Mr. Chairman, clause 9, subclause 1 contains a very interesting feature, namely the security feature which it embodies, or the forward pricing feature. Both
the Prime Minister and the hon. member for Halton speaking yesterday characterized this one-year forward price as the vehicle by which a long-term planning on the part of agriculturists could be carried out. In agricultural circles both in this country and in many other parts of the world two concepts are used in arriving at a pricing formula for agricultural products. The first is the concept of parity. I do not want to be called out of order, Mr. Chairman, because I am going to refer to this only very briefly in order to lay the foundation for the case I am going to make. One concept is parity which, I am the first to agree, involves certain production restrictions. I do not think anybody will deny that this would be the logical outcome of such a policy. Not a curtailment of production-I want to make that clear
but a curtailment of certain aspects of production. And it envisages possible subsidies.
The other concept is an agricultural price formula based on the concept of supply and demand. That, of course, is the principle embodied in the bill which is before the committee this afternoon. One of the strange things is that in recognizing and attempting to introduce a pricing formula, a program involving the theory and the concept of supply and demand, the minister and his government have not accepted the principle of forward pricing which is the key to this concept and principle which has been advocated by all those who have implemented or brought into existence an agricultural policy based on the concept of supply and demand. In effect this one-year forward price is not a forward price at all, and an agricultural program based on a forward price of one year is doomed to failure. It is with this aspect of clause 9 that I wish to deal, rather briefly.
What does a forward price propose to do? Its purpose is to iron out the fluctuations in price over a production cycle. That is the purpose, and that is the anchor which might make for successful operation, even though the present formula is based on supply and demand which is the market price. Why is it advisable that these fluctuations in price should be eliminated?
The losses and the hardship to prairie farmers due to price instability are impossible to calculate, but they are great. Long term production planning is practically impossible in view of the lack of long term price assurance. Consequently, farmers, in an attempt to guess the market, are in-and-outers and this increases the wide fluctuations in price. Let us take the case of cattle as an example.
Agricultural Products-Price Stabilization
When prices are low and breeding stock is becoming scarce the market prospects look attractive. Farmers begin to purchase and breed livestock. By so doing they absorb stock which would otherwise have gone to market. Packers, in closer touch with the market and employing the staff skilled in analysing trends, increase their purchases of storable meats. The supply of available stock is further decreased. Prices rise rapidly, but the farmer has little available for sale. He is himself a buyer. By the time he has completed his breeding program and his stock is ready for market many others have done the same thing and have reached approximately the same point. The packers, by drawing on supplies built up during the period of low prices, purchase to a minimum. Farmers are not purchasing breeding stock because their needs in this line are filled.
The result is an immediate supply far exceeding immediate demand and prices take a drastic drop. The farmer is caught. He cannot hold off the market because his product deteriorates. Production is not economical in many instances and the breeding stock goes to swell the supply of killing animals. Many farmers who should never have been in the livestock business, for economic reasons, have been attracted by the later very high prices. For them, retention of a livestock production program at low prices would be business suicide. Their herd goes, lock, stock and barrel. Prices are depressed far below a level which will even show a net return to the most efficient producers, and they remain low for a much longer period than they remained at the peak. Not only have many farmers bred stock just before the slump but many continue to breed for some time after in the hope that the recession is an abnormality which will be short lived.
However, the forward price carefully administered can closely reach a certain objective and may lead to results far superior to so-called competition as presently practiced. Provision must be made for a lower price if the supply cannot be absorbed. That is the point the minister stressed the other day. When he is about to set the prescribed price he is going to have to take into consideration the demand on the market, and if the demand is great, it is logical to suggest he will raise the prescribed price above the preceding 10-year average to encourage production; but if the demand is less than the supply, conversely, he would lower the prescribed or guaranteed price below the last 10-year average in order to discourage production. That is, in essence,
Agricultural Products-Price Stabilization a true forward price. But you cannot do it on a 12-month period. You must do it on the basis of a production cycle.
It is well established what is involved in a production cycle. You cannot say you will make an investment in livestock just because you know that 12 months hence the price is going to be what it is today. You have to know five years ahead, and the production cycle is accepted in agricultural colleges throughout the country as being five years for livestock. It simply means that you must know what the price will be of the progeny of an animal five years hence. Thus a realistic forward price for cattle must be over the entire production cycle for five years. That does not mean the minister will have to wait five years to set the price. The price will be set each and every year, but when a man invests in livestock in 1958 he is going to know that in 1963 he will receive the price that prevailed at the time he went into the business. We will say for argument's sake it is 20 cents a pound. Now, if in 1959 the minister believes that demand has outstripped supply he could raise the price to 21 cents a pound in that year. In 1960 if the minister thinks that supply is greater than demand he could drop it to 19 cents.
The point I am trying to make is that the man who invests in livestock must know at the end of one production cycle, namely five years, that he is going to get a guaranteed or prescribed price equal to the price that prevailed when he first went into the business. I suggest in all seriousness that this program based on supply and demand which completely ignores the key to this proposition, which is a forward price base of one production cycle, is doomed to failure and because of that, Mr. Chairman, I would move seconded by the hon. member for Kindersley the following amendment:
That subclause (1) of clause 9 of Bill No. 237 be amended by deleting all the words after the word "board," in line 18 to the end of the subclause, and by substituting therefor the following words:
"and shall continue thereafter for a period of one production cycle in the case of all named and designated commodities, or for such other additional period as the governor in council prescribes."
One further word, Mr. Chairman. The argument I have made is not simply that I do not believe a farm program can realistically accomplish what of necessity has to be accomplished by using the pricing principle of supply and demand. I believe that never in history has demand ever exceeded supply. It is simply a question of distribution. That is the problem we should be trying to solve rather than worrying about demand. We have land, labour and
capital almost continuously producing grain which should be producing livestock. At certain periods we have land, labour and capital producing livestock which should be otherwise engaged. And always we have labour and capital producing agricultural products which would be much more effectively employed in the production of secondary products for consumption by society. It is our duty as custodians of the agricultural industry to institute the necessary steps to adjust these allocations to as high a standard as we can reach and I honestly believe that we cannot do this with this measure which we will pass in a few minutes. I also believe that only by the application of the principle of a parity price properly administered can we hope to reach that very desirable goal.
Subtopic: MEASURE TO PROVIDE GUARANTEED PRICES FOR CERTAIN COMMODITIES, ETC.