States (e.g., Rice Growers Association, Tri Valley Growers, AgWay) also faced bankruptcy or converted to investor-owned firms during the same timeframe. The underlying financial pressures included mounting debt loads, fierce new competition, the need to access capital, the need to reduce member production and price risk, the need to grant members access to their equity and the need to realize the co-op's market value.

With several large agriculture co-ops facing the same issues at roughly the same timeframe, one has to ask -- are these isolated events or are they part of some larger pattern? What can be learned from these events that can be useful to other co-ops? To answer these questions the KIS project approached researchers throughout Canada and the United States to build upon their existing research on restructured agricultural co-operatives. The result is a book titled Co-operative Conversions, Failures and Restructurings featuring thirteen research cases by twenty-two researchers.

Aggregating the stories of thirteen agricultural co-ops provides a number of insights into the strengths and weaknesses of the co-operative business structure. First, some of the conversions were simply due to poor management, or to excessive control by management, problems that can affect all business enterprises. A case in point is the Saskatchewan Wheat Pool (watch the blog site for an upcoming entry on SWP).

Many of the co-operatives were affected by classic co-op problems, including:

·            lack of capital -- co-ops often cannot not raise, from their members, the funds required to expand operations

·            property right problems -- without clear ownership, co-op members do not have an incentive to provide capital or to exercise control

·            portfolio problems -- members were reluctant to put all their investment capital in their co-op, particularly when its fortunes rise and fall with that of their farm operation.

Another key driver for the structural change in many of the co-operatives was the so-called "industrialization of agriculture". The need to move their business further away from the farm gate and into processing and marketing requires capital that co-ops typically do not have; the transition to an IOF means access to capital that can be used for growth and expansion. As some of the co-ops found out (a good example is SWP), gaining access to capital can create another problem -- overspending and unmanageable debt.

In other instances, the role of the agricultural co-op appears to be no longer required. Co-ops often formed initially to provide competitive pressure in strongly oligopolistic markets. Over time, however, markets have evolved with changes in technology, consumer preferences, and policy reform. In this evolution, some agricultural co-ops became just another player in an increasingly competitive world market competing for member patronage (market share). As the co-ops took on new strategies for growth and expansion, they reached a point where maximizing earnings replaced co-op principles and the co-op began to operate like an IOF.

Adding to the dynamics of market evolution is the evolution of the individuals that own and operate the co-ops. While market forces and co-op structure certainly played a large role in the massive restructurings that took place, the members also had an impact. In some cases it was their commitment to the co-op that lapsed, while in other cases the members simply failed to carry out due diligence. In other cases it appears that the members -- and the boards they elected -- may not have had the tools and perspective to oversee the increasingly complex and capital intensive operations that were increasingly becoming the norm.

To read the ebook Cooperative Conversions, Failures and Restructurings or to purchase a paperback copy of the book, visit: http://www.kis.usask.ca/CoopBook.html

This blog entry was authored by Murray Fulton and Kathy Larson. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca

]]> Viterra Australia - What Might Happen Down Under? tag:illativeblog.ca,2009://1.102 2009-09-18T19:51:03Z 2009-09-18T19:54:25Z Earlier this year Viterra announced its intention to acquire ABB Grain Ltd. of Australia. Last week ABB Grain shareholders voted 83% in favour of removing the shareholder cap from their constitution; the removal allows Viterra to move another step... Murray Fulton Earlier this year Viterra announced its intention to acquire ABB Grain Ltd. of Australia. Last week ABB Grain shareholders voted 83% in favour of removing the shareholder cap from their constitution; the removal allows Viterra to move another step towards completing a $1.6 billion takeover of ABB Grain. With the purchase of ABB Grain, Viterra is set to become a major grain marketing company with sourcing in two hemispheres; together Australia and Canada account for 37% of exports of wheat, barley and canola. The Australian Broadcasting Corporation (ABC) recently interviewed me about the Viterra/ABB Grain merger. The following are some of my thoughts. ]]>

First, a recap of some of Viterra's history. Its predecessor, Saskatchewan Wheat Pool (Pool or SWP), was a grain handling co-operative formed in 1924 to help combat what was perceived at the time to be the unfair pricing and marketing of farmers' wheat. The Pool grew to be the major grain handling company in western Canada with nearly 60% of the provincial grain handlings. After a decade of declining profitability in the 1980s, the Pool realized in the early 1990s that it had to consolidate and modernize its grain handling network, and grow its business lines, if it was to successfully deal with trade liberalization, rail deregulation, potential CWB changes and the emergence of new competitors (e.g., ConAgra, LouisDreyfus, Bunge, producer-owned terminals). In 1996, the Pool began trading its shares on the Toronto Stock Exchange; it also launched massive investments in a new elevator system and in new value-added enterprises (e.g., hog barns, international terminal operations, grain processing). Debt loads mounted and the Pool began losing market share and incurring large losses. In 1999, the CEO and COO were asked to resign and Mayo Schmidt was brought in as CEO. After a massive divestment and a $405 million debt restructuring in 2003, the Pool eventually converted to a corporation in 2005. In 2006 it succeeded in a bidding war with Richardson International to acquire Agricore United. The newly merged company was named Viterra. With the number one and two ranked Canadian grain companies now merged into one, it was only a matter of time before Viterra would look for international investments.

The ABC reporter raised two broad questions about Viterra's takeover of ABB Grain. First, given the severe financial troubles that SWP got into in the late 1990s, is there a concern that the same thing could happen again? Second, what would be the impact on Australian farmers of the merger?

There are at least two perspectives on the first question. On the one hand, Mayo Schmidt and his management team were not part of the poor investments and bad business decisions of the 1990s that lead to the Pool almost going bankrupt. Rather Mayo Schmidt was brought in to rescue the company and he was successful in doing so. On the other hand, research indicates that, on average, merger acquisitions do not go well. Acquiring companies most always overpay for their acquisitions. While SWP/Viterra seems to have been successful in incorporating Agricore United into its operation, it remains an unanswered question as to whether Viterra has paid too much for ABB Grain and whether the promised synergies of the merger can actually be realized.

As for the impact on Australian farmers, the experience in Canada may shed some light. When SWP bought Agricore United in 2006 most farmers appeared not to be concerned about a loss in competition as they often had three companies to which they could market their grain. Now, a few years later, the concerns about competition and service appear to be more prevalent, at least if the sharp increase in the use of producer cars is any indication. And there are farmers who are located in areas where SWP and Agricore United were the only options; these farmers are likely feeling the lack of competition created by the merger.

Over the last number of years, many agricultural co-ops have converted to business corporations in an effort to survive in a fast-paced industrialized agriculture, and the converted co-ops have merged with each other, thereby decreasing the competition the co-ops were originally established to combat. Giving up farmer ownership and control has its benefits (e.g., farmers are no longer required to directly finance the construction and operation of an elevator system), but it also has its costs (e.g., lack of service in some areas, potentially higher prices for storage and handling). The real nature of these costs means that farmers will continue to search for methods by which they can bring some competition to the grain handling system when it is needed. The latest incarnation of farmers' attempts to create greater competition is the stepped-up use of producer cars, a practice, interestingly, that was among the first of the responses that farmers used 100 years ago to deal with concerns about lack of competition. Although times change, the need for some form of farmer ownership and control appears to be timeless.

