The Canadian government’s intervention in Agricultural Markets
Agriculture is of major importance to the economy of Canada as it represents 1.5% of gross domestic product (GDP). “Agriculture is an industry that, in the absence of government farm programs, is a real-world example of the perfect-competition model” (McConnell, Brue and Flynn, 2012).
A price support is the minimum legal price a seller may charge, usually set above the equilibrium. They are the reason our society loses because they add to the economic inefficiency. This is due to the fact that price supports enhance the over-allocation of resources to agriculture, therefore, “the marginal cost of the extra production exceeds its marginal benefit to society” (McConnell, Brue and
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Although it encourages a fair chance to our native Canadian producers, “the result is a less efficient use of world agricultural resources” (McConnell, Brue and Flynn, 2012). A similar response is outlined in the Cocktail Party Economics textbook, relating to the milk industry; “There are stiff tariffs on imported milk, and foreigners don't really sell in the milk market.. This is good for dairy farmers but not so good for society” (Adomait and Maranta, 2012). That system is referred to as the Supply Management System, where native producers are allowed to monitor the price and supply of their goods. The supply management system is an example of a governmental intervention as it is a cartel which permits Canadian producers to sell their goods for a higher price when compared to a free market price. “Cartels are groups of producers that agree to not exceed certain production quotas in order to keep market prices up” (Adomait and Maranta, 2012). “These farm cartels continue to exist because the government imposes trade restrictions on these particular foodstuffs and enforces strict food safety laws.” (Adomait and Maranta, 2012). The supply management system is endorsed by native producers, however when compared to a market policy, it does not bring advantage to consumers and thus reducing …show more content…
There is some controversy on the subject as some people consider efficiency as the main goal, while others believe it should be the fair treatment of producers. “Charges levied at these monopolistic agencies are that they raise consumer food costs unduly, allow inefficient farmers to persist in the sector, and bar young farmers from entering the poultry and dairy industries by inflating quota values and thus raising the cost of farming operations” (Skogstad, 2001). A quote I personally agree with is, “the government gets it wrong not because it is evil but because when it disconnects itself from free markets it loses valuable information about what people value or a firm’s opportunity cost” (Adomait and Maranta, 2012).
On the other hand, government intervention can be extremely useful. In order to prevent monopolistic action in the agricultural market, the government can either “create laws that encourage competitive markets, regulate the monopoly, or own the monopoly” (Adomait and Maranta, 2012). By intervening, the government can balance the efficiency/equity scale by giving small producers a chance to compete in the
A trip to any supermarket in Canada will reveal nothing out of ordinary, just the usual of array of fresh and packaged goods displayed in an inviting manner to attract customers. Everything appear familiar and reassuring, right? Think again. A closer microscopic inspection discloses something novel, a fundamental revolution in food technology. The technology is genetic engineering (GE), also known as biotechnology. Blue prints (DNA) of agricultural crops are altered and “spliced” with foreign genes to produce transgenic crops. Foods harvested from these agricultural plants are called, genetically modified (GM). Presently, Canada has no consumer notification; GM foods are being slipped to Canada’s foods without any labels or adequate risk assessments. This essay argues that GM foods should be rigorously and independently tested for safety; and, consumers be given the right to choose or reject GM foods through mandatory labels. What is the need for impartial examination of safety of transgenic foods? And why label them? GM foods are not “substantially equivalent” to conventional foods, genetic engineering of agricultural crops is not a mere extension of traditional plant breeding, and finally, there are human health implications associated with it.
this notion of stable supply and demand affected prices of farm commodities. “Low prices on
Farming in Canada is a backbreaking occupation. Due to the fact that many tribulations come alongside farming, the outcome is not always a positive one. Many problems can occur with the climate and soil, which creates difficulties in crops and livestock. This essay will show that farming is an extremely tough job in Canada. The sources that will be used are “Food and Agriculture”, “Fruit Growing Industry in Canada”, “Making Connections” and “www.omafra.gov.on.ca”.
Fair trade international is also jointly owned and managed by certified producers. Producers are able to influence the overall strategy, premiums, prices and standards through fair trade internationals board, its consultation processes and commitees. Stable prices: there is a fairtrade minimum price that’s set to cover the cost of production sustainability, even when prices fall in the world market drop. Empowerment of farmers and workers: farmer groups must be certified by having visible administration and democratic basis and structure. There must be representatives of workers on the committees that decide how to use the premium from fair trade. Fair trade supports both groups to develop in this area. A Fairtrade Premium: the premium helps them create a better life for themselves. It is paid in addition to the agreed upon fair trade price, and they choose democratically how to spend it. Usually they spend it on health care, education, processing facilities or farm improvments to improve
To really begin to understand this complex topic a person really needs to understand the basics of agricultural subsidizing. A subsidy is defined as a grant by a government to a private person or company to assist an enterprise deemed advantageous to the public (Mish, 2003). More specifically, in the agricultural industry the government provides financial assistance to producers in the farm industry in order to prevent decline in production. The government does this by providing financial assistance to farmers and by managing the cost and supply of certain commodities. There a few reasons for this. One reason is to provide assistance to family sized farm owners who have trouble competing with commercial farms. This is supposed to maintain an efficient market balance. Another reason is to control the prices of commodities and keep the global food prices low. There are two main ways that payments are made. The payments may be made directly based on historical cropping patterns on a fixed number of acres. Or they can also be made depending on current market prices. Farmer’s may be guaranteed...
