The difference only 100 farmers make to a commodity

In times of negative mar­gins for farm commodities, smart farm managers turn their thoughts to alternative and niche markets to increase pro­fitability.

And while it makes sense on the individual level to con­sider those options, it can also inadvertently create a band­wagon effect that eventually undermines the profitability that initially attracts people to those niche markets.

Niche markets are, by definition, small and specializ­ed markets. They are not im­mune to the laws of supply and demand. A problem results for the industry when enterprising farmers see success in a com­modity and gear up production – with no view to the true market potential or the impact on the market of increased pro­duction.

I speak from my own experience as a sheep farmer. The sheep industry is very small compared to many other farm commodities in Ontario. It is also perhaps one of the largest niche markets. It is cur­rently returning reasonable positive margins. As a producer in the sheep industry, I worry that it will once again grow at a pace that will swamp demand.

By my calculation, 100 producers entering the industry with family sized operation would increase Ontario lamb production by close to 20 per cent – and return the industry to the overproduction and nega­tive margin days of 2002 to 2007. History shows us that in the 2001 to 2006 period, lamb production expanded by over 20 per cent, and prices dropped to well below the cost of pro­duction. It took five years of losses to reduce the provincial flock to sustainable levels and positive margins.

The actions of only 100 pro­ducers entering the sheep busi­ness could not only be a big disappointment to those 100 pro­ducers, but could also de­stroy the margins of the ex­ist­ing 4,000 producers. 

I’ve learned, over time, that it is in my best interests as a sheep farmer to encourage pro­fitability in other commodities. If other commodities are not profitable, then some of those producers will migrate into my commodity and adversely af­fect my business. That’s part of my personal motivation for ensuring that we have good risk management programs in place for Ontario farmers.

I serve on the board of the Christian Farmers Federation of Ontario, and we have been active members in a coalition that is developing a compre­hensive risk management plan. Such a program would help bring stability to many facets of Ontario agriculture and would be good News for both large commodity producers and those who produce for niche markets. If we can all work together, we can all prosper.