To visit Viterra Australia's website, click here. 

To listen to Murray's interview with ABC's Kendall Jackson, click here.

This blog entry was authored by Murray Fulton. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca
]]> Scenarios for Climate Change tag:illativeblog.ca,2009://1.101 2009-08-21T21:18:28Z 2009-09-16T15:18:08Z I was recently invited to participate in a foresight workshop sponsored by Agriculture and Agri-Food Canada (AAFC). The workshop was the third in a series of events designed to explore future paths of climate change impacts and agricultural adaptation... Murray Fulton

I was recently invited to participate in a foresight workshop sponsored by Agriculture and Agri-Food Canada (AAFC). The workshop was the third in a series of events designed to explore future paths of climate change impacts and agricultural adaptation in Canada.

]]> Foresighting (definition) is an activity designed to explore the possible paths that an issue or a sector might follow. It is increasingly being used in government and industry to get people to actively think about future scenarios and to step outside the cognitive box of the status quo or of the simple extrapolation of current activities. 

While the KIS project has not actively undertaken any foresighting activities, there are some important similarities in what foresighting and KIS are trying to achieve. One of the underlying tenets of the KIS project is that agriculture and rural communities are undergoing major changes and new conceptualizations of the sector and the issues it is facing will be required to respond and adapt effectively to these changes. For instance, one of the activities undertaken by KIS was Agriculture 2020, an exercise in which various futures were articulated.

The first part of the AAFC's foresighting exercise was the development of four different scenarios about the future (the scenarios were described by looking back from the year 2030). The futures were designed to provide a context for identifying issues, generating strategic responses and understanding the consequences of different reactions. The second part of AAFC's exercise was an examination of the science issues that agriculture will have to face in each scenario. The third part of the exercise - the one in which I participated - as the examination of the policy and market instruments that the sector requires in each scenario.

The four scenarios that were examined represent a unique combination of two critical uncertainties facing agriculture - the nature of climate change impacts and the nature of the global geopolitical environment. The four scenarios are presented in the figure below. More details on the scenarios can be found here.

It is interesting that the scenario developers focused on uncertainties surrounding climate change impacts and the global geopolitical environment as being the most critical. The first of these reflects technological uncertainty and asks, "Will science be able to react quickly enough to keep up with climate changes?" The other dimension reflects socio-economic and political uncertainty and asks, "Will we be able, individually and collectively, to update the social, political and economic institutions and organizations that frame and make decisions so that they are capable of keeping up with an increasingly complex decision making environment, one in which coordination and co-operation are likely to be increasingly important?" In short, one of the dimensions reflects society's ability to undertake technological innovation, while the other is about society's ability to generate institutional and organizational innovations.

Participation in the workshop left me with a number of thoughts and observations. Here are two.

First, I was very impressed by the ability of a very diverse group (attending were civil servants, industry representatives, farmers, academics and what be termed interested observers from other sectors and other parts of society) to engage in a quite abstract discussion of future climate change scenarios. It was clear that the impact of climate change and geopolitical forces on the world is of immense interest, and that people have been thinking about these issues. With few exceptions, the discussions were wide ranging and did not seem to be tied to the standard philosophical perspectives typically found in agricultural discussions in Canada (e.g., the market versus marketing boards). This capacity to engage critically in issues that are likely to define the future of agriculture is essential if the sector is to morph and develop in the ways that are required.

Second, although everyone was willing to discuss the critical issues, it was perhaps not surprising that collectively we had difficulty getting beyond a simple extrapolation of the current situation. Interestingly, this was most obvious (at least to me) in the case of the Hot and Hungry scenario (although it was present in all the scenarios). The Hot and Hungry world is a nasty place to be. Science has been unable to keep up with the impacts of climate change, and society has become increasingly non-cooperative. Yet, the policies and market institutions envisioned in this world were just extensions of what we have today.

One of the premises behind the foresighting exercise, I believe, is that, if we do not like one or more of the outcomes that we have envisioned, we can then take steps to make sure they do not happen. Yet, there are many things that will not allow this to happen (witness the inability of the financial sector to be able to change its behaviour in advance of the financial crisis). Short time horizons, the interests of influential groups and collective action problems are three important reasons why taking steps now to avoid bad outcomes in the future is difficult. 

To this list we need to add our tendency to fall back on the status quo (psychologists call this the status quo bias). It is often our inability to really understand the implications of a new situation that limit our ability to act in ways that could avoid the situation. My conjecture is that this tendency for the status quo - the equivalent of getting caught in a cognitive rut - is one of the great challenges we must address if we want to adequately adapt our science and our institutions to whatever outcomes emerge from climate change (or any of the other challenges that will present themselves).

This blog entry was authored by Murray Fulton. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca

]]> Copenhagen Considerations tag:illativeblog.ca,2009://1.100 2009-08-04T17:09:31Z 2009-09-16T15:17:31Z I recently was invited to be a respondent at the National Agricultural Biotechnology Council 21st Annual Conference (NABC 21) in Saskatoon. The overall theme of the conference was Adapting Agriculture to Climate Change. The three presenters in the session... Murray Fulton

I recently was invited to be a respondent at the National Agricultural Biotechnology Council 21st Annual Conference (NABC 21) in Saskatoon. The overall theme of the conference was Adapting Agriculture to Climate Change. The three presenters in the session I was involved in shared their perspectives on the roles of ethics, policy and carbon markets in agriculture's adaptation to climate change.

]]> Dr. Harold Coward spoke about the ethical considerations that might go into policy decisions and provided an overview of how various religious groups view the ethical issues involved in biotechnology, one of the technologies that is likely to be front and centre as agriculture adapts to climate change. Gordon McBean identified the importance of policy uncertainty and the impact that this can have on adaptation. Ben Gramig outlined the costs and the bureaucratic issues that must be considered as we design policy in the face of climate change.

In my comments, I focused on the scheduled December 2009 meeting in Copenhagen that will attempt to design a new international framework for dealing with climate change. The timing of this meeting is important as it is being held during a major worldwide financial crisis. As a result of this crisis, there are significant debates and discussions going on regarding the question, "What should the new economic order look like?" As an example, I cited a recent article in Vanity Fair by Joseph Stiglitz, the Nobel prize winner. Part of Stiglitz's argument is that there is a real danger that the economic crisis is going to allow protectionist forces to rear their head. Perhaps more importantly and certainly more interestingly, he identified the importance of looking back at the policies that governed the international monetary system over the last 30-40 years and asking whose interests were privileged within this system. His conclusion is that it was the developed countries, and specifically the large financial institutions, that were the prime beneficiaries of the system that was developed.

