Tuesday, January 09, 2007

Canada Takes Issue With Corn Price Supports

It is reported in today's Des Moines Register that the Canadian government has decided to take a complaint to the WTO with respect to the price supports that US farmers receive. Canada says that the price supports encourage overproduction and distort trade. It is said that Canada's complaint is similar to one that Brazil brought over US cotton price supports.

Paradoxically the Canadian International Trade Tribunal ruled last year that Canadian corn growers had not been harmed by US price supports.

Quite possibly the reverse is true. US price supports stabilize the market price farmers receive by setting a floor under it. If the market price goes below the cost of production, the supports kick in. Because the US corn market is big enough to swing world market prices, it's arguable that the support works to the benefit of all corn farmers in the world, courtesy of the US taxpayer. Without that safety net there'd be nothing to prevent the North American market from crashing and taking Canada's corn growers along with it.

While we're on the subject of international trade, one has to wonder: if no corn grower in Canada stands to gain by this, what's the point?

The point is, it's a political realignment. By this, Canada can gain credibility with those in the WTO who are waving the bloody shirt of the third world dirt farmer in his loincloth in an effort to bust open world markets for their grain, which IS produced on the backs of those long suffering souls. Brazil is one of these underdeveloped countries-and it's the largest soy exporter in the world. India and South Africa aren't far behind and Argentina's in that crew as well.

If Canada's so concerned about free markets, they'd abolish the Canadian Wheat Board tomorrow morning before coffee break and have done with it. But they won't, because they aren't. This is about posturing and positioning.

I had a discussion with one of my correspondents on this subject not too long ago. He's in India. I made the same argument, that the price the Indian farmer gets for wheat is due, in some measure, to US price supports. He said "Well, our farmers don't take grain to the elevator and get a price. They are mostly small farmers and they sell the grain to a middleman who's usually the village loan shark. They take what they can get."

I told my friend that rather than that being an argument for demolishing price supports in the US and posturing before the WTO with a cynical appeal to the poor third world farmer, it was an argument for agricultural reform in his own country.

Stay tuned....this issue will be around for a while.


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