The Revival of Supply Management

Two straws in the wind

this tweet links to an article on Russian wheat, including a desire to form an international wheat cartel, like OPEC, to do some supply management.  (We used to have an International Wheat Agreement).

This is positive news for Canadian grain farmers. Anything which adds uncertainty to export sales from other nations is positive for grain growers/exporters here. https://t.co/exHSKjvMst

— Terry Daynard (@TerryDaynard) December 13, 2019

There was also an article on Wisconsin dairy farmers expressing interest in supply management for dairy, as Canada still has.

Hemp and Tobacco (and Taxis) III

Reverting back to tobacco, in contrast to the article quoted in my first quote, there was at least some evidence that the benefits of the tobacco allotment/quota programs eventually benefited the owners of the quotas more than the actual farmers.  This article from the 1981 Washington Post discusses the issue, tied to the fact that Sen. Helms, a man for whom I had about as little respect as possible, was pushing the tobacco program while his wife was an owner of tobacco quota.

Note: IIRC over the years, maybe in the 1990's, the law was changed so that absentee owners of quota had to either sell the quota or become more actively engaged in farming.

Hemp and Tobacco (and Taxis) II

I never did get to the "taxis" part of my post yesterday.

The NYTimes yesterday had a piece on how New Yorkers had made inroads on the Chicago taxi industry.

To recapitulate the Times' previous articles on taxis in NYC:

• to operate a cab you need a medallion, issued by the city.  IMO medallions are a way to limit entry, by restricting entry you're able to manage the prices/rates charged and limit turmoil.  That's very similar to supply management for tobacco in the US and dairy and eggs in Canada; also it's similar to the marketing co-ops for things like cranberries
• NYC had a bidding war for the medallions,  which savvy investors used to manipulate prices and make exploitative loans to individual drivers hoping to gain an asset for their retirement..  With Uber and Lyft hitting, medallion prices have plunged, and drivers are unable to repay the loans, forcing them into bankruptcy.
• in yesterday's article the same pattern was followed in Chicago by wised-up guys from NYC.

I've noted the parallel with agricultural supply management already.  While the medallion program likely worked reasonably well for many years, as did the tobacco program, with time smart people with money found a way to exploit the rules and make money, gaining their returns at the expense of those with fewer smarts and/or less money.

Hemp and Tobacco (and Taxis)

The Atlantic has an article using a history of the tobacco program to talk about hemp.

The history is accurate enough.  The professor points out that tobacco quotas were initially based on past tobacco production, so they tended to provide existing tobacco farmers with a guaranteed annual income (disregarding weather and similar hazards) for years.  That stabilized the regional economies.  When the program was ended there was immediate upheaval and consolidation of farms. By locking out new farmers (she doesn't note the limited provision for new farmers in the program, though the amount of quota available each year was small) it meant black and white sharecroppers lost a chance for upward mobility.

Her argument thus becomes:

"Instead of charging would-be cannabis growers for the privilege of growing, states should award licenses to a larger number of applicants from communities that have been hit hard by the War on Drugs. Much as small-scale tobacco farms anchored entire communities across the Southeast, cannabis cultivation on a human scale, rather than a corporate one, can build wealth within communities of color where opportunities to amass property have been denied—frequently at the hands of the government.

 The argument seems good, but as I've argued in other posts, the growing of hemp in the new world of legal pot (and industrial hemp) is subject to many hazards, even for experienced farmers trying to add a new crop to their operation.  If the argument was that people who had been growing illegal pot should be given licenses to grow it legally, I'd have fewer concerns.  But asking people from the inner city to grow hemp would be stupid. You'd have to have a new hemp producer program to offer financing, help gain access to land, and provide mentoring. ( I don't know the failure rate for new farmers of conventional crops, but I suspect itt's high.) That's not happening.

In the absence of such a program what would likely happen?  As in programs reserving government contracts for minority and female owned companies--you use a figurehead with the right attributes, while the real money goes to the men behind the curtain.

Supply Management in Our Future?

There's a discussion of "supply management" in this twitter thread:

I agree with much of this and am still preparing for SM policies for grains by next year. Would have been this year if not for planting fiasco. https://t.co/cJLXWd2lwO

— John Phipps (@jwphipps) October 1, 2019

1 - SM, by fixing parity prices for commodities, won't help specialty producers. Palouse lentils, hoop-house raised heritage hogs, organic arugula won't get meaningful price parity (using differentials from marker prices? See how well it worked for OPEC in the 70s) 2/n

— Silvia Secchi (@ProfSecchi) October 1, 2019

Canada has had supply management.  

The Farm Bureau didn't like the idea of a government program in the spring.

Here's a more recent article on it.

My own thoughts are:

• I think supply management would slow the exit of farmers (perhaps fewer bankruptcies and more sell-offs when retiring) but aren't a magic bullet. There's value in slowing the exits, both in impact on the farmers and their communities and perhaps in allowing more time to find niche alerantives to the commodity milk market.
• I'm not sure why alternative "milks" have gained so much market share--price or perceived health benefits or animal welfare concerns  If it's price, supply management would shift demand out of milk.. At least it improve the outlook for those alternatives.