I used Stiglitz's article as a jumping off point to think about what Copenhagen and subsequent meetings will have to say about what will emerge in terms of international climate change policy. If we can take a lesson from the financial system, I think that the GHG policy will be drafted in a way that benefits certain groups. Who might those groups be? On the corporate side, I suspect they will be the large energy companies and the large biotech firms. What about countries? Are we witnessing a period where the influence of the West is giving way to some of the other countries, in particular, India and China? Are these new economic powers going to put their stamp on this policy environment in a way that fundamentally changes the economic order?

One of the panel speakers mentioned the developing countries' desire to "stick it" to the West for their policies over the last several decades. My guess is that this will be difficult to do. However, I also suspect that the current economic crisis and the restructuring that inevitably follows will provide countries like India and China the opportunity to play a much larger role than we have seen. The response of agriculture to this new global regime could be just as important and interesting as its response to climate change.

To view all the presentations on streaming video, visit the NABC 21 website.

This blog entry was authored by Murray Fulton. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca

]]> Danish online auction, potential in Canada? tag:illativeblog.ca,2009://1.99 2009-02-18T20:48:00Z 2009-02-18T21:21:11Z Policy decisions in agriculture often beget other changes - be they in behaviour, in technology and/or in the way that things are organized and decisions are made. The Danish sugar industry is a good case in point.... Lynette Keyowski

Policy decisions in agriculture often beget other changes - be they in behaviour, in technology and/or in the way that things are organized and decisions are made. The Danish sugar industry is a good case in point.

]]> In 2005, after succumbing to much pressure for reform, the European Common Market Organization introduced a new policy regime for sugar. After nearly two decades of price support through subsidies, levies and production contracts, EU sugar producers were faced with a 40 percent decrease in the sugar price over the four-year implementation period. This substantial price decrease meant Denmark's ability to retain large-scale sugar beet production was in jeopardy. Reallocation of production quota from less to more efficient producers was believed to be one of the responses necessary to maintain production.
In Denmark, sugar beet production prior to the reform was based on non-transferable contracts to meet a national quota; production in excess of this amount could be sold on the world market. In general, contract allocation was tied to the amount of land owned by a producer and was based on historical production levels. Minor quota shuffling occurred when a processing plant closed and when grower noncompliance resulted in quota being shifted to new entrants. While the ability to lease quota was introduced in 2004, overall there was little transferability of sugar contracts among producers, even though such transfers would have been profitable. Research at the University of Copenhagen indicates that, largely because of a lack of transferability, the Danish sugar industry gave up substantial profits due to inefficient quota allocation among producers.

In addition to price decreases under the EU reform, the ability to sell excess sugar production on the world market was also removed. Meeting a national quota via contract production, however, has remained. Profitability pressure resulting from lower guaranteed prices and lower production requirements made reallocation of sugar contracts more attractive in Denmark, as producers faced the need to either lower their costs or switch to other crops.

In 2006, an initial effort was made to reallocate production through bilateral exchanges. This strategy was fraught with problems that arose due to the uncertainty of the evolving regime - problems that included how to settle contract quantities and prices, which plant to deliver to, fair distribution of quality product and how to adjust to new EU productivity initiatives. The result was an inefficient reallocation of sugar beet contracts. In fact, as the new pricing regime unfolded, university researchers estimated that within four years Danish sugar beet production would drop to 25 per cent of the national quota.

The introduction of the Partisia Contract Exchange an online auction for quota reallocation - created an environment where buyers and sellers could be matched and the gains from reallocation could be optimized (e.g., the lowest overall cost - including production, transportation and processing - could be identified). Reallocating quota from less efficient growers to more efficient ones would retain sugar beet production at 75 per cent of national quota and the lower cost of production among the efficient growers would offset to some extent the lower price being received for sugar beets.

One of the key features of the auction was that it was based on software that encrypted information and provided what is referred to as 'deep confidentiality'. In the Danish industry, renegotiations take place between multiple interest groups and the result affects the division of the total profit among these groups. Differences in interests - not only between the processors and the growers, but also among different grower groups with different distances to the processing plants, different soil conditions, and so on - means that confidentiality protection in the contract exchange is important in the ongoing contract renegotiations. Since a bid on the contract exchange would reveal information about the individual growers' contract valuation if the bid were to become public knowledge, the high level of confidentiality built into the Partisia Exchange ensures that growers trust that their private information would never be shared, stored or aggregated for the purpose of future price discrimination. Encryption also significantly reduces transactions costs within the system since third party verification is no longer required.

In summary, the Partisia Exchange greatly enhanced the ability of the Danish sugar market to adjust to new policies by reallocating production to more efficient producers and by allocating product more efficiently to the production plants - without the need for third party verification, or for growers and buyers to interact other than through the exchange.

As global competitive pressures continue to increase and new policy initiatives are introduced, there are many other possibilities for the application of technologies like Partisia Exchange's online auction software. In the Canadian context this technology may have application to supply managed sectors such as dairy and poultry. For example, could this technology more efficiently allocate quota amongst producers in a given province, or even among provinces? Or, in the grains industry, would it be advantageous for the Canadian Wheat Board to implement an online auction to replace its current tendering practices for awarding cars to elevator companies?

References

Bogetoft, Peter, Kristoffer Boye, Henrik Neergaard-Petersen, Kurt Nielsen. 2007. "Reallocating sugar beet contracts: can sugar production survive in Denmark?" European Review of Agricultural Economics, 34(1): 1-20.

This blog entry was authored by Lynette Keyowski. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca
]]> Dealing with zoonotics requires a harmonized approach tag:illativeblog.ca,2009://1.93 2009-02-03T13:49:18Z 2009-02-03T16:40:20Z In late January, the Canadian Food Inspection Agency confirmed a turkey farm in British Columbia tested positive for the H5 strain of avian influenza (CBC News Story). Over fifty-thousand birds were destroyed and a quarantine of the 23 poultry farms... Kathy Lang In late January, the Canadian Food Inspection Agency confirmed a turkey farm in British Columbia tested positive for the H5 strain of avian influenza (CBC News Story). Over fifty-thousand birds were destroyed and a quarantine of the 23 poultry farms within a 3-kilometre radius of the infected farm was instated. Although the risk to human health was estimated at nearly zero in this case, different strains of avian influenza (e.g., H5N1) have been linked to death and illness in humans in both Asia and Europe in recent years. ]]>

When an animal disease outbreak occurs in Canada it is natural to question Canada's game plan for preventing and managing zoonotics. Zoonotics are any infectious diseases that can be transmitted from animals to humans, or vice versa. Avian flu can be classified as a zoonotic because certain strains of avian flu are known to have infected humans. Tuberculosis is also a zoonotic; estimates are that "10% of human tuberculosis cases were related to cattle tuberculosis and raw milk consumption", which is why milk pasteurization was made mandatory.


