Monday, 7 March 2011

There Are Happy Farmers Out There

As  provincial Federations of Agriculture in the Maritimes  held their annual meetings over the last couple of months, the message and the mood  hadn't changed much from a year ago. The livestock industry continues to be in serious decline, the regions Federally inspected slaughter plants for beef and pork hang on by a thread,  and wet weather during harvest had severely cut into the quality of important  oilseed and grain crops. One important change, the potato industry, because of drought in Russia and flooding in Holland, is enjoying much better returns.

What a difference at annual meetings in the United States. The challenge there, should farmers fight to maintain their billion dollar subsidy programs now that commodity prices are rising..

From: "Good Times Spur Policy Challenges for Corn and Soybean Growers"

"Skyrocketing commodity prices, soaring federal deficits, and increases in food prices have created a serious policy challenges for corn and soybean growers. At issue: if direct payments to farmers should be continued or modified."

And from

"While grain producers are seeing prices rise, cattle producers are enjoying climbing prices as well.
"The cattle market is real, real good," said Lynn Perry, manager at Western Livestock Auction.
The market usually starts to slide in October and November. "This year it just held steady and got stronger," Perry said. "

Why the difference in tone between farmers in the U.S. mid-west, and Maritime producers?  For starters, American farmers get to split a direct to the farm mail box subsidy pie of about 5 Billion dollars.
( $37.6 BILLION dollars in direct payments between 1995 and 2009)

Interestingly, many of the fire-breathing, deficit cutting, Republican Senators that were recently elected in the U.S., come from these mid-west agricultural states and are determined to maintain subsidy levels in the new Farm Bill.  (Right now it looks like the 2012 Farm Bill will include $30 Billion dollars in subsidies.) And with 2012 a presidential election year, you know how that will go.

Canada, the boy scout of trading nations, stays away from what are called commodity-specific subsidies (grow this crop and we'll send you a cheque) because they're not really allowed under international trading rules. Canada does offer financial help when there are serious weather or market disastors (like mad-cow).  And what we heard over the weekend from  PEI MP Wayne Easter is that budget estimates show farmers  here will see a sharp decrease  in these kinds of programs in the years ahead.

What makes this important is that there is essentially a North American market for most of what's produced on Maritime farms. Livestock prices are established through trading at the Chicago Mercantile Exchange. Futures markets there set prices for the major grain, and oilseed crops.  And with those direct subsidies, longer growing seasons, free or cheap irrigation, cheaper transportation and energy costs, and so on, the North American price may well be profitable for the U.S. farmer, but not  pay the bills in the Maritimes.  The high Canadian dollar has just made this worse.  That's why you hear farmers speak so often about competitiveness.

Canada can't (won't) compete in the farm subsidy game with the U.S. or Europe. It will use international trade negotiations to try to even the playing field, and of course run into questions about Canada's support for Supply Management. (see yesterday's posting).

And maybe it doesn't matter just at the moment. If all the news reports are right, Maritime farmers look to be heading for a stretch of  better prices. The only fly in the ointment will be input costs, what the higher price for fuel, fertilizer and farm chemicals will do to the bottom line. So just maybe Maritime farmers will be in a much happier mood when the 2011-12 annual meetings roll along.

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