By TOM BUTTON

It will be a roller coaster ride, and it's time to
learn how to strap on the seatbelts.
That's the fast growing consensus as the U.S.
Congress and President Bill Clinton get set to
unleash a new farm bill that will dominate American
farm policy for the next seven years.
There's also consensus that Ontario farmers have no
choice but climb on that roller coaster. The only
way off is to stop growing corn, soybeans and
wheat.
"We're going to see a lot more price volatility,"
predicts George McCaw, policy analyst for the
Ontario agriculture ministry assigned to tracking
farm bill impacts on farmers north of the border.
"American corn planting will go through the roof
next spring," McCaw expects. "The year after that,
we'll see a big swing to soybeans.
"Instead of being locked into historical planting
patterns in order to make sure they keep getting
their government cheques, American farmers will
have a lot more flexibility to respond to market
signals."
Clinton and the Congress face a Dec. 31 deadline to
put the finishing touches on the 1995 farm bill.
Intense talks continue to focus on myriad details,
but it looks as if Republicans in the House and
Senate are the big winners.
The new farm bill will do the two things the
Republicans insist on. It will chop federal
spending, cutting US$2 billion in subsidies to
farmers. But it will also get Washington out of
farmers' decisions, allowing them to plant what
they want where they want.
Indeed, the Congressional version of the bill
emphasizes that point with its name, the
Agricultural Market Transition Program. See page 27
for details.
But will it put Canadian and American farmers on a
more level playing field? "It depends on how prices
evolve," McCaw says. "Under most scenarios, the
Americans will continue to get more than Ontario
producers."
The final farm bill will likely authorize cheques
to American farmers, whether prices are high or
low. The single biggest change in U.S. farm policy
is that subsidies won't be linked to either prices
or production. Instead, American farmers will get
essentially the same federal cheque, no matter what
they grow and what they earn.
Ontario farmers, by contrast, will get more
government help in years with poor crops or poor
harvests. In order for Ontario farmers to get the
same level of support as American farmers under the
new farm bill, therefore, markets will have to be
bleak.
Brian Doidge, economist at Ridgetown college, says
Ontario corn and soybean producers will be forced
to do a much better job protecting themselves
against market risks.
"Right now we've got about 15 per cent of producers
using options, up from about five per cent when we
first started talking about them 10 years ago,"
Doidge says. "With the new farm bill, everybody is
going to have to know how to use options."
Doidge is already telling farmers to pencil out
their cost of production. "Watch it like a hawk,"
he says. "And not just fertilizer and seed. You've
got to know your overhead too."
He is also urging growers to get used to selling
crop up to three years before they grow it when
there is a chance to lock in profit, and then
protect themselves with options or hedging
strategies.
"There's no question there are going to be big
swings in U.S. corn and soybean acreage," Doidge
says. "That means big swings in prices too, and a
lot of pressure on farmers to learn risk
management."
Terry Daynard, executive vice president of the
Ontario Corn Producers Association warns that the
U.S. government won't be able to resist meddling in
farm politics. "We're seeing a long-term,
seven-year commitment to reduce costs, but all
kinds of things are going to happen in those seven
years, including two presidential elections,"
Daynard points out. "It sounds good, but I'm not
sure it's going to happen.
"The biggest downside is that it's going to take
away a lot of the set-aside requirements," Daynard
says. The loss of the set-aside should boost corn
plantings, he points out, but the new rules on
planting flexibility will let farmers grow crops
such as soybeans that they veered away from in past
because of lower subsidy levels.
"There's going to be more of everything," Daynard
says. And while he agrees the farm bill paves the
way for pricing volatility, he thinks the fact most
corn growers also grow soybeans and vice versa
should moderate the effect on a farmer's overall
income.
Daynard is also far from sure the volatility will
be much greater than farmers have had to cope with
under previous farm bills. "One of the factors that
has caused a lot of volatility has been the U.S.
government jumping in and out of the market," he
says. "I'm not sure it could get any worse.
"However it turns out, I'm glad [provincial
agriculture ministry] Noble Villenueve is taking
GRIP coverage to 85 per cent," Daynard adds. "We
may need it."
   

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