A Price Policy for Canadian Agriculture Gordon L
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Iowa State University Capstones, Theses and Retrospective Theses and Dissertations Dissertations 1946 A price policy for Canadian agriculture Gordon L. Burton Iowa State College Follow this and additional works at: https://lib.dr.iastate.edu/rtd Part of the Agricultural and Resource Economics Commons, and the Agricultural Economics Commons Recommended Citation Burton, Gordon L., "A price policy for Canadian agriculture " (1946). Retrospective Theses and Dissertations. 13364. https://lib.dr.iastate.edu/rtd/13364 This Dissertation is brought to you for free and open access by the Iowa State University Capstones, Theses and Dissertations at Iowa State University Digital Repository. It has been accepted for inclusion in Retrospective Theses and Dissertations by an authorized administrator of Iowa State University Digital Repository. For more information, please contact [email protected]. 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ProQuest Information and Learning 300 North Zeeb Road. Ann Arbor, Ml 48106-1346 USA 800-521-0600 NOTE TO USERS This reproduction is the best copy available. UMI' A paics PQLICX ftJiK iGKICULl'URE Igr Gordon L. Burton A Thesis Sutasltted to the Graduate Faculty for the Degree of DOCTOR OF PHUOSOPEY Major Subject! Agricultural Eeozmiss Approvedt Signature was redacted for privacy. Chai^ of^Major 'tSork Signature was redacted for privacy. Head of Bajov Department Signature was redacted for privacy. Dean of (Graduate College Zova State Coll^ 1946 UMI Number: DP12615 UMI ® UMI Microform DP12615 Copyright 2005 by ProQuest Information and Learning Company. All rights reserved. This microform edition is protected against unauthorized copying under Title 17, United States Code. ProQuest Information and Learning Company 300 North Zeeb Road P.O. Box 1346 Ann Arbor, Ml 48106-1346 il 0 S TABLE OF CONTENTS I. INTRODUCTION 1 A. The Purpose of Formulating a Price Policy for Canadian Agriculture 1 B. The f^ame of Reference. 2 C. Canada's Coimoitnent on Farm Product Price Supports*.•. 4- II. REVIEW OF LITERATURE 8 A. A Diagnosis and Proposal by T. W. Schvilts 8 B. The Norton^Worklng Proposal. 20 III. AN ANALYSIS OF SOME SPECIFIC PROPOSALS TO STABILIZE FARM INCOME 23 A. A General Comparison of the Schultz and Norton- Working Plana 23 B. The Application of the Schultz Plan in Detail......... 33 1. The effect of crop failure on the distribution of payments. 34 2. The Schults plan is less regressive than the Norton^Working plan. 34 3. Duplication of payments on inter-farm sales 35 4. Disorimination between producers.39 C. The Application of the Norton-Working Elan in Detail 42 1. The effect of crop failure on the distribution of payments.... 43 2. The effect of price variation on the distribution of income payments................... 43 3. The administration of the plan.45 4. The plan favours the operator with a high ratio of sales to net income. 46 5. Payments on a gross sales basis would create a two-price syston.. 47 6. Payments based on net sales or net income favour the specialized feeder..................... 49 7. The definition of net farm income ^ a. Inventory changes.... 50 b. Income in kind................................ 51 e. Income f^rom non-farm sources*. 51 D. Summary. 52 T ill IV. THE VALIDITY OF CANADIAN AGRICULTURE'S CUDJ TO "PARITY". 56 A. The Vulnerability of the Agricultural Industry to Fluctuations in Demand.... 56 B. The Validity of Income Parity. 6l C. The Non-Validity of Income Parity. 65 D. The Non-Validity of Price Parity 68 V. POPULATION AND AGRICULTURE liv THE CANADIAN ECONOUI 70 A. Differential Rates of Grovth of Urban and Rural Population 71 B. Gainfully Occupied in Agriculture and Other Occupations 75 C. Ifiovement of Population Within Agriculture 77 D. Relative Bates of Increase of ImproTed Acreage and Numbers of Faras 73 £. Fertility Rates in the Urban and Rural Sectors of the Eoonony*************************************** ^1 F. ProspectiTe Population Changes in Canada and Their Effect Upon Agriculture. 85 G. The Outlook for the Future. 89 H. A Suggested Explanation of the Declining Relative Position of Agricxilture—the low iscome elasticity of the demand for food......... 92 VI. STABILIZATION OF SUPPLY 97 A. Rationale of a StabiliBation Prograa 100 1. Production control. 102 2« Consuaer choice 103 3* Technological Improvements 103 4* Rural-urban oovement of population. 103 5m Price uncertainty................... 104 B. A StabiliBation Program for Wheat.. 