By Connor Lynch
LONDON — Ontario’s cap-and-trade system is an extra squeeze on the already thin margins in the beef industry.
That’s according to a report by London-based Western University assistant professor of economics, Brandon Schaufele. Schaufele, who was commissioned to do the study by the Canadian Cattlemen’s Association, said that, around the world, there aren’t good answers on the impact of carbon pricing on agriculture. “Cattle are pretty important to Canada, so what are the effects?”
What makes agriculture different from other industries when it comes to pricing carbon is that farming as an industry is almost uniquely sensitive to international pressures. A drought in Brazil has an almost direct effect on farmers in Ontario. But the only effect a carbon price here has on Brazil is making Brazilian farmers more competitive.
“The beef sector does not have pricing power,” Schaufele said. “If demand is high, prices are high. If not, prices are low.” Consequently, putting a price on carbon emissions means a direct tax on beef producers that will not affect consumers, since it won’t change the prices they pay.
Finding an impact on producers is tricky, because the beef sector only pays for carbon in indirect ways: in the cost of fertilizer and inputs to grow feed, using diesel for the tractor, etc. Schaufele’s calculations put the impact of carbon pricing between about $1 per hundredweight to $2 per hundredweight for a producer to raise that animal in added costs.
Schaufele figured most producers could handle the bump in cost, figuring that only more inexperienced or inefficient beef farmers would get pushed out of the industry by it.
The margin increase doesn’t seem much, but industry margins are very thin, said Lambton County beef producer Al Williamson. “Things are tight and have been (for some time). The replacement (cattle) are too near to what the finished price is,” Williamson said. Constant price pressure has already forced many beef producers in his area out of the business, and the remaining farms have largely consolidated into larger operations. “We can go down the road and say, this guy had cattle, that guy had cattle.” Any remaining producers who’ve managed not to scale up could even be forced out of the industry, said Williamson. For larger producers, it’s added costs in an industry that doesn’t need them and can’t do anything about them.