Feed costs, policy and development in Nova Scotia

The aim of this research is to evaluate the economic effects of transforming freight subsidies on feed grain shipments to Nova Scotia into equivalent output based payments to livestock and poultry producers. Changes in the long term federal policy of feed freight equalization (and recently other elements of the domestic feed grain policy) have negatively impacted upon the economic position of farms in the province. The purpose of the policy change considered here would be to alleviate the harmful consequences of reduced freight equalization and to facilitate adjustment. (Producers, farm organizations, regional politicians, and federal ministers have all stated this as a shared policy objective.) The analysis is also applicable to any planning or decision making with respect to minimizing the negative effects of any future termination of the program entirely. A partial equilibrium static analysis is carried out at the individual subsector level to estimate the gains in producer welfare brought about by the removal of feed input price distortions. Static welfare gains are found to arise both from the utilization and the production of feed stuffs. The price elasticity of feed grain production in Nova Scotia is estimated as elastic in the intermediate term. A number of leakages of program benefits with the current system of payments are also found and assessed. Producers would realize corresponding benefit transfers as a result of the proposed change. The incremental public administration costs are estimated on the basis of current capacities and agencies in place. Such estimated costs are below the value of price efficiencies. The additional presence of transfer benefits for producers further increase the cost effectiveness of addressing the unsatisfactory position of producers in this manner. The implications which the policy change (and an undistorted input price environment) would have on the rates and directions of technical change in the agricultural industry are also considered. The induced innovation hypothesis is reviewed with related theories, models, and empirical research. A survey is made of the prospects for wide ranging, and frequently location specific, technical change which could over time reduce the industry's competitive disadvantage with respect to feed costs. Evidence of past induced technical change in the industry's production and utilization of feed inputs is reported. The removal of feed input price distortions is seen as neither a necessary nor sufficient condition for the accelerated technical progress which would restore the industry's competitive position. However, it is argued to be a necessary condition for any public program to be cost effective in achieving this end or related targets. A sensitivity analysis is made of the induced technical change benefits which could be expected to arise if the policy were changed for the next fifteen years. The proposed policy change is analyzed and found to be a low cost, high pay-off regional development project. It is found that it could significantly contribute to the alleviation of the serious problems which have arisen from the unplanned manner in which feed freight equalization was reduced in Nova Scotia.Land and Food Systems, Faculty ofGraduat