backSowing the seeds of capitalism
By BERNARD TOBIN
TIETZOW, Germany - German dairy farmer Mattias Beuster says his processor isn't paying him enough for his milk. He hopes to cut a better deal when he can renegotiate his contract in 2002."They have big lawyers, so we have to stay with them," he says through an interpreter. Processor-producer battles over the value of milk? Welcome to farm capitalism in East Germany. Beuster's processor got into the former German Democratic Republic market when the German government was hungry for free market investors in 1991 after unification of East and West Germany.
"They got a great deal," he says. But capitalism converts like Beuster want a bigger piece of the milk-price pie. "There are so many dairies that would step in and pay much better," he says.
Beuster is one of the new breed of farm entrepreneurs, who, with the aid of government financing, has been helping germinate the seeds of free market agriculture since the crumbling of the Berlin Wall triggered the communist collapse in 1989.
The boarded windows and broken ceilings of the Soviet army barracks, which line the highway to Beuster's farm, 40 kilometres northwest of Berlin, are a testament to over 40 years of communist rule in East Germany. The last troops left the area in August, 1994.
But across the grey winter landscape, colours not seen before German unification in 1990 continue to emerge. Neon Volkswagen dealership signs blink methodically in lifeless winter wheat fields, and bulldozers diligently excavate new industrial sites every other kilometre.
The farm Beuster manages in the village of Tietzow is one of 4,500 former collective farms, more than 70 per cent of which have been converted to farm co-operatives, partnerships, or joint-stock partnerships. Over 22,000 farmers work land that was returned to the original owners after unification. Beuster's farm is part of the four-farm Agro-Glien co-operative, which set up shop in 1991.
Beuster gets 63.5 pfennig (C$0.584) per litre for his milk. His production cost is 49.2 cents. That's a little over nine cents profit per litre, but it's not enough for the young dairyman who studied agriculture at Humboldt University in Berlin.
By comparison, in 1994, gross income per litre of milk for 400 Ontario farmers who participated in the Ontario Farm Management Analysis Project was 57.7 cents. Total cost of production, including interest and depreciation was 46.2 cents for a profit of 11.5 cents per litre.
"People buying milk pay little," Beuster says. A quick price survey of several downtown Berlin supermarkets suggests has a point. A one-litre carton of 3.5-per-cent-fat milk averaged C$1.52, while a loaf of bread will set you back C$3.50. How does Beuster compare the old East German times to the free-wheeling days of capitalism?
"There's a lot of security...but adjusting to a market economy has taken its toll," he says. The price of a loaf of bread, a staple food item East Germany subsidized heavily, has gone from C$0.05 to about C$3.50. But the German Deutsch- mark has stabilized, allowing farmers to venture into the trading world with confidence. Before unification, the East German mark was, at times, worth only one-tenth the value of its West German equivalent.
In five short years, farmers in East Germany are already producing milk more cheaply than farmers in West Germany, and are quickly closing the gap in cereal and rapeseed production efficiency.
The West remains inefficient primarily due to the predominance of small family farms. Almost 90 per cent of the 550,000 farms in the west worked fewer than 124 acres in 1994 - 55 per cent were classified "part-time".
East German farmers have benefited from huge government financial backing and are advancing at an incredible pace compared to farmers in Poland and Russia, other countries trying to move to market economies.
Livestock farmers, however, have not had a smooth transition. Since 1990, beef cattle numbers have dropped by 47 per cent, and hog numbers are down 70 per cent.
The consumption of beef and pork continues to decline in Germany. Much of the beef decrease can be attributed to fear of bovine spongiform encephalopathy or Mad Cow disease. Pork production has suffered from a large-scale hog cholera-induced slaughter and poor prices, thanks to inefficient production and marketing structures.
Overall, in 1995, consumption of beef and veal is estimated at 11 kgs per person; pork, 38.5 kgs; and poultry, which shows the most growth, 8.2 kgs.
Jochen Borchert, Germany's federal Minister of Food, Agriculture and Forestry, says the government has been aggressively rebuilding East German infrastructure to keep people on the farm.
"We had to manage the structure change during a very short period, and we are doing everything to prevent these people from leaving the rural areas."
He says Germany has been successful because it did a better job of managing the transition to capitalism than other eastern European countries. A fast structural change without creating jobs at the same time won't work, he says.
They also have the money. East German wages are already 80 per cent of those earned in the west. But many farm workers have been displaced since communism was ushered out and the unemployment level is expected to be 15.5 per cent in the east for 1996.