105 1. Wheat as a food and feed grain 106 a. Stabilisation of exports 107 b. Specialioation versus diversification in the Great Plains region.............. 110 c. Viheat for feed competes with oats and barley... 113 2. A storage prograa for wheat 115 3* A forward price for wheat 126 a. Administration. 126 b. Basis of determination..... 130 c. Lnplementation of forward prices— compensatory payments 138 d. Effect on gross farm income.... 141 4. Siaomary**.••••••••••••••••••••••••••••••••••••••• ^3 ir C« A Stabilization Frograra for Coarse Grains 14-5 1. A storage program 147 a. For oats.. 148 b. For barley. 149 2. Forward prices, 151 3* Sunsary.... 154 VII. STABILIZATION OF THE OUITUT OF LIVE3TXK AND LIVESTOCK PRODUCTS 156 A. A Forward Feed-Hog Ratio 158 1. For spring pigs..... 160 2. For fall pigs.. 163 3. StDDmary. 165 B. Forward Prices for Beef Cattle...................... 166 1. Fed cattle........ 167 2. Feeder and grass-fat slaughter cattle 172 C. Forward Prices for Sheep, Lambs and Wool............ 174 S. Forward Prices for Dairy Products 175 £. Forward Prices for Eggs and Poultry................. 181 F. A Note on Perishable Plant Products................. 185 VIII. THE LKVEI. AND STABILITI OF FARM INCOME 189 A. The DetezTOinantB of the Level of Farm Income........ 193 B. The Level and Duration of Income Supports.. 198 C. A Suggested Method of Supporting Farm Income........ 203 1. The operation of the plan.....207 a. Definition of operating expenses 208 b. Definition of income... 209 c. 1!hen should the plan be effective?.......... 211 2„ The integration of a forward price and an income,stabillKation plan 2L^ D. The Relative Merits of the Plan 215 n. AGRICULTURAL PRICE POLICY IN CAMADA 220 A. The Development of Agricultural Price Control 220 1. The pre-World War II period... 220 2. The fiorld War II period 232 B. The Probable Impact of Past Btperience Upon Future Price Controls.. 242 1. The use of forward prices. 243 2. Discrimination among producers 245 3. Production controls.. 246 4. The adoption of a storage program. 247 C. The Present Stabilisation Program for Agriculture... 248 1. The stabilization of aggregate farm income...... 249 2. The stabilization of individual fam income..... 254 X. SELECTED LIST OF REFERENCES 257 XI. ACKNOWLEDGMIiiiT 261 1 I, IKTHODUCTION A. The Purpose of Fomiulating a Price Policy for Canadian Agriculture One of the two objectives of this thesis is to examine the desirability of formulating a price policy for Canadian agriculture. The question may quite properly be askedx "Why bother to formiilate a policy? The danand for and the supply of the food and feed stuffs which Canadian fanners produce will determine their price." Well and good, so they will; but it is also proper to ask» "Can we formulate a price policy which will do the job any better than would the unaided forces of supply and demand, better in the sense of making a more efficient use of resources and of stabilizing the incomes of individual producers?" The scope of this thesis is, then, in the first place, the provision of an answer to this basic question. In those areas wherein we find controls to be more efficient than the unfettered forces of supply and demand, we propose to examine the suitability of certain techniques as a means of attaining the desired ends. The primaiy purpose in attempting to formulate a price policy for Canadian agriculture is, then, to devise an economic fjramework within which people engaged in farming in Canada can better contribute to their own welfare and to the welfare of other citizens in the Dcaninion. Free market prices have not operated in the past in such a way as to maximize real output per unit of input. The allocatlve function of prices has been 2 impaired liy fluctmtions which have resulted in a high degree of uncertain ty to the primary prodiicer. Farm income has been extremely variable, resulting in alternate feast and famine for farm people through no fault of their own. We are concerned with devising means of smoothing out these peaks and troughs and of giving producers a more accurate indication of how much of what products they may produce with greatest advantage to thoaselves and to the economy as a whole* .Any effort to make the best possible use of Canada's rich resources and to improve the standard of living of her citizens, both rural and urban, needs small excuse. B. The f^rame of Reference Although it may appear to be self evident, it seems worth repeating that there is nothing sacred in either free enterprise or government control per se.