Who in Canada is responsible for preventing and managing disease outbreaks and more specifically, zoonotics? A March 2008 report by KIS Collaborator Patricia Farnese and B. von Tigerstrom analyzed the legal framework for animal health in Canada to answer this question. As it turns out, there is dual jurisdiction, with both provincial and federal laws and regulations regarding animal health in place, In some instances provincial regulations are more stringent than the federal ones. However, if a conflict ever arises over which regulation to follow, the federal regulations always supersede the provincial regulations. The report concludes that dual jurisdiction results in a duplication of efforts between the province and nation for the most part, but examples exist where disease surveillance done at the provincial level is not required at the federal level.


The province of British Columbia is one such example; BC monitors diseases that are more prevalent in its turkey populations and those diseases are not required to be monitored at the federal level (p.18). This imbalance in disease surveillance and reporting raises a red flag. If both the provincial and federal levels have jurisdiction, yet there is no designated lead agency, the potential exists for each level to delay a response to an animal health crisis because of a mistaken assumption by each level that the other is handling the crisis. To counteract this potential for disaster, the report suggests harmonizing legal frameworks and improving information sharing.


Since the writing of the report, headway has made in the interface between how animal and human health are regulated. Health Canada established the Public Health Agency of Canada and Foreign Animal Disease Emergency Support Plans to bridge the gaps in the authority to prevent, control and eradicate zoonotic disease. Centers like the Center for Public Health and Zoonoses at the University of Guelph and InterVac at the University of Saskatchewan's Vaccine and Infectious Disease Organization (VIDO) are recent initiatives aimed specifically at dealing with zoonotic diseases. With these developments Canada is on the leading edge to develop the human capital to solve zoonotics problems, implement solutions to disease outbreaks and develop vaccines for humans and animals to prevent and treat zoonotic epidemics. It seems Canada is on track to ensure protocols and procedures are in place, with the CFIA named as the lead agency, so that these research centres can put their expertise to work in a timely manner should ever a zoonotic outbreak occur.

Further reading:
Farnese, P.L., B. von Tigerstrom. 2008. "Report on the Legal Framework for Animal Health in Canada." pp. 48.

This blog entry was authored by Kathy Larson using research conducted by KIS Collaborator Patricia Farnese (College of Law, U of S). To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca
]]> The 2009 Budget - Can Stimulus Packages Stimulate? tag:illativeblog.ca,2009://1.86 2009-01-26T16:57:12Z 2009-01-26T17:02:23Z World leaders from U.S. President Obama to Canadian Prime Minister Harper are moving quickly to announce and implement stimulus packages (click here and here). Indeed, a consensus appears to have emerged among economists and politicians that massive government spending is... Murray Fulton World leaders from U.S. President Obama to Canadian Prime Minister Harper are moving quickly to announce and implement stimulus packages (click here and here). Indeed, a consensus appears to have emerged among economists and politicians that massive government spending is required to pull the world economy out of the tailspin that it is in now. In Canada, the stimulus package is an integral part of the budget the Conservatives are introducing on January 27, 2009. ]]>

While woe betides any politician who dares speak out against this new orthodoxy (witness the political chaos generated late last year when the Conservatives did not get on track quickly enough), a number of journalists and economists are questioning the stimulus package idea. In a recent National Post article, Terence Corcoran cites results from a number of studies by eminent economists that call into question the efficacy of stimulus packages. In what could be called the accepted wisdom before the events of the last six months, the studies cited were in agreement that government spending has little impact on economic performance and may even drive out private spending in many instances.

At the same time, economists like Paul Krugman, the most recent winner of the Nobel prize in economics, are saying that without a major stimulus package the economy will slide into a major depression (click here and here). Which economists should be believed?

One key to sorting out these very different conclusions is to look at how the arguments are being framed. Personally, I think Andy Harless' line of reasoning has merit. He argues that stimulus packages will work today because we are in a situation never seen since the 1930s. Put another way, the studies that Corcoran cites are correct under specific circumstances, since they were done for periods when the economy was more or less working correctly. Under these conditions, the previously accepted wisdom, I think, is accurate - government spending has little impact and may even drive out private spending in many instances.

But the conditions today are not normal, and this is where I think Krugman and others are coming from when they argue that a massive stimulus package is required. Without a stimulus package, Krugman believes the outcome will not be a minor downturn or relatively small increases in unemployment. Rather, the outcome could be a full-blown depression, perhaps with price deflation.

Personally, I think the world economy is in a great deal of danger. The reason is expectations. If everyone expects the economy to go to hell in a hand basket, then it will. While this kind of pessimism may seem foreign to residents of Saskatchewan (where Help Wanted signs still grace the door of most businesses), in the rest of North America and much of the world the very worst is being expected. And the cost of these expectations being fulfilled will be enormous. One outcome that Krugman is worried about is deflation - if people ever begin thinking that prices will fall, then consumer demand will essentially dry up and investments will be put on hold indefinitely. The result will be large-scale unemployment and further major losses in stock market value.

Seen in this light, government stimulus packages that are being announced are about creating some optimism and thereby holding off some of the worst impacts of a recession/depression. Multipliers of the sort that are being bandied about are not the real issue, and citing (or refuting) them sheds little light on what the impact will be of a well-thought out stimulus package. What is more important is whether consumers, investors and business leaders around the world believe that the stimulus packages will work. If they do, then a serious recession may be averted; if they do not, the outcome could be a major economic depression.

This blog entry was authored by Murray Fulton. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca
]]> Agriculture Offset Credits: Where Do They Fit? tag:illativeblog.ca,2009://1.85 2009-01-12T16:15:49Z 2009-01-12T16:24:44Z Saskatchewan has the highest per capita greenhouse gas (GHG) emissions of all Canadian provinces and ranks fourth among provinces in terms of total emissions. Saskatchewan is also a province that stands to lose a great deal as a result of... Terrence Scott Saskatchewan has the highest per capita greenhouse gas (GHG) emissions of all Canadian provinces and ranks fourth among provinces in terms of total emissions. Saskatchewan is also a province that stands to lose a great deal as a result of climate change impacts. The province sits in an area where significants impacts are predicted. Complicating matters further, an important part of Saskatchewan's economy - namely agriculture - is especially vulnerable. The question of how much Saskatchewan should do and what specific steps to take are topics of discussion, debate and controversy.
Agriculture is not a sector that is targeted for emissions capping. Agriculture can, however, play an important role as a provider of offsets. Saskatchewan farms have considerable potential to sequester carbon in soils by adopting measures such as reduced tillage, continuous cropping, conversion of annual cropland to perennial grasses, and tree planting. Janzen et al (2005) provide carbon sequestration estimates for various farm land practices. Relative to estimates reported by Janzen et for continuous cropping and reduced tillage, 0.5 t/ac/yr of carbon sequestration would be a conservative estimate of sequestration potential for these two practices alone. On Saskatchewan's 42 million acres of farmland used for annual crops, this could mean sequestration potential of over 20 million tonnes/yr of CO2-e, which would offset about 30 percent of Saskatchewan's total annual emissions of 70 million tonnes CO2-e. Not all of this carbon would necessarily earn offset credits. However, if it did, and carbon prices similar to EU Emission Trading System prices were achieved, it would mean an additional $400-800 million in gross revenue for Saskatchewan's agricultural sector annually. Perennial grasses, afforestation, agroforestry and other GHG removal/reduction activities add to the overall potential.

