.. rketing boards to protect such items as milk, chicken, turkey and eggs. The boards manage supply, control prices and limit imports. Supporters of the system insist it is an efficient way to do business. It gears production to known demand and provides stability to Canadian farmers by insulating them from the sometimes-wild fluctuations in world commodity prices. After 1972, when federal legislation paved the way for marketing boards, several sectors of Canadian agriculture went through a dramatic transformation from highly competitive industries to virtually monopolies.
Within (most) marketing boards lie three pillars of advantages for farmers: 1. Single-desk selling: The Canadian Parliament gave producers within a marketing board monopolies so as to gain more control for commanding a higher price for their product. Instead of competing against one another they have formed an alliance leaving the consumer with little options in product selection. 2. Price Pooling: Pooling means that all sales are deposited into pool accounts. This is beneficial to farmers because they all benefit equally. I.e.
some agricultural is seasonal so long as the farmer is producing the same grade and meeting the same quota as the next farmer, then regardless of the time and amount of sale all farmers will profit equally. 3. Government guarantee: All farmers receive an initial or partial payment upon delivery. If returns to the pool exceed the sum of the total payments then farmers receive a final payment. Should returns fall short (something that rarely happens) then the federal government makes up the difference. This helps to prevent bankruptcy and extreme loss to smaller farm industries. A major question for consumers is “Do Marketing Boards Impede Competition?” From 1955 to 1975 the annual net income of non-farm unincorporated businesses rose fairly smoothly, the net income for farm operators changed dramatically.
One of the major contributors to these dramatic changes, is the weather. Which can result in either a large or small harvest. Either way the farmers net income is going to be effected. Another major factor, which hinders todays farmers, is the initial investment which is substantially greater than other non-farm businesses. By implementing the marketing boards it takes the pressure and incentive off the farmers to produce larger quantities, but it limits the amount of output.
In answer to the question, marketing boards only impede competition by limiting consumer variety and options. Marketing Boards are used more to provide a safety net for farmers. Keeping in mind that the government serves the needs of producers through the regulation of output at the same time it restricts consumer choices. With agricultural marketing boards, producers enjoy higher prices and incomes. Overall, in marketing boards, it is individual consumers who ultimately pay the price for this form of regulation.
The political power of farmers has taken precedence over consumers who are politically weaker, less geographically concentrated, and on the whole, less intensely and consistently interested in food prices. How widespread are they? Marketing Boards are introduced whenever a particular product becomes highly demanded by the consumer, therefore causing producers to increase output by large quantities. When a product becomes so popular, it encourages new independent farmers to enter the field. This creates high competition making it difficult to obtain an income that is profitable. At this point marketing boards are introduced. This is why products such as wheat, dairy, turkey, etc.
have resorted to marketing boards. In Canada marketing boards are used widely because it serves as a safe guard to guarantee an equal marginal profit for all farmers. The government sets regulations on quotas, imports, supply, and taxes. With all these regulations in a large area of produce it deters international trade. For example, the United States of America tends to avoid marketing boards, and focuss more on a market system rather than the mixed economy (partial government control) like Canada.
This is why U.S. producers can sell their products cheaper, and market internationally more competitively. For example, in the U.S. many farmers use a cooperative market system rather than relying on the government to enforce regulations that ensure an equal profit for all. Unfortunately, in Canada our producers cannot be as competitive internationally because we use marketing boards that increase the price for produce. Like anything else, there is both a positive and negative side to using marketing boards, and perhaps they are so widespread because it levels off the highs of boom periods and the lows of recessions, maintaining a steady of income for producers.
How do Marketing Boards affect the Canadian Economy? In recent years, Canadas farm income support systems, and especially marketing boards, have come under increasing criticism and pressure for change from various areas both within and outside of Canada. In particular, pressure has been coming from consumer groups, food processors, and Canadas trading partners. Economically marketing boards focus solely on producers without much thought to consumers. Consumer Groups have argued for many years that government farm programs were excessively costly to consumers. As noted earlier, marketing boards support farmers by raising the prices paid by consumers.
By 1992, farm support programs were costing Canadians an estimated $440 per person per year. Reports are finding that consumers are becoming concerned with the rise in prices and lack of options and choices in their selection of produce. Canadian food processors are among the group of complainants. Their main concern is that under Canadas marketing boards, all the government help to farmers made the prices higher (stemming from higher production costs) for Canadian processors. In particular, in the early 1990s prices of chicken, turkey and milk in Canada were higher than U.S. prices by 50% or more.
The U.S. receives subsidies from the government to support their payments, rather than through the higher prices that occur under Canadian marketing boards. The most serious of issues is regarding Canadas trading partners, through trade negotiations. Even though a method of keeping our produce prices down would be to limit our imports, in 1995 the World Trade Organization (WTO) agreement broke down the barriers of reducing trade between countries. As a result Canada was no longer allowed to use import quotas and high tariffs were implemented.
Although these tariffs serve the same purpose as the quotas, the WTO stated that over the next 6 years these tariffs were to be reduced by 15%. Canadian consumers found this beneficial because of lower prices but the producers found this potentially threatening. The government tried to convince the producers that even though the tariffs were dropping, the marketing boards would still protect them. Overall, marketing boards may not be necessarily conscience of consumers, but definitely economically sound for producers. All in all, it will remain to be an on going battle to whether the declining tariffs will pose a threat to our Canadian producers.