Eastern farms are now more productive, but efficiency has cost jobs. Under communism, 400 people in the Tietzow village worked in agriculture. Seventy people used to work for Beuster's farm when it was a collective farm. Today, the dairy operation employs 11 people. The farm houses cows in a freestyle, slatted-floor dairy barn and a double-10 herringbone parlour.
Only two other farmers, who run private farms, work in agriculture. So what happened to all those farm workers in the village?
"Few are jobless, but they should have been jobless in GDR days," quips Beuster, referring to the lazy days of communism. Many have fled for Berlin and the west, others have taken pensions, and some have taken jobs with new industry. Before reunification, 850,000 people worked in East German agriculture. Today, 157,000 do.
The official government policy is to encourage all farmers to return to farms expropriated during land reform after 1949, but small farmers are given little financial support, sources say. Farmland expropriated between 1945 and 1949 has not been given back to original owners, mostly the aristocracy. Borchert says farmers are key to Germany's social and environmental landscape. "Without agriculture this couldn't be preserved."
But East Germany is encouraging bigger, more efficient farms. Small peasant farmers - under 100 sows, fewer than 40 cows - are discouraged unofficially, one German farm insider says. Land also comes cheaper in the East - about half the Western rate.
At the Tietzow co-operative farm, government support is plentiful. The 870-hectare (2,175-acre), 250-cow operation received a C$1.34-million loan at 8.3 per cent interest, but the government is paying over 70 per cent of the interest as a grant to the farm, which produced 1.3 million litres of milk in 1995.
Beuster's friend Udo Folgart, who manages another of the co-operative's four farms as well as a creamery in the neighbouring village of Paaren, has a nose for business. He wants to cut out the middle man gobbling up the profits from the creamery's 100,000-litre annual cheese production. "We want to go directly to consumers. We don't want to go through supermarkets....At the end, we'll make a better profit for ourselves."
Less than four per cent of the co-op's income is earned from cheese, but the German government has put up a C$108,000 grant, roughly 40 per cent of the capital to get Folgart into the processing business. Half the cheese is shipped to supermarkets in Berlin. The rest is sold directly to consumers from a retail stand at the creamery, located at the local fairground and recreation centre that doubles as a demonstration farm site.
About 25 per cent of the land worked by the co-op's four farms is being rented from the state, which holds land in trust until the original owners can be found. Government arbitrators are still trying to sort out who owns much of the property, a task made more difficult thanks to the lack of East German land record keeping.
The co-op members also rent small parcels of land from 56 private owners who don't want to go it alone, Folgart says. Land rents are determined using a $C3.25-per-soil-point basis. The point scale ranges from zero, the very worst farmland, to 100, for the best German land available. The average for the co-op land is 28 points, or C$91 a hectare per year ($36 per acre).
With no chance to renegotiate the co-op's "milk treaty", Beuster says the co-op will have to squeeze more profit out of other areas. Last year, cow performance on Beuster's farm improved by 1,000 kgs.
But he's looking forward to 2002 when he can put the squeeze on his processor. "Because we're bigger, many processors will be wanting us."
Farmers will fight for landowner rights
Five generations of Fishers have farmed in Burlington, going back to 1818. For most of that time, local hospital fundraisers were the extent of the family's political involvement.But 37-year-old Jamie Fisher, who grows fruit and cash crops with this father Peter, says there have been a few "wake-up calls" in past few years.
"My six-year-old daughter asked me if being a farmer makes me the bottom of the food chain," says Jamie Fisher, who has four young children. "In a way, she was right."
The other eye-opener came three years ago when the Fishers were told they could no longer sell fruit pies out of their farm retail store because of a zoning restriction.
Fisher is part of a growing alarm over the erosion of landowners' rights across the province. "There isn't anybody in this room who hasn't experienced that frustration," he says, referring to the 100 concerned farmers who battled fog and snow to attend a forum on landowners' rights in a church basement in Hornby, north of Milton, late January.
The meeting was part of a process initiated by the Halton Region Federation of Agriculture to draft a statement on landowners' rights, which is hoped to be completed by March. Fisher says reaching a consensus will be difficult, especially on issues such as severances; but having a concrete position will help get action from politicians in specific areas. A draft statement, for instance, says landowners should be notified immediately of any change in zoning or designation. Other issues include expropriation, trespassing, property tax, and right to farm.
"The way it's going, it's going to put us out of business," says Fisher. "All these rules have been made, while we have been doing our own thing. If my kids are going to farm in Burlington, we're going to have to change the rules or it's not going to be economically possible to farm."
