Why part-time farmers succeed

NOT much remains of the enthusiasm that greeted the emancipation of world trade following the Uruguay round in 1992. For the past two years, the world has been wrestling with practical economic problems not foreseen at the time, and no one seriously believes we operate in an open, subsidy-free agricultural environment.

Countries such as SA, Australia and New Zealand are falling victim to the same problem: None of them is sharing in the benefits of unrestricted market access. SA no longer has subsidies and, in the other two countries, subsidies to producers are now less than 10%. All of them compete with countries in which subsidies make up as much as 70% of the value of farm production.

The US, members of the European Union and countries such as Norway and Japan still subsidise their farmers generously -- often indirectly and under other names -- thus benefiting them unfairly.

This enables these countries to dump products on overseas markets and bring down prices to a point where the local farmers in the importing nations cannot compete profitably. The US congress recently voted $6bn (R37bn) to assist American farmers.

In these depressed markets, SA farmers have tried to negotiate good prices for their export products. Meanwhile, the domestic prices of unprotected products have been low even in years of shortages -- such as wine and oilseeds, to name but two -- with the domestic price still much lower than farmers would prefer.

Wine producers say local buyers of their products want to pay much less than a year or two ago, and the same thing is starting to happen with export wine. Other countries are saying that SA wine farmers have a surplus and must be prepared to accept lower prices.

It is interesting to note the view of the Organisation for Economic Co-operation and Development (OECD) ascribing up to 40% of the price drops to the weak world economy.

In SA, farmers have another problem: Some brokers and processors of their products are reneging on contracts when they discover they can buy subsidised products from overseas suppliers for much less. In the oilseeds industry, a large group of farmers has launched a court action against an SA processor unwilling to meet the terms of its contracts.

Gert Pretorius, chairman of the oilseeds industry's producer organisation, Nopo, says this lack of ethics has put producers in a difficult situation at a late stage of the season. Nopo's earlier warnings to its members to make sure their contracts with buyers were watertight were unfortunately ignored by some. Nopo has some contracts in its possession which were signed by producers but not the buyers. Obviously this renders the contracts null and void. Pretorius's advice to farmers is to make more use of the SA Futures Exchange (Safex) or the Nampo brokerage service or to seek the assistance of co-operatives and agri-companies. ``Unethical behaviour by some agents or processors means they won't survive in the long run. No producer makes the same mistake twice,'' he warns.

Nopo has requested urgent discussions with the Oil Pressers' Association and has asked producers to identify problem cases. This could serve as a warning to ``chancers'' in other industries.

Minister of Agriculture Derek Hanekom says SA should do everything in its power to bring about a reduction in trade restrictions. On a global level, this could be achieved by the country's new membership in the Cairns Group, which fights for the elimination of protective measures in all countries.

``Bilateral negotiations with large trade partners could also do wonders,'' says Hanekom. ``In three years, the dairy industry could benefit to the tune of about R200m and fresh and canned products by R100m. Reductions in tariff costs could mean benefits of R1bn to the fruit industry over a decade.''

Because globalisation has a dark side, SA will emerge on the sunny side only if the country and its allies succeed in winning the battle for total freedom. Otherwise it will remain an unjust war.

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