Marketing Boards Essay Research Paper IntroductionMarketing Boards

Marketing Boards Essay, Research Paper

Introduction

Marketing Boards are government involved ways of regulating farmer.s production and price, while protecting the overall profit of every farmer in that particular production. Since there is nothing farmers can do about the inelastic nature of the demand for farm products, the key to supporting and stabilizing farm prices and incomes lies in controlling the supply of farm products. In other words, farmers would benefit greatly from an oligopolistic (banning firms together) price and supply agreement among themselves. Farming is a highly competitive industry . it consists of many small, independent producers selling substantially similar products in a big marketplace.

Given these realities, it has proven very difficult to achieve any kind of agreement or coordinated action on the part of farmers, even when it would be in their best interest to do so. Attempts have been made to use farm cooperatives to restrict production and thus support and stabilize prices; however, these efforts rarely work. Such agreements are voluntary and lack means of enforcement; as a result, too many farmers don.t participate or break the agreements. This is when farmers turned to government assistance to help with their low and unstable incomes and marketing boards was proposed.

In the following we will discuss what marketing boards are, how they work, how they effect the Canadian economy, and how widespread they are. We will focus on particular Canadian producers who use marketing boards and how they are both positive and negative in contributing to the economy. We will also look at how marketing boards are effecting the consumers. In total outlook, the purpose of this review is to provide a clear and explicit focus for the research to be undertaken as well as to establish the scope of the study.

What are Marketing Boards.

The main objective of marketing boards is to operate in the best long term interests of the producer and the consumer. By smoothing out seasonal and alternate supply irregularities in providing farmers with a fair return for their labor and investment. Marketing boards also attempt to promote marketing efficiency through centralized coordination of product and market research, transportation and selling. Marketing Boards are Government-sponsored organizations of farmers that support farm incomes by restricting the supply of produce, usually through a system of quotas on individual farmers.

Every province has marketing boards for each major commodity, and the provincial boards differ widely in their authority over the control of both marketing and production. With the institution of the National Farm and Products Marketing Act in 1972, the first national marketing boards were established- the Canadian Egg Marketing Agency and the Canadian Turkey Marketing Agency. Although operating under separate legislation, the Canadian Dairy Commission and the Canadian Wheat Board are also national boards.

Marketing Boards are criticized for their attempt to manage supply, even though only a few operate comprehensive supply management systems (dairy products, eggs, turkeys and tobacco). Some say that the boards are government- mandated monopolies designed to raise prices above competitive levels, which is a disadvantage to consumers on eggs, broilers, turkeys and milk. A total .tax. estimate of $500 million to $1 billion annually, not including direct government subsidies to these producers. This tax is not imposed by a legislator but by those who benefit directly for it such as farmers (not consumers). In addition the tax is not visible, as is a sales tax, so it is difficult to measure. Finally, the cost of collecting the tax is high for consumers and producers. In a recent study of the British Columbia Egg marketing boards, it was found that every dollar transferred from consumer to producer cost the consumer $1.25 and the producers as much as $0.65.

By intervening in the normal operation of the market system, marketing boards create two major problems. First, the cost of operating the market boards is added to the farm price of the product, and the consumer actually pays proportionally more than the original cost added to the farm price because the retail price is calculated as a percentage of the wholesale price. Second, the production quota system, which has to go along with any supply- management system, restricts from freely expanding their production according to their ability to run an efficient operation. For example, all egg producers have quotas on egg- laying hens. Without such a quota, a farmer cannot sell eggs. If the farmer produces more than the quota allows the board can have the excess hens destroyed.

In 1981 the Economic Council of Canada called for the deregulation of the agricultural industry. Marketing boards are negative to deregulation because it would force many farmers out of business and plunge the rest back into extremely high levels of competition. Making more quotas available for the various products would reduce the price of those goods, but it would also create a surplus of products, leaving some producers with a market and some without one. Those that would like to see the powers of marketing boards stripped away suggest that they should exist as a producer association to seek new export markets, to increase domestic demand by advert