Farmers have been asleep at the switch while their land has been designated out from under them, said Hamilton-based environmental lawyer Herman Turkstra. "What you don't look after depreciates. What you aren't aware of will be grabbed...and life is not going to get any simpler."
Brampton-based property rights consultant James White said there are now 400 provincial acts relating to agriculture, each with myriad regulations. Regulatory enforcement is "discretionary with different degrees of zeal...by members of the Green Gestapo," he said. "Quality of justice" from boards, agencies and commissions is "disappointing....Appeal tribunal staff should not share offices and work responsibilities with commissions whose decisions they are adjudicating."
While agreeing that "there are bureaucrats who go well beyond the mandate of the legislation," Turkstra, warned farmers against going after the bureaucracy too vigorously.
Politicians depend on top bureaucrats for an "advanced radar warning system...by which they keep their job," he said. But he urged farmers to make their voices heard. Attendance was poor at recent hearings on Niagara Escarpment Plan regulations, he said: "700 people (at meetings) from Niagara Falls to the tip of the Bruce Peninsula."
Turkstra also urged farmers to articulate their positions clearly: "A lot of platitudes aren't going to get you anywhere. Rubrics like 'property rights' are meaningless." Pat Murphy, Halton's top planning bureaucrat, said the time has never been better for farmers to get changes, with governments undergoing cost cutting: "The government can't afford to be in the regulatory business as it has in the past."
As well as the recent repeal of the New Democrats' planning legislation Bill 163, Murphy noted a property rights resurgence in the U.S., with Republican Speaker Newt Gingrich in the vanguard. Forty-four states are now considering laws against "takings", or restrictions on land for environmental reasons. The Endangered Species Act, the Clean Water Act, and the Safe Drinking Act have been delayed. A bid to get the Environmental Protection Agency elevated to cabinet status has been shelved. Republican presidential hopeful Phil Gramm has proposed a bill to compensate landowners if any government regulation reduces land value by more than 10 per cent. "The environmental bandwagon in the U.S. is not only stopped, it's lost a couple of wheels, largely because of the resurgence of property rights," said Murphy.
White noted that in Florida, landowners can sue for compensation of loss of fair market value to their property. Another act establishes levels of compensation.
"Those who do not own land should not make the rules for those who do," he said. "The uninformed should be silent."
Asked whether the Ontario Federation of Agriculture should fill in the regulatory vacuum that may be left by government, Turkstra said self-policing bodies such as doctors and nurses are often "a tougher cop" than the bureaucrats. Professional organizations become highly politicized, he said: "You'll get a bigger turnout than you ever had for your meetings." - JMM
More growth forecast
Three top United States broiler industry leaders predict consumption will increase to around 100 pounds per person by the year 2000. But their vision spells bad news for cattlemen.Mike Helgeson, chief executive officer of Gold'n Plump Poultry; Buddy Pilgrim, president and chief operating officer of Pilgrim's Pride; and Buddy Wray, president and chief operating officer of Tyson foods, predict a two to three per cent annual growth until the year 2000. They spoke recently to participants at the 41st annual convention of the National Broiler Council in Washington DC.
Current U.S. broiler consumption is estimated to be about 72 pounds per person. Pilgrim predicts chicken may drive beef consumption down to less than 60 pounds.
Here in Canada consumers could soon be eating more Canadian chicken. Historically, Canadians eat more white meat than dark. Producers have tried to supply demand for dark meat and allowed imports to make up the shortfall in white meat.
British Columbia producers are successfully reversing this concept. Some countries prefer dark meat, so B.C. has found off-shore markets for surplus dark meat allowing more chicken production at home.
At the recent Canadian Chicken Marketing Agency directors' meeting in Ottawa, other provinces examined the idea of a national export policy. Ontario chicken board general manager Bill Doyle said Ontario has no current export plans.-RI
Growmark posts a profit
Illinois-based Growmark co-operative's FS brand originally stood for "Farm Service". But it's now "First Successful", a reference to strong financial results following the co-op's first year in Ontario.When Growmark, of Bloomington, Illinois, took over the ailing United Co-operatives of Ontario a year ago, member co-ops in Ontario hadn't seen dividends since 1979. But they saw some last year, after Growmark posted a US$500,000 net income in Ontario on sales of US$134 million, not including petroleum.
Chief executive officer Norman Jones says patronage dividends were "substantial", in the neighbourhood of 60 to 70 per cent of the total investment made by member co-ops into Growmark. In the fiscal year ended Aug. 31, 1995, Ontario members received a total of C$2.5 million in cash and stock, paid on a percentage of profits based on sales.
