Farm to Free Market and Market to Farm

Feb 26, 2018

“Farm to free market is important, but so is market to farm.”

Those were the words of the Honorable Maurice McTigue on Thursday, February 8th to over 250 people gathered in Pasco at our Second Annual Farm to Free Market Dinner. McTigue was a former member of New Zealand’s parliament and is currently the Vice President of Outreach at the Mercatus Center, a market-oriented think tank at George Mason University.

McTigue’s candid presentation received a warm ovation for his valuable insights on the need for markets and farms to interact without government intervention.

How can a farmer go from receiving $12.50 per lamb to over $100 per lamb in a few short years? By allowing farms to respond to the market. At least that was New Zealand’s experience during the late 1980s.

Faced with severe debts, New Zealand was forced to reform all parts of its government. Budgetary cutbacks were made, downsizes occurred, and government support for all industries, including agriculture, was withdrawn. Farmers feared the removal of government support would mean the demise of their industry.

He told the story of the sheep industry and how heavily they were subsidized. Sheep farmers received $12.50 per lamb from the government, in addition to the $12.50 received from the market. Knowing they could receive a guaranteed, if small, income, sheep were overproduced and mostly sold into  developing Middle Eastern markets in competition with goat meat for little profit. Additionally, New Zealanders ate a lot of lamb. After the subsidies were removed, however, farmers found ways to improve the quality and value of their production by responding to market demand and increased total revenue while using fewer resources.

Reforms were difficult, to be sure, but McTigue noted that many farmers would not go back because they like the independence and are better off today.

Instead of trying to just produce more product, farmers had to learn to produce more profit by responding to consumer demands, said McTigue.

Environmental quality improved as farmers no longer put excessive amounts of subsidized fertilizer on land. The diets of New Zealanders also upgraded as farmers responded to consumer demands, offering a greater diversity of food.

This was just a part of the story told by McTigue.

The story of New Zealand’s reform gives American farmers and taxpayers a lot to think about. As the United States embarks on the 2018 Farm Bill discussion a few lessons should be remembered:

  • Reforms were not done in isolation – all industries were reformed to meet competition from world markets so farmers didn’t end up bearing the brunt of changes.
  • The private market can do most things better and more affordably than the government.
  • Farmers must be given the latitude and freedom to respond to the market.

Hopefully, the lessons taught on that night will not go unheard in the upcoming Farm Bill debate.

Washington Policy Center will make video available of the dinner once available.