The offset potential for agricultural producers is one reason for Saskatchewan to be interested in a cap and trade system. However, there are also concerns. Nationally imposed emission caps on certain sectors that are relatively important in Saskatchewan will have negative economic impacts. Also, there is a risk of "non-permanence" of the predominant offset agricultural producers are able to provide - i.e., soil carbon sinks. Sinks last as long as the land use or farm practice that created the sink, or as long as an effective replacement practice, continues. If these sink maintenance practices end, carbon is released back to the atmosphere, resulting in little or no net climate benefit. The concern about "non-permanence" is that farmers may at some point want to alter the sink maintenance practices in response to changes in production and market conditions.

Given the concerns just described, policy-makers may be tempted toward approaches other than cap and trade. Instead of large-scale emitters paying farmers for offsets that may in the end not benefit climate change goals, the monies could instead be used to develop technology that will produce direct reductions in the emissions of large scale emitters - e.g., carbon capture and geological sequestration that is being tested in south-east Saskatchewan oil fields. An important policy question, however, is how quickly large scale emitters will actually come up with such emission reducing technologies if emission caps are not now imposed to signal the clear intent of governments to achieve emission reduction goals. There is a strong argument that caps can significantly hasten technology development and innovation.

Undoubtedly, new technology will play a major part in a Saskatchewan emission reduction strategy. However, a singular focus on new technology can easily lead to a search for that ever-elusive magic bullet that will solve all the problems. Solutions are more likely to come from a whole range of technologies, existing and new, and from a variety of public policy instruments. The very hope of a magic bullet can create complacency and a false sense of security, with the unfortunate result that measures to solve the problems at hand are not taken. Agricultural sink technology that is capable of making substantive and immediate offsets to Saskatchewan's overall emissions exists today. It seems a mistake not to get the most benefit possible from that technology.

If agricultural carbon sinks are to be used effectively to contribute to climate change mitigation, the sinks will have to be maintained long term. It is possible to speculate regarding circumstances where this would not need be the case, such as, if at some time in the future, we expect climate change to be so successfully resolved that the sequestered carbon can be put back into the atmosphere without adverse effect. That, however, from today's vantage point, seems like an unlikely circumstance. Hence, we can expect cap and trade policy to be designed such that someone is held responsible for replacing credits that are lost when sinks are not maintained. Capped emitters will be extremely reluctant to buy offset credits if they run the risk of having to replace them if farmers discontinue sink maintenance practices. Thus, if farmers are going to receive a significant offset credit price under a cap and trade system, there are two basic choices: (1) farmers commit to long term sink maintenance ( alternatively to replacing offsets lost if they decide not to maintain the sink): or (2) governments backstop the soil sink offsets provided by farmers under a cap and trade system on the basis that soil carbon sinks are urgently needed to being dealing with the pressing climate change problem.

For further reading, see:

"GHG Offset Credit Policy for Agriculture in Saskatchewan: Capturing Opportunities Available Through GHG Emissions Trading", https://wiki.usask.ca/kis/index.php/Carbon_Credit_Policy_Wiki

Janzen, H.H., Desjardins, R.L., Angers, D.A., Boehm, M.M., Campbell, C.A., Carter, M., Gibb, D., Gregorich, E.G., Kaharabata, S., Lemke, R., Masse, D., McAllister, T., McConkey, B., Rochette, P., and Smith, W. 2005. Mitigation practices for agricultural land in Canada: A summary of "expert opinion". Agriculture and Agri-Food Canada Internal Report, Lethbridge Alberta.

This blog entry was authored by Terry Scott of TESCO Consulting. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca
]]> The Role of Economics in Policy Making tag:illativeblog.ca,2008://1.84 2008-10-30T17:12:53Z 2008-10-30T18:01:17Z Australia has a salinity problem - scientists there predict that one third of agricultural land in Western Australia will be affected by dry land salinity over the next century; currently the figure is about 10 percent. Australia has spent... Murray Fulton

Australia has a salinity problem - scientists there predict that one third of agricultural land in Western Australia will be affected by dry land salinity over the next century; currently the figure is about 10 percent. Australia has spent billions of dollars on their salinity problem over the last 20 years, yet progress remains slow (for a brief analysis of salinity programs, see Pannell and Ridley 2008). One reason (among many) for the lack of success was that the funds were spread thinly and non-strategically among farmers. Although the allocations were socially and politically attractive, they were not technically and economically efficient. In addition, there was a presumption that farmers would adopt land management options that could address salinity regardless of how those practices might affect their bottom line.

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Salinity policy, however, is changing in Australia. This shift has been prompted by some rather simple economic analysis. And replacing the old policy is a new investment framework that is based on basic economic decision rules.The economic analysis that, in part, prompted the policy change drew heavily on concepts learned in Economics 100 - that society has limited resources to spend on a problem such as salinity and spreading these resources across all farmers without any analysis of where the best results can be achieved is wasteful. The new policy framework under development is firmly rooted in cost-benefit analysis; investments are to be made strategically where they have the biggest impact. In addition, attention will be paid to whether the required technologies exist and whether farmers have any incentive to adopt them.


The salinity example illustrates very clearly the role that economics plays in public policy making - the overarching goal of economics is to ensure that funds spent by governments are used wisely and provide the greatest benefit possible. Indeed, as speakers at the recent symposium The Role of Economics in Public Policy indicated, the economic paradigm underpins most of the policy making process in government today. The Knowledge Impact in Society project (www.kis.usask.ca) and the Johnson-Shoyama Graduate School of Public Policy (www.schoolofpublicpolicy.sk.ca) jointly organized the symposium (click here for the program and presentations). While economics is sometimes not used or is ignored (as was the case in salinity policy), it nevertheless remains vital to good public policy.


As the symposium panelists indicated, there are many reasons that economic analysis is not considered. Oftentimes the models and results that economists generate are not communicated properly - economists tend to speak in their own language, one that others do not understand. Many economists rely on analysis that is much too complex - what is needed for good policy work is simple concepts that are applied in a straightforward and well-understood way. The need to publish in leading economics journals means that academic economists often have little incentive to work with the basics; students are likewise trained to use overly sophisticated models. Economists may not have the technical knowledge required to interact with others in the policy process, and they often do not understand the pressures - legal mandates, equity considerations, and time constraints - that policy makers face. Academic economists often do not take the time to build personal relationships with policy makers, relationships that are critical if the academics and their recommendations are to be trusted enough to be incorporated into policy.


The problems identified above mean that from time to time the balance is lost between political pressures and economic realities, resulting in good public policy being pushed aside. Short-term political costs, spread over many people, can swamp long-term economic benefits. Vested interests, with access to key political players, can sustain policies that have limited benefit to society. And policies that do not fit with the existing mindset of citizens may never see the light of day.