Citing strong "acceptance of the members and sales volumes generated by member co-operatives", Jones says Ontario sales had already hit 12-month targets after 8.5 months; on the year, Growmark had budgeted for a slight loss.
Strongest areas were fertilizer, feed, seed, agricultural chemicals and consumer items. Market shares increased as well. "We intend to be a factor in North American agriculture. We've moved people from a wait-and-see attitude to one that we are a player," says Jones.
For fiscal 1995-96, Jones says he's expecting higher sales and patronage refunds to all member co-operatives. The co-operative will also seek a way to pay patronage refunds on petroleum sales through UPI, which is 50-per-cent owned by Sunoco Canada.
As well as the 37 Ontario members, Growmark serves more than 250,000 U.S. farmers throughout Illinois, Iowa and Wisconsin. Sales last year were US$1.1 billion. Some products sold to U.S. farmers, such as bovine somatotropin (BST), are unavailable to Ontario customers. But Jones thinks science should have the final word. "The science is sound in the U.S.
Our producers in the upper Midwest are competitive with California. If we didn't make it [BST] available to our producers, they would leave the area that we serve. "The key is to view yourself as a player in a global industry rather than a province or country."
In Ontario, the first FS store opened in Chesley in December. A key holdout in Ontario remains Hensall District Co-operative, with sales exceeding $100 million a year, and 4,000 members. The main stumbling block is Hensall's alliance with Shur-Gain, a competing feed brand.
Hensall directors wanted to observe Growmark's startup period in Ontario. Jones says discussions are continuing. - JMM
Syrup producers tap into satellites
By ROBERT IRWIN
Long before they saw their first television, many of those gathered in the Alexandria Legion hall were making sweet golden maple syrup which earned Canada its coveted international reputation. But on this Saturday in mid-January they are tapped into American maple syrup technology through a satellite TV hookup to Cornell University's Maple Production School at Ithaca, New York.In a further assault on tradition in a lifestyle which is steeped in tradition, several speakers urge them to consign their galvanized sap buckets and lead soldered pans to antique dealers and to spend the proceeds on modern equipment.
This is the second consecutive year for the day-long interactive seminar which, this year, focused on syrup quality, profitability and the complexities of tree management.
About three dozen producers gathered at the Alexandria downlink in Glengarry county, about 45 km northeast of Cornwall. There were similar gatherings at Guelph and Komoka, Ont. Other Canadian provinces and northern American states took part too.
Eastern Counties Maple Syrup Producers' Association President George Fowler, whose group sponsored the Alexandria link, says the satellite conference is, "getting more and more important because the Ministry of Natural Resources isn't going to have as many people around in future."
Fowler, who has been tree farming and making syrup near Iroquois, in Dundas county, for more than 40 years, explains the strong message about lead and galvanized materials has little to do with current syrup quality, which has never been better. Instead it comes as a result of more sophisticated testing procedures and a lead scare story in a Boston newspaper.
"Maple syrup is a very stable product. I never heard of anyone getting sick over it," Fowler explains. In earlier years some sap buckets were actually coated with lead paint. Producers were also warned that use of paraformaldehyde pellets in tap holes promotes tree decay. The pellets are currently illegal but a black market exists. During the past 30 years, when they were legal, billions were used to retard microorganism growth, thereby boosting sap production as much as 60 per cent.
When questions from producers at the various downlink sites are broadcast, they come in approximately equal numbers from both sides of the border. They reveal few differences between the maple industries in the two countries.
Still, no one can tell one American caller why Canadians are permitted to label their product 100-per-cent pure while he can't. Also curious is research offered by Dr. Tom Hall from the Pennsylvania Bureau of Forestry showing the devastation wrought by gypsy moths in U.S. maple bushes; Ontario moths prefer oak.
"The conference gives us a chance to see what's new and see what the price is going to be," relates Jamie McOuat. He and his wife Colleen made the one-hour drive to the Alexandria conference, from their farm near Lachute northwest of Montreal.
Typical of the current generation of producers, the young couple milks 50 cows and still finds time to handle 2,000 trees with a vacuum setup. McOuat's proximity to Ontario with its higher syrup prices helps him maintain respectable margins.
Last year, like many eastern Ontario producers, he fetched up to $45 per four-litre container. At the time Quebec surpluses were forcing prices in some areas east of McOuat as low as $25.
Butler predicts prices across Ontario could nudge up $1 or more this year. He says over the years our prices have been as good or better than the U.S. too.