Wednesday, 11 May 2011

Someone is Paying Attention

Paul MacNeill, in his various roles as newspaper editor, and CBC commentator on radio and TV, has spoken more forcefully about the crisis in rural PEI than anyone else. Like his late father Jim, Paul doesn't take any prisoners, but it isn't just raw criticism, he's got a good feel for what has to change for things to get better. This week he writes about a very innovative  approach to giving primary producers a bigger stake in the food system.

How to save RURAL PEI

Second Opinion by Paul MacNeill, publisher

It is an all too familiar scene. Farmers forced to sell their land to pay the bills, paving the way for once productive land to be replaced by cottage sub-divisions, or even worse left to simply grow over. Many other farmers barely eke out a meager living.
The flow of people and money from rural Canada is staggering. Our population is aging; our ability to produce products to sustain our nation in the long term is eroding. The vibrancy of rural Canada is hemorrhaging.
And our politicians are unable to grasp the crisis. Just read the Ghiz government’s glossy Rural Action Plan as a prime example of a simplistic non-solution to the real issues.
The real issues are simple. Our farmers are paid too little. Our population is aging and we are not creating jobs to attract new residents, let alone keep the youth we have.
It’s an issue that impacts all of Prince Edward Island and rural Canada, but one that has stymied politicians in search of a quick fix that will never work.
Our agricultural model is built around the reality that farmers produce commodities and are paid for commodities. How much it costs to produce has nothing to do with the price paid. That is entirely a product of supply and demand. In real terms it means potatoes selling for less than the cost of production or fishermen selling canners for $2.75.
It is a system that guarantees the most important cog – the farmer - receives the least. A loaf of bread costs in the neighbourhood of $3, of which the farmer receives only pennies and has no capacity to increase the price of the loaf. The final cost is defined only after everyone else - the bakers, millers, middlemen, storage providers, grocery store conglomerates and trucking companies – have taken their share.
It is here that farmers should target their focus, not out of frustration or envy but as the only place to significantly improve their own bottom line.
Collectively farmers have the capacity to pool resources to invest in all those other businesses that add value to the commodity they produce.
Each year farmers go cap in hand seeking bank financing for input costs, items such as fertilizer, fuel, and seed. This is this model that has largely created the massive struggle in Canadian agriculture. Farmers use their assets, such as land, to guarantee the costs of their inputs.
But what if the true value of farm land was utilized to create seed funding for an agriculture focused, professionally run and independently managed mutual fund that would invest on behalf of Island farmers into those companies adding value to farm commodities.
I can hear you now ... but the farmers are broke and barely able to pay their own bills, how in the hell can they afford to invest in other companies?
Surprisingly easily.
Most farmers do owe money. But most also own land unencumbered of debt. This property is key to the creation of the mutual fund. The sole requirement of government is to place a fair market value on that land, and then loan that amount to the farmer, payable to the mutual fund. Collectively this is the seed money for the fund.
Government then gets out of the way and lets private enterprise do the rest. The fund invests in the value added chain. The farmer uses his mutual fund asset to guarantee inputs. And dividends paid from the fund will allow the farmer to repay government and diversify. It’s good for the land and the bottom line.
The potential benefits to the farmer and rural communities are striking. As farmers prosper the value of land will increase which means greater tax revenue. Vibrant farms infuse communities with cash. New businesses will open that will require workers. The population decline seen in rural PEI will cease. Residential properties will increase in value.
The concept is the idea of New Zealand native Steve Nixon, who now calls Saskatchewan home. He has long ties with agriculture and communities and believes something dramatic must be done to protect our rural way of life. If we keep doing what we have always done, we will get the same disappointing results.
His idea turns the traditional farm business model on its head. It is exactly what PEI and rural Canada needs.
This is neither a co-operative nor a government managed program. It is simply a strategy to pool the collective assets of Canadian farmers to allow them to put more dollars in their pockets.
Perhaps the closest model is the Ontario Teachers’ Pension Fund, one of the largest investors in the country. It invests in companies, such as the parent company of the Toronto Maple Leafs, with the sole purpose of growing the wealth of teachers.
Take that model and transfer it to agriculture. Grow the wealth of farmers and we will grow rural Canada.
Paul MacNeill is Publisher of Island Press Limited. He can be contacted at

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