Farmers Forum staff
ROCKWOOD — Canadian farmers are being confronted by much lower crop prices in 2024, and yet, staple foods are in short supply throughout the world.
This contradiction stems from distortive agriculture policies in the United States, and a Trump presidency will only increase barriers to trade, according to one of the researchers behind a new study exploring the growing disconnect behind worldwide demand for food and lower American grain exports.
Blame it on U.S. biofuel and ethanol policies — and other support programs — that are somewhat “insulating” American grain and oilseed markets from international supply-and-demand-pressures and strangely putting downward pressure on price, according to the policy note published by Ontario-based Agri-Food Economic Systems think tank and co-authored by Al Mussell and other well-known agricultural consultants.
Think tank research co-authored by Al Mussell.
Simply put, U.S. government policy has encouraged more of America’s huge grain and oilseed output to stay at home and avoid the export market, in response to geo-political events and agri-food trade rifts with China. This has lowered crop prices in North America, creating a challenge for Canadian farmers who rely on sales into the American market without the corresponding benefits of being part of the American agricultural machine.
Mussell sees the incoming Trump administration as exacerbating the market distortions that aren’t good for Canadian producers. For starters, Trump has promised “massive” tax cuts that he intends to fund with tariffs on goods from other countries, he said. There’s been no assurance that this won’t include agricultural products from Canada. “Throw a 10 or 20 % duty in there, and it starts to look a bit like chaos for us,” he said.
Trump’s return could “prove to be the biggest development maybe since the end of the Second World War,” he said. “We’re kind of backing away from the rules-based trading environment that I think was exceptionally good for Canada.”
Trump policy is well-known for being “America-first” and he encourages other countries to put their own people and businesses first.
A look at Canadian agriculture during President Trump’s first term from 2015 to 2020 reveals that if there were any negative affects, they were drowned by increased sales. Canadian farms were more prosperous in 2020 than in 2015, Statistics Canada reports. While small farms, earning less than $100,000 per year, reported a decrease in revenue, all other farms reported, on average, that for every dollar of revenue earned in 2020, 17.1 cents were profit, up from 13.1 cents in 2015.
Existing U.S. policy has led to a paradox of a world needing more grain for food while America gradually retreats and grows more grain to fuel cars, trucks and aviation, as explored in the report by Mussell and his colleagues.
“Today, the U.S. has been overtaken by others in exports, and (the U.S) is more policy-driven, more North American-oriented, and less of a consumer growth-based agricultural economy. It is especially evident in the stunning expansion and role of U.S. renewable fuels policy,” said co-author of the report and research associate Douglas Headly, referring to the legislated increase in corn-based ethanol and soy-based biodiesel.
Ted Bilyea, co-author and research associate, pointed out that Brazil is now the world’s leading exporter of soybeans and, as of last year, corn.
Mussell noted that global cereal stocks have increased in only three of the last 10 years and stored grain will have to be drawn down again this year to meet demand. “Meanwhile, we have large crops and low prices in North America.”
He added: “This crossing of market signals discounts the disparity in many parts of the world, including traditional Canadian export customers” and will make the U.S. an even more important export market for Canadian farmers.
However, he advised that Canada, as a major agri-food exporter, should redouble efforts to export elsewhere in the world. This is even more true with the wildcard of a President Trump added to the mix.
