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It's competition, not cooperation

By David Leyonhjelm - posted Wednesday, 19 October 2011

News that Australia is about to cease licensing wheat exporters, and Canada is planning to abandon its single desk for wheat and barley exports, has revived debates about whether farmers should cooperate or compete.

Cooperation in the form of sharing major equipment, bulk-buying inputs such as seed, fertiliser and fuel, and aggregating commodities like wheat or wool to reduce freight costs, have long been a feature of agriculture.

But there has also been a lot of cooperation in the marketing of commodities. Sometimes this was because there was little or no alternative, but more often it was due to the perception that farmers needed to cooperate to avoid being exploited.


For over a century, from Europe and Japan to America, New Zealand and Australia, cooperatives and other farmer owned entities sought to retain control over the marketing of their produce.

But whereas they all began as voluntary organisations with a clear purpose, over time many gained the backing of legislation and their purpose became confused. Quite commonly, cooperation gave way to compulsion.

At one time Australia had numerous so-called marketing boards with the power to compulsorily acquire and sell farm produce, from the lamb marketing board in Western Australia to which lamb producers in the state were obliged to sell their lambs, to the Australian Barley Board which controlled barley grown in South Australia, and the Australian Wheat Board which bought and sold all wheat in Australia.

A lot of voluntary cooperatives were discontinued as they lost relevance, with commercial providers concentrating on what they were good at replacing farmers trying to do something they were not good at. But farmers also became more commercially aware and saw that when others made a profit, it was not necessarily at their expense.

Legislated versions have been heading the same way, although the process has been slower and there are many willing to defend the status quo. It is only a few years since ABB and AWB were privatised and lost their monopolies amid much gnashing of teeth. Now, only the NSW rice industry clings to an enforced cooperation model with all rice grown in the state automatically vested in the NSW Rice Marketing Board.

The same trend is occurring in Canada. The Canadian government has said it will allow wheat and barley growers to sell their crops to whoever they choose, when they choose, from 1 August 2012. Again, there is a lot of teeth gnashing.


It is curious that cooperation should have been made obligatory in the case of wheat and barley when canola, oats, pulses and myriad other crops faced no such constraint. Nobody could seriously argue that growers are capable of marketing their canola crops but incompetent when it comes to wheat and barley, and only ardent socialists would argue for collective marketing of them all.

A clue to the explanation can be found in the Canadian dairy industry, which is still highly regulated. The Canadian Dairy Commission manages price support, market sharing quotas and production targets reminiscent of Australia prior to 2000, in order to "stabilise revenues and avoid surpluses". Imports are also limited to 5% of the market. Widely known as "orderly marketing", this keeps dairy product prices up and allows Canadian dairy farmers to stay in business despite an average herd size of just 50 cows.

What it illustrates is that government intervention in agriculture in the name of cooperation and orderly marketing is invariably at the expense of consumers and often at the expense of those wishing to become farmers. The only certain beneficiaries are established farmers who would otherwise find it difficult to compete.

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About the Author

David Leyonhjelm is a former Senator for the Liberal Democrats.

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