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Industry consultant Jerry Bouma offers advice on this and other issues poised to have a profound impact on western Canadian agriculture.

The low cost game may be a good one for Sam Walton, but not for western Canadian agriculture, says Jerry Bouma of Edmonton-based Toma & Bouma Management Consultants, who has worked on many industry projects over many years.

Meristem Land and Science caught up with Bouma at an Alberta meeting of the George Morris Centre, the agri-food think-tank, where the veteran industry observer and consultant was a featured speaker on key challenges facing the industry. Here's a brief look at his thoughts on responding to the "Wal-Mart-ization" of agriculture and other points of advice from his talk.

1. Don't follow the bouncing ball

That's right. The bounding, yellow smiley-face one in all the Wal-Mart commercials that touts the company's low price mantra. Wal-Mart entered the food business in Canada this past year, sending ripple effects throughout the industry. Canadian agriculture, by and large, has positioned itself as a low-cost provider, but can't compete over the long-term with that approach, says Bouma. As buyers consolidate and drive prices down, there is less money on the production side and Canadian agriculture becomes less sustainable.

"Wal-Mart's entry into the food business is a huge development," says Bouma. "Already, we had seen a massive consolidation where we've got very few major retailers of food products. This trend is having a huge influence in the U.S., and in the UK, and it's affecting Canada, placing a great deal of pressure downwards on the food system. On the food service side, for all intents and purposes, there are two major food service suppliers on the continent.

"We've based our whole strategy on economics, and our whole system in Western Canada is based on below cost provider of raw materials. Well, we're finding that we're not winning in that game. We have to look at the question of what really drives innovation and development, then try to move our whole value added capability forward to bring some cohesion and mass to this area."

2. Kill the paranoia

BSE is clearly the most serious issue to hit Canada's beef industry. But, as serious as it is, much of the reaction is rooted in misinformation and ill-formed perceptions, says Bouma. Add to that the spectre of politics, which adds a complex and highly unpredictable situation that seriously clouds the future.

"Food safety and quality assurance is not only becoming an increased emphasis, one could also say it's becoming an increased paranoia. Obviously, we're in the thick of the BSE situation here. We're also having to deal with Avian flu, swine fever and the list could go on and on. The danger is that these things can get blown out of proportion and develop into a real credibility crisis for our agricultural industry. Education and getting past the politics are key approaches to how we handle these issues."

3. Capitalize on new opportunities

On the upside, there are many new opportunities developing, says Bouma. "There are exciting developments taking place both in terms of food for health and for industrial products, such as the use of agricultural feedstocks and raw materials for bio-energy and bio-materials. And a whole new and continued emphasis on new experiences and food as entertainment.

"This is one of the attributes of our affluence, that there is a lot of uniqueness and differentiation taking place with respect to new food experiences. We need to find ways to capitalize on the opportunities this presents."

4. Where have the good times gone?

In a time of unprecedented societal affluence, it's tough to fathom the problems in agriculture, says Bouma. "Are we in an economic recession? No. Are there high levels of unemployment? No. Are consumers paying an inordinate amount of their income on food? No. Meanwhile, in every ag sector you look at, we're suffering - whether it's beef, which is under crisis, whether it's pork, which is under serious crisis, or whether it's crops like potatoes and wheat, which are seeing very low prices.

"I've been in this business 27 years and I grew up on a farm, so I'm intimately familiar with agriculture, and quite frankly I don't think it's ever been worse. In the production sector, you have to ask yourself, what's wrong with this picture?

"I think we have to seriously challenge the least-cost mantra - it's leading us in a direction that isn't good for anybody."

5. It's about politics

Economic-based strategies are fine in text books, but in the real world of global agriculture, politics is what greases the wheel, says Bouma.

"You can't get away from the fact that it's highly political, and I think we've deluded ourselves into thinking that we can develop agricultural policies on economics alone. It's not reality. You look at the U.S. Farm Bill and all the indirect support programs - it totally distorts the system. And we're under the illusion that we can compete purely on economics. I think this is one of the most poorly understood areas. And politicians get sucked in to this thinking that 'if the economy heats up and we don't get political, we'll be okay.' We're being real suckers here."

6. Spread it around

The fundamental issue facing agriculture across the board is the question: do we really have a competitive functioning marketplace? says Bouma. A competitive marketplace is defined as many buyers and many sellers, and that's not what Canadian agriculture is seeing today on the buying end.

"We have inadequate pricing mechanisms to transfer value back to the producer, which is one of the most basic foundations of an economically sustainable system - that's a huge, fundamental problem."

Suppliers fall all over each other to provide low cost, he says. Meanwhile, the consumer often pays well below what they'd be willing to and there's little funneled back to producers. "That's why I think we have to be very careful of falling into the trap of listening to so-called free enterprise critics of some of our managed systems. I think the real challenge is how do we keep evolving those managed systems to become not only more responsive, but more importantly, to maintain some fair and equitable distribution of value. We need to move to a more balanced and effective system."

7. Balance cowboy outlook with business acumen

On a global scale, Canadian agriculture also needs to move to effective, "interdependent" relationships, he says. "On the low cost side, we ultimately can't compete with the Brazils and the Argentinas and even the Uruguays and South Africas.

"We need to find a balance between outlook of the free range cowboy who says 'don't tell me what to do with my land and my cattle,' and the crushing dependence of the US poultry producer, to find an effective state of interdependence. Ultimately, that's the real challenge - how can we create a more effective environment?"

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