Symposium participants had a number of suggestions for how to address the need for better and more appropriate economic analysis, and thus redress the crucial balance that is required. Chief among the suggestions was the need to ensure that applied economics was an integral part of university training for those working in the policy-making area (this includes people in the public service, as well as people in the businesses and organizations that deal with government). Indeed, the point was made that a new program in applied economics is required in Saskatchewan. Economist training needs to provide students with a strong foundation in the basic economic concepts and how these can be applied to public policy problems. Students need to be provided with the proper communication skills (both oral and written), and they need to be able to converse with people from other areas (e.g., scientists, social scientists, administrators). And they need to know that the real world is not textbook perfect - that compromises have to be made, all the while ensuring that economic factors are considered.


There are a number of public policy schools springing up across the country - the latestones are at the University of Ottawa, the University of Toronto, the University of Calgary, and here in Saskatchewan where the University of Regina and University of Saskatchewan have joined together to create the Johnson-Shoyama Graduate School of Public Policy. Discussion at the symposium examined the role these schools might play in better positioning economists and economics in the policy process. The view was expressed that the foundation of public policy schools must include a solid and significant economic component. It was felt that policy schools could provide incentives to faculty to undertake policy research. Policy schools offer the opportunity through their outreach and engagement activities to package research results for non-academic and non-economist audiences. Policy schools also represent an opportunity for academics to build relationships and trust with government officials, and to provide graduate students with the appropriate analytical and communication skills.


One of the panelists nicely captured what is required for a better working relationship between economists and policy makers. Policy-makers would benefit from being as willing to accept criticism as they are willing to accept praise, while economists would benefit from being as willing to give praise as they are willing to give criticism. Policy makers would benefit from an appreciation of the ability of economists to identify unintended consequences, while economists would benefit from an appreciation of the myriad of constraints under which policy makers must work.


This blog entry was authored by Murray Fulton. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca

]]> Coordination and Co-operation in International Agricultural Markets tag:illativeblog.ca,2008://1.83 2008-10-14T17:00:15Z 2008-10-30T17:38:50Z It is interesting to see how the current financial crisis is changing the way that we think about the world. This point was driven home for me when I had the opportunity to attend a symposium last week in... Murray Fulton

It is interesting to see how the current financial crisis is changing the way that we think about the world. This point was driven home for me when I had the opportunity to attend a symposium last week in Berkeley, CA entitled "Causes and Consequences of the Food Price Crisis" (click here for details). Sponsored by the Giannini Foundation, the symposium featured faculty from the agricultural and resource economics departments at the University of California, Berkeley and the University of California, Davis.

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There was a reasonable consensus from the speakers that the rapid price increases in corn and soybeans (and by extension, wheat and canola) that we have witnessed over the last two years are the result of increases in demand because of increased ethanol production in the United States and a decrease in supply because of droughts in countries such as Australia; increases in food demand in China and India are argued to have played much less of a role. Why did an increase in demand due to ethanol production have an impact when an increase in food demand in China did not? The reason is expectations. Food demand in China and India has been rapidly increasing since the early 1990s. As a result, the continued growth over the last two years was expected and had already been built into prices a number of years ago. In contrast, the increase in demand from ethanol production - and the decrease in supply due to droughts - was not expected. As a consequence, these shocks had a major influence on price as the market tried to adjust.


The speakers held a wider variation of opinions on the question of whether future corn and soybean prices would settle back to their historical levels, or whether they would settle at some higher point. Of these two views, the latter one likely had a few more adherents. One reason is input prices - if oil prices remain higher than they have been historically, then commodity prices will have to rise to cover the increased cost of production. There is also a concern that agricultural research investments have been slowing, with the result that yield increases are also slowing (see the Illative Blog entry on agricultural R&D posted November 29, 2007).


The picture is different for rice (although, interestingly, unexpected shocks again are critical). One of the key factors behind the rapid rise in rice prices at the beginning of this year was that exporting countries began to a play a game with each other. Given that there was a lack of information on world stocks, each country became worried that prices were going to rise and that their consumers would rebel. In the case of India, the situation was made worse because of the election that was being held. Each country reacted by closing its borders to exports, thereby keeping the domestic price low. However, since these border closures were not expected, the international consequence was that prices rose rapidly, so rapidly in fact that world trade was endangered. One speaker described how close the world market for rice came to collapsing because of a lack of rice to trade. Hoarding by rice consuming countries and individuals, who also were unsure of stocks and supply, exacerbated the problem.


One part of the solution to this problem, of course, is greater communication among exporters and importers about the levels of stocks. However, communication is not enough. What is also required is agreement by all the exporting countries that they will not panic and close their borders when price looks like it will rise, while importing countries must agree not to hoard supplies when the market gets tight. Thus, what is needed is coordination and co-operation - if all countries can agree to keep borders open and trade flowing, price increases can be softened and world trade can continue. In short, countries have to have the expectation that borders will remain open, and this expectation needs to be fulfilled.


The idea of coordination and co-operation of the sort described above would have been heresy even a month or two ago. However, with events in the financial markets showing how critical it is for a coordinated approach to international finance, it is now time to once again think about international co-operation in the food area (international co-operation was an integral part of the grain trade in the 1960s, and was suggested as an option following the dramatic rise in prices in the 1970s). Indeed, one of the symposium speakers, speaking in the wrap-up session, suggested that now is a good time for some serious thought on how international co-operation could be structured around food security. In fact, efforts in the food area could and should be linked to efforts in the financial area.


With the British Prime Minister suggesting the need for a new Bretton Woods agreement (click here for the story in the Telegraph), now is the time to start thinking about how agriculture fits into the global trading system. Given its severity, the financial crisis will have a profound impact on the institutions that govern international trade and finance. It is critical that agriculture begin the process of thinking about how it will structure itself as it attempts to fit into this new environment.


This blog entry was co-authored by Murray Fulton. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca

]]> Structure of the U.S. Beef Industry tag:illativeblog.ca,2008://1.82 2008-09-25T16:00:19Z 2008-09-25T14:30:33Z Although the U.S. beef packing industry has always been concentrated, recent announcements pave the way for even higher levels of concentration. Specifically, the Brazilian beef processor, JBS, who last year purchased the third largest packer in the United States (Swift... Murray Fulton and Kathy Lang Although the U.S. beef packing industry has always been concentrated, recent announcements pave the way for even higher levels of concentration. Specifically, the Brazilian beef processor, JBS, who last year purchased the third largest packer in the United States (Swift and Company), announced its intention in March of this year to purchase the fourth and fifth largest packers (National Beef and the beef packing operations of Smithfield), as well as Smithfield's shares in Five Rivers Ranch Cattle Feeding (Reuters). Not only would these acquisitions make JBS the largest beef packer in the United States and further increase industry concentration, they also open the way for a high degree of vertical integration in the beef industry. ]]>

These developments are interesting, since if they proceed they would reposition the beef industry with an industry structure that is more in line with that in the poultry and pork sectors. However, as a recent article in Policy Issues points outs, it is not clear how the U.S. Department of Justice will rule on these latest acquisitions. A ruling was expected by some in September 2008, but antitrust reviews normally take between eight and sixteen months. We were unable to locate any ruling from the Department of Justice at the time of entry posting.


