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All Things Considered: December 2008

Brave New World


November 27, 2008
By Jim Knisley


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Brave New World

For a while I tried to keep track of the crises, figure out how they developed, determine the implications and impacts, and look for a rational way forward.

There are now too many crises to count, too Byzantine in their origins, too interwoven, too global, too profound, too damaging and leading to too many plausible and potentially unpleasant futures.

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When Paul Krugman, this year’s Nobel Prize winner for economics, starts quoting William Butler Yeats – “Things fall apart; the centre cannot hold.” – in his New York Times column, the situation is truly grim.

While there is not enough room on this page or even in this entire magazine for a complete list of the things that have fallen apart, a short list is useful.
In no particular order these include: world credit markets, world currencies with the exception of the Japanese yen, world stock markets, commodity markets, consumer demand and consumer confidence, international trade, too many national economies to list separately, insurance companies, pension plans, hedge funds, North American auto companies and on and on and on.

Canada, despite a better-regulated, stronger financial sector than most, faces the loss of full-time, middle-income industrial and service jobs. The Canadian dollar has tanked. Oil prices have fallen off a cliff.

Perhaps the most telling sign is that I was on the road recently and pulled into a Tim Hortons drive-through for a coffee. I’d made this stop dozens of times before and always faced an early morning lineup of cars. This time there was just one car in front of me.

Maybe I read too much into that. One visit to Tim’s doesn’t necessarily indicate anything, but there is a flood of more objective data that indicates consumers are cutting back. They’re holding onto that toonie for a time when they might really need it.

While Canadian poultry producers, unlike our friends to the south, are protected from much of the economic carnage because of supply management, they may not be immune.

As shoppers try to reduce their weekly grocery bill, one can envisage an overall drop in meat consumption. One might also speculate that more meals could be taken at home rather than at fast food restaurants. You might also consider consumer concerns over packaged meats.

The rapid descent of the loonie against the U.S. dollar will offer some additional protection against imports – last year’s worry – but that may not be enough.

Given the speed at which things fell apart this fall, producers and their marketing boards will have to be prepared for just about anything.

This could be tough and deeply unpopular stuff. Producers want to produce. It’s what they do and they’re good at it.

And if everything were well with the world consumers would want to consume and they have shown that they want to consume what poultry farmers produce. But all is not well with the world. No one knows how bad it may get nor how long it may last.

Uncertainty breeds uncertainty. People may hope for the best, but they are planning for the worst because it is the only sensible thing to do.

This may seem far too speculative to worry about. But in late October the United Kingdom reported a 20 per cent drop in spending on food. It also reported a seven per cent drop in spending on beer. While the drop in spending on food is startling, a drop in British beer consumption is truly shocking. It ranks right up there with Toronto hockey fans finally giving up on the Maple Leafs.

What the British food figures show is that in developed nations a fair bit of spending on food is discretionary. People can and will shift to lower cost alternatives. Many can and will buy less and make better use of it. They can even grow or raise their own.

While no one knows what will happen tomorrow, let alone in 2009, poultry producers should be prepared. It is possible that per capita and total consumption of poultry and poultry products could fall in the year ahead.

If prices were to be maintained, production would have to fall. While this is unpalatable, the alternatives are worse. Without production control: supplies would exceed consumption, freezers would overflow with birds and then things would get really ugly.

The beauty of supply management is that it allows a fair return to producers in exchange for agreeing to manage supply in good times and bad. It can also be a fragile system if supply isn’t managed.

It wouldn’t take much for the anti-supply management chorus to resume singing and if things are bad enough some powerful people might even listen.

So producers should be prepared. While bad economic times may not necessarily mean quota cuts, they should be prepared to cut production quotas if necessary and show that Yeats’ line doesn’t apply to everything.


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