The impact of post-farm-gate value-added activities on western Canadian agriculture

In recent years in Canada, direct support provided by governments to the agricultural sector has been decreasing due to international obligations under the General Agreement on Tariff and Trade/World Trade Organization (GATT/WTO) and the North American Free Trade Agreement (NAFTA). Consequently, governments and the agriculture industry are exploring ways of generating and sustaining farmers' revenue from the marketplace. There is a renewed interest in the concept of "post-harvest value adding" by the federal and provincial governments and the agriculture industry, and substantial investment has been made in value-added initiatives in the post-farm-gate sector.;The purpose of this thesis is to assess the impacts of post-farm-gate value added activities on western Canadian agriculture. Value adding activities in the form of research and development projects in the post-farm-gate sector are assumed to result in increased demand for primary commodities produced in western Canada. Thus, the thesis aims at assessing the effects of value adding on the production of primary commodities, prices and the welfare of farmers. Primary commodities that are considered here include wheat, barley, canola, slaughter cattle and slaughter hogs.;The procedure adopted to achieve the objectives of the thesis is first, to establish the type of relationships among the commodities considered in the study using a Leontief function. Second, the nature of the market for these primary commodities is assessed using a Translog function. Finally, simulation experiments are conducted to provide insights into the effects of the assumed increased demand for commodities resulting from post-harvest value adding activities. The effects assessed are changes in prices, quantities and producer welfare in the form of profits.;The results indicate significant economic interrelationships among wheat, barley, canola, slaughter cattle and slaughter hogs at the farm sector. Wheat production and barley production appear as complements but canola production appears to be a substitute for wheat production. Hog production is positively related to the prices of wheat, barley and canola. Cattle production is positively related to the price of barley. The results indicate jointness in the production of hogs and barley. On the issue of the existence of market power held by processors, there is no evidence of non-competitive behaviour in any of the commodity markets examined.;Results from the simulation exercises indicate that an increase in the price of one commodity results in an increase in the production of that commodity and a fairly constant or decline in the production of others. An implicit assumption underlying the simulation model is that land is fixed, so that there is competition for the land resource in production. Farmers' welfare is increased significantly with an increase in the price of grains/oilseed. Experiments conducted by increasing the quantity of commodities demanded on the domestic market revealed a very small effect on commodity prices. As a result, the increase in farmers' profits is also minimal. Changes in quantity variables did not trigger changes in price variables, suggesting that in Canada, commodity prices are exogenously determined, predominantly by situations in the international market.