There are a number of economic and political factors to consider when determining whether to allow the acquisitions to proceed. Currently, there is overcapacity in the packing industry, a result of falling cattle numbers. The increased concentration resulting from the proposed acquisitions would assist in rebalancing supply and demand, albeit with the likely impact of reducing cattle prices paid to cow/calf producers. Allowing the purchase of Five Rivers Ranch Cattle Feeding to proceed would assist the beef industry in achieving the kind of efficiency gains that the poultry and pork industries have obtained with their substantial vertical integration and non-price coordination. However, allowing vertical integration on this scale is likely to be unpopular with producer groups and policy makers, who have traditionally called for limits to be placed on vertical integration.


Canadian producers obviously have an interest in the outcome; typically the industry structures that emerge in the United States eventually make their way north. It is interesting to note that there tends to be much more debate on these issues south of the border, with considerable research being undertaken in universities and policy centres and with producer groups taking strong policy stances. The debate and discussion surrounding the JBS acquisition raises questions about the Canadian beef industry's views on this topic. If there is a lack of formal discussion and debate in Canada, will the Canadian beef industry be caught flat-footed and struggling to remain competitive with the U.S. system? Is there any room for the Canadian industry to pursue a different path? Would a somewhat independent path be good for Canadian beef producers, and for the industry as a whole?


Further Reading:


Department of Justice. "Statement of Douglas Ross, Special Counsel for Agriculture Antitrust Division, U.S. Department of Justice before the Subcommittee on Antitrust, Competition Policy and Consumer Rights Senate Judiciary Committee" May 7, 2008. http://www.usdoj.gov/atr/public/testimony/232891.htm


Center for Rural Affairs. "Act to Halt Meat Market Mergers" petition. http://salsa.democracyinaction.org/o/2715/t/3528/petition.jsp?petition_KEY=802


The Beef Site. "US Farmers Oppose JBS-Swift Takeover." September 16, 2008. http://www.thebeefsite.com/news/24329/us-farmers-oppose-jbsswift-takeover


The Cattle Site. "Senator Against JBS Merger Monopoly." June 25, 2008.

http://www.thecattlesite.com/news/23331/senator-against-jbs-merger-monopoly

This blog entry was co-authored by Murray Fulton and Kathy Lang. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca
]]> Role of Economics in Public Policy - Oct 20th Symposium tag:illativeblog.ca,2008://1.81 2008-09-11T16:11:17Z 2008-09-11T16:12:02Z KIS has partnered with the Johnson-Shoyama Graduate School of Public Policy to host a one-day symposium on October 20th that will explore the current state of economic analysis in policy formation. Questions that will be addressed at this symposium... KIS Executive

KIS has partnered with the Johnson-Shoyama Graduate School of Public Policy to host a one-day symposium on October 20th that will explore the current state of economic analysis in policy formation. Questions that will be addressed at this symposium include: Are economists and economic analysis being used in the policy process? If so, how? If not, why not? Are economists being trained in the correct manner to be effective in policy decision-making? What is the best way to use economics in policy creation? The symposium will be held at TCU Place in Saskatoon, SK.

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The symposium's underlying premise is that economic analysis is a critical tool for policy formation, that numerous factors are eroding the role that economists play, and that these factors need to be addressed. The program begins with an opening speaker, followed by two panel sessions, closing comments from the opening speaker, and wrap-up remarks from a rapporteur. The symposium brings together people from academia, government, policy think tanks, and industry organizations.


Dave Pannell from the University of Western Australia is the opening speaker. Dave will explain economic concepts and tools that are valuable to policy makers. He will draw from his own experiences tackling environmental problems in Australia to explain how policy makers can effectively use economic analysis.


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Speakers in the morning panel session will be asked to share their perspectives on why a gap between economic analysis and policy decision-making exists. They will shed light on the types of analysis that can be useful, the issues surrounding obtaining usable data, the lack of appropriately trained applied economists, and the common views/myths associated with economic analysis.

Speakers in the afternoon panel session will be asked to share practical solutions to help bridge the gap between economic analysis and policy-decision making. Are we entering an era where policy think tanks substitute for in-house economists? How can policy makers and economists work together so that analysis is comprehendible, timely and useful? What competencies are required to apply the tools of economic analysis?


The panel session agenda has been arranged to ensure plenty of time for audience participation and discussion. There will be an extended lunch break to allow registrants to network or take a short walk on the river bank to enjoy the sights of Saskatoon in early fall. A nominal registration fee will be charged to cover the costs of meals/breaks.


For a full agenda and to register, please visit:www.schoolofpublicpolicy.sk.ca

]]> Effective Public Policy - Rural Credit and Extension tag:illativeblog.ca,2008://1.80 2008-09-04T18:36:29Z 2008-09-04T18:43:24Z I recently had the opportunity to consider what has made public policy on rural credit and agricultural extension in Canada effective over the years. This opportunity came when I participated in a seminar on agricultural technology extension and rural... Murray Fulton

I recently had the opportunity to consider what has made public policy on rural credit and agricultural extension in Canada effective over the years. This opportunity came when I participated in a seminar on agricultural technology extension and rural financing in Beijing and had the chance to compare policies in these two areas between Canada and China. Here are some of my observations and thoughts.

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Experience in Canada

Rural credit and agricultural extension have been critical to the development of Canadian agriculture. Rural credit has been important in a number of ways: (1) personal financial services (e.g., savings accounts, loans) were provided to farmers and rural residents; (2) financing was provided for the purchase of seasonal inputs, machinery and buildings, and land; (3) formal loan requirements led to greater emphasis on farm accounting and farm management; and (4) a well functioning financial system allowed excess funds to move back and forth between agriculture and other sectors in the economy as they were needed. Agricultural technology extension encouraged the adoption of new technologies, which in turn lead to major productivity increases and/or improvements in the environment.

In retrospect, an overall policy framework in Canada can be identified. For both agricultural credit and extension, this framework included government involvement, private sector commercial activity and collective action by farmers and rural residents (e.g., credit unions, farmer associations), with the timing and magnitude of these three elements differing between the two areas. This framework, however, was not developed in advance. Instead, it was reactive - it was created and modified over time in response to the needs of farmers, rural residents and the agricultural industry. While there were important pieces of legislation that created the foundation for this framework (this legislation included acts establishing the experimental farms, credit unions, the Prairie Farm Rehabilitation Administration, and Farm Credit Canada), most of the framework was created by using this and other legislation in ways that addressed problems as they arose.

Experience in China

The rural credit system and the agricultural technology extension system are also very important to agriculture in China. Although the two systems have had a long history and have at times worked very well, there is an understanding that both systems are facing a number of problems at the current time.