...struggling to earn any income at all and sometimes do not even get the opportunity to eat. Another issue that Raj Patel did not touch on is the lack of care consumers have for the farmers. It seems that consumers care about farmers about as much as the corporations do, which, in my opinion, is not a lot. When consumers only care about low prices and large corporations only care about making a profit, the farmers are left out to dry. Many consumers believe “food should be available at a bargain price, a belief that relies on labor exploitation and environmental exhaustion at multiple points along the commodity chain.” (Wright, 95) Corporations as well as consumers generally tend to be selfish and I think Raj Patel is afraid to mention this. If only these people cared a little bit more about each other I believe the hourglass of the food system will begin to even out.
Tweeten (1986) in his study on “Impact of Domestic Policy on Comparative Advantage of Agriculture. “He revealed the input output prices through supply and demand with open market criteria. They have no comparative advantage in some of products. Absence of price supports and trade restrictions causes that commodities would be
An early review of government market interventions shows that discretionary based interventions usually fails in accomplishing targeted policy objective compared to interventions based on rules as the latter proves to be more successful in a market economy. At the same time, discretionary interventions gives results that are undesired that could be quite damaging and high cost to the government. The harmfulness in this aspect can be defined as total impact on those involved in either marketing or producing commodities.
Farmers are essentially the back-bone of the entire food system. Large-scale family farms account for 10% of all farms, but 75% of overall food production, (CSS statistics). Without farmers, there would be no food for us to consume. Big business picked up on this right away and began to control the farmers profits and products. When farmers buy their land, they take out a loan in order to pay for their land and farm house and for the livestock, crops, and machinery that are involved in the farming process. Today, the loans are paid off through contracts with big business corporations. Since big business has such a hold over the farmers, they take advantage of this and capitalize on their crops, commodities, and profits. Farmers are life-long slaves to these b...
This view implies that governments intervene for many reasons, including the redistributional and stablisation functions. While market failure is one reason for intervention, other considerations, including questions of equity and social justice determined the nature and the extent of government intervention. This point was expanded upon by Groenewegen (1990,2) who argued that the extent of market intervention in the supply, distribution and redistibution of goods and services are not dictated by purly political and ideological considerations, other considerations may play a role including the failure of the market in certain instances to ensure efficient, equiable allocation of resources.
The supply and demand of the market creates a balanced equilibrium price. This is because of the market price; however, in this case, market price is changed and farm programs may easily result in overproduction or loss of innovation. Manually marketed prices may result in an unbalanced equilibrium in which not both the consumers and producers can benefit from the market. The market works with an invisible hand that regulates itself when each individual in the market strives for personal gains. There may also be government scandals and corruption involved in agriculture subsidies.
Inclusiveness, in the context of agribusiness value chains in developing countries, refers to the beneficial participation of smallholders (Da Silva & Baker, 2009, p. 6). Contract farming has considerable potential for integrating smallholders in to export and processing markets, and into the modern economy (Kirsten & Sartorius, 2010, p. 504; Wang, Wang, & Delgado, 2014, p. 2). Contract farming is a form of vertical coordination whereby agribusiness firms contract farmers to produce for distant markets or to grow raw material for their processing facilities under various conditions (Prowse, 2012, p. 5). These conditions might include providing seed, other inputs, credit, and technical services to smallholders while guaranteeing supply to the agribusiness firm. It is a mechanism by which agribusinesses replace or supplement primary agricultural production with supply from smallholders (Glover & Kusterer, 1990).
As well as the high crop yield, there are many other benefits of farming this way, it assists the farmer to farm, monitor and protect his land and livestock. Intensive farming also brings down the price of fruit and vegetables making it more affordable for families, and due to food being less expensive can help in solving worldwide hunger. The Environment Protection Agency regulates how livestock, pesticides and animal manure are obtained, so farmers help to provide healthy produce. Another great advantage is that large productivity of food is possible with the least amount of land.
...re an attractive and lucrative business for future generations. Trade agreements need to be one hundred percent fair to both parties and we need to encourage the local farmers in our communities. Local farmers are barely staying afloat in developing countries because there isn’t enough subsidy provided for them. And this is the industry must people in these countries rely on. Philip Legrain states that countries like Japan, Germany, Britain and South Korea are losing their farmers because they aren’t earning enough by simply staying in the business. Western countries gain all the benefits of the laws set by the organization and in my opinion, that is unfair. The change we ae looking for starts now from us and our daily economic decisions. Because everyday we get to vote for what to purchase and the more we purchase ethical produce, the better for the world at large.
Growers are generally isolated from a majority of end-consumer and have little control over input costs or process received for their produce. The primary exception is where local farmers sell produce in local markets and where there is a direct link from farmer to consumer. In most traditional agriculture marketing systems growers tend to receive minimal profit. From the perspective of the chain actors, any integration up or down the VC can help them to receive a greater share of the