Recently in Commodity Markets Category

Policy decisions in agriculture often beget other changes - be they in behaviour, in technology and/or in the way that things are organized and decisions are made. The Danish sugar industry is a good case in point.

It is interesting to see how the current financial crisis is changing the way that we think about the world. This point was driven home for me when I had the opportunity to attend a symposium last week in Berkeley, CA entitled "Causes and Consequences of the Food Price Crisis" (click here for details). Sponsored by the Giannini Foundation, the symposium featured faculty from the agricultural and resource economics departments at the University of California, Berkeley and the University of California, Davis.

Blog entries from early May ("Just Fiddlin...?" and "Just Fiddlin...? (Part 2)") painted a picture of the extent of unresolved policy issues in Canadian agriculture. As we indicated in those earlier entries we would post follow-up blog entries to estimate the costs of having improperly aligned policy. This entry is the second follow-up entry. In this entry we provide a rough cost estimate of the widened canola basis in the commodity market. The estimates that we provide are by no means a complete costing of the issues; in fact we encourage comments on our assumptions and alternative ways to valuate the policy issues.

Preliminary estimates show that the costs of an erratic canola basis could be in the range of $100 in a one-time loss to an annual $400 million loss (see Table 1). This cost is one that is borne entirely by farmers (as the entry from two weeks ago indicated (link), the costs associated with transportation problems are split between farmers and other system players).