For agricultural extension, these problems include: (1) a lack of investment in agricultural technology extension (China lags behind other countries in the percentage of the value of gross agricultural production that is devoted to extension); (2) a relative lack of extension personnel in the crop and animal areas; (3) a lack of extension personnel with professional knowledge; (4) a lack of attention given to the needs of farmers; and (5) insufficient time for agricultural extension personnel to carry out extension activities because they are being asked to do other things.

The rural credit system is also facing a number of challenges. Although the formal credit institutions (Agricultural Bank of China, Rural Credit Cooperatives, and Postal Savings) provide financing to farmers, in many areas the largest source of credit is from private money houses or relatives and friends; many rural residents also do not have access to places where they are able to make deposits. The Rural Credit Cooperatives lack competition at the local level, and both they and the Agricultural Bank of China have pulled out of many rural areas in favour of more lucrative urban markets. The Rural Credit Cooperatives are often too closely linked with the local township government, a situation that has resulted in excessive levels of bad debts in some areas. The consequence is that on average farmers are not able to get access to the capital they require to support and develop their farming operations and the rural businesses they wish to start (the latter are much more capital intensive than farming and require large loans). The lack of access to funds is exacerbated by high interest rates and short loan periods.

What Did I Learn?

Although there are many reasons for the poor performance of the current Chinese system, a number of key (and interrelated) factors can be identified: (1) there has been a reliance at particular times on either government or commercial enterprises, rather than allowing both to emerge and co-exist; (2) farmers and rural residents have not been allowed/encouraged to directly participate via producer associations and credit unions; (3) the organizations that do exist have often become politicized or captured by political/business interests; (4) staff professionalism has not been encouraged or rewarded; and (5) legislation in this area has been prescriptive rather than enabling.

In addition to providing a roadmap for what could be done in China to address its problems, the above list serves as a reminder of what has been responsible for the success we have had in Canada. Effective policies do not just happen; instead they are the direct result of paying attention to institutions and ensuring that they work properly, of developing and rewarding professional management and staff, of allowing farmers to be actively involved, and of using policy in innovative ways while ensuring that it is not captured by specific interests. And while these observations and lessons were obtained from an examination of rural credit and extension, they apply to virtually every area of agricultural activity in Canada today.

This blog entry was authored by Murray Fulton. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca

]]> How COOL is it? tag:illativeblog.ca,2008://1.79 2008-08-28T15:58:00Z 2008-08-28T02:44:40Z In the 2002 Farm Bill, the United States introduced country-of-origin labeling (COOL) for various commodities. COOL implementation has twice been delayed, but it will now come into effect on September 30, 2008 based on the revisions outlined in the 2008... Kathy Lang Library of Parliament 2003). However, the list of exemptions for the so-called mandatory regulation results in a great deal of food not having to carry country-of-origin labeling. ]]> AMS Website).

Exempt-status has been granted to hotels, restaurants, in-store delis, and food stands. Retail stores with sales under $230,000 and butcher shops also do not have to abide by COOL regulations. And if the product undergoes some type of processing - breaded, in a sauce, chocolate-covered, cooked, smoked, cured - COOL does not apply. For example, chicken fingers, meatballs, salad mix, and frozen mixed vegetables are all exempt from country-of-origin labeling.

It is an admirable goal that consumers should have the right to know where their food comes from. Outbreaks of food-borne illness such as E.coli O157:H7 contaminated spinach in 2006 and Salmonella Saintpaul tainted peppers in recent months offer support for COOL legislation, as do statistics on meat recalls: in 2007, 33.756 million pounds of beef were recalled in the United States due to E.coli contamination (Marler blog). The recent outbreak of listeriosis from contaminated Maple Leaf meat products may lead to Canadian consumers requesting similar legislation.

However admirable, the reality is that we live in a world where Americans spend 47% of their food expenditures away from home, and those establishments are exempt from COOL, so does COOL really meet the objective of letting consumers know where their food comes from? And of the food that is consumed at home, the growing popularity of ready-to-heat and ready-to-eat meals and side dishes (which are also COOL exempt) means that COOL still fails on fulfilling consumers' right to know.

At this year's Farming for...Profit? Conference held in Moose Jaw at the end of June, Flynn Adcock from Texas A&M presented some statistics on the value of products subject to COOL. Of the $1.03 trillion that Americans spent on food in 2007, only 2.7% of these expenditures are imported food items that fall under COOL. At first blush, this percentage sounds miniscule, but that amounts to $28.9 billion, $7.5 billion of which are products imported from Canada.

Narrowing our focus to beef exports from Canada to the U.S., we find that COOL is likely to have a substantial impact on the Canadian beef industry. In 2007, Canada exported 1.38 million head of live cattle worth $1.489 billion to the United States. Beef exports in 2007 were 288,657 tonnes worth $985.46 million. Nearly 80% of Canada's beef exports are to the United States and this trade is worth $2.47 billion (Canfax website).

How has the impending COOL regulation affected beef trade thus far? A grandfather clause allowed any animals that entered the United States by July 15, 2008 to be labeled as U.S. origin. Statistics show that up until July 15, feeder exports to the U.S. were up 60% from last year. As the figure below indicates, weekly feeder exports declined significantly after July 15th but are nearly on par with 2007 exports only four weeks after the grandfather date took effect (Canfax Weekly Reports). The decline was only expected to reverse if demand outweighed the cost of labeling and tracking. Early estimates were that COOL would cost $2 billion in its first year of implementation (Carter and Zwane). Revised estimates are $133.6 million in the first year - $44.6 million for record-keeping and $89 million for implementation (AMS Website). What might be working in Canada's favour is the fact that the U.S. beef herd has been contracting for the last two years, so U.S. feeders and packers may still need to source Canadian cattle to maximize utilization and capacity.

Figure 1. Weekly Canadian Feeder Exports to the United States, weeks ending April 26 through August 1

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Source: CanFax Feeder Export Statistics

Do consumers prefer products grown within the borders of their own nation? Maybe so, but are they willing to pay for that information? The costs borne by players in the system will make their way down to increased food prices. One objective of COOL was to narrow consumer's information gap; perhaps the gap that needs to be filled is consumers' awareness of the testing and screening protocols that were already in place previous to COOL. Consumers also need to understand the limitations of COOL, since half of their meals are outside the home where COOL has no jurisdiction.

It has been argued that COOL originated as a way to end low commodity prices. Low commodity prices may have been the case seven years ago, but certainly not today when prices for grains, fruits and vegetables are at all time highs. Some have said that COOL is in direct conflict with trade liberalization and the goals of the Doha round. With trade talks collapsing at the end of July and a U.S. presidential candidate interested in renegotiating NAFTA, could it be that the U.S. is not concerned about how COOL will affect trade relationships, as long as consumer fears are addressed.

This blog entry was authored by Kathy Lang. To read additional Illative Blog entries or to leave comments on this entry, please visit www.illativeblog.ca. The Illative Blog is an initiative by the Knowledge Impact in Society (KIS) Project based out of the University of Saskatchewan. Email correspondence can be sent to kis.project@usask.ca  






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