Agriculture support programs inadequate in new trade environment

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Agriculture groups are concerned existing programs won’t measure up while other countries pile billions into support for their farmers

By Jennifer Betzner, John Greig

Farm leaders are worried the current suite of government risk management programs are ill-prepared to help Ontario farmers through tough times brought on by trade wars.

Solid farm income over the past decade means reference margins will really have to dive in order to trigger payments from existing programs, industry sources say.

The programs were set up when the trade world was much more predictable and before American politicians dumped billions of dollars directly to their farmers.

The American government has had several programs that have paid out more than $30 billion to farmers who have felt the impact of trade disruption including dairy, hog and crop farmers.

China has targeted agriculture products in the United States for special attention, virtually cutting off trade to hurt supporters of American President Donald Trump, who had significant support among farmers.

Why it matters: Farm organizations are pushing the federal government to rethink support programs in the face of growing concerns the programs will be of little help through a crisis.

Federal, provincial and territorial leaders established an industry panel to look at the issue at their annual meeting in 2018. It was again discussed without any changes in 2019 at their meeting and slated for more study.

“There’s actually no program that covers the price shortfall in the marketplace we are seeing in today’s world for grain and oilseeds farmers,” says Markus Haerle, chair of the Grain Farmers of Ontario board and a farmer near St. Isidore.

The agriculture ministers are expected to meet this fall to again discuss risk management programs, but there’s little optimism they will move beyond the current program framework set up in 2018 for five years under the Canadian Agriculture Partnership that governs federal and provincial agriculture funding.

“We are getting very little confidence coming from them that they will address it in the proper fashion,” says Haerle.

Soybean farmers, especially, are in a bind because the North American price has declined due to American trade action. So although they are feeling the effects, they are not the direct targets, so there’s less willingness to look at programs.

Canola farmers have been directly targeted for trade reduction by China, as have farmers in the beef and pork sectors. There’s been discussion of a compensation deal for those farmers, says Gary Stordy, of the Canadian Pork Council.

The recent multi-billion-dollar compensation deal for dairy farmers from the federal government was promised four years ago, said Haerle, but it still hurt as grain farmers are the ones hit by trade issues right now.

“All we’re asking from the federal government is to treat the grain sector equally. We’re also impacted by trade distortions and trade offsets and that’s what we want to bring across,” he said.

The issue with AgriStability

After several years of strong grain prices, the financial liability for federal and provincial governments to pay out to protect farmers at 85 per cent of their reference margin (the calculation used to figure out when farm payment is triggered) became too large. As a result, the program was reduced to 70 per cent.

The program has since seen declining usage across the country every year.

Coralee Foster, a partner with BDO in Mitchell and a grain farmer, says there are several reasons why farmers aren’t using the program.

“You have to be in a pretty bad situation in order to make an AgriStability claim,” she says. It’s like any insurance – if the potential payout is unlikely to happen, and the cost is too great, then people choose not to use the product.

AgriStability also covers whole-farm margins. As a result it penalizes farmers who have diversified businesses.

Ontario farmers also have the Risk Management Program, which helps insure a floor price for farmers for different commodities. The Ontario-specific program is more popular with Foster’s clients and she says many of them could get a payout after this season.

However, the program is capped at $100 million, which doesn’t last long during a year with serious problems.

The provincial Conservatives promised to increase the program cap by $50 million during the 2018 election, but Ernie Hardeman, Ontario’s minister of Agriculture, Food and Rural Affairs, has told Farmtario he doesn’t expect that to come until later in the government’s four-year mandate.

Foster says that her clients are currently more concerned with state of crop development than the effects of trade, but she expects concerns will surface when they have to market the crop.

The longer-term risk management programs also take a long time to pay out, as an application is made after a farm’s fiscal year end and then it can take months before a payment arrives, if it does.

Governments look to build new markets instead

Governments have so far focused on creating programs to aid marketing agriculture products to other markets around the world. The Market Access Initiative, a federal-provincial program under the CAP was announced in September.

It increased the amount of money available and makes accessing the program easier than previous trade development programs.

At Canada’s Outdoor Farm Show, Premier Doug Ford and Ernie Hardeman, minister of Agriculture, Food and Rural Affairs encouraged food exporters and farmers to look at the program.

The premier and agriculture minister held a round table with farm organizations across the sector at the show that especially focused on trade.

“If the Chinese are not buying our product they must be buying someone else’s,” says Hardeman.

“We want to know where they are buying so we can sell our product there and we have to put an initiative in place to make sure our processors can have access to the world market.”

Ford said that Hardeman recently met with his counterparts from the United States Department of Agriculture and nearby state agriculture officials to continue to develop markets there.

“The minister was down speaking to the department of agriculture, we have had the department up in Ontario too in the office speaking with them. We’re working hand and hand. It’s beneficial in both countries to come up with a mutual rewarding relationship,” he said.

During remarks before the roundtable discussion, Ford emphasized the importance of the new trade deal with the United States and Mexico to Ontario agriculture trade.

The provincial officials had no news on a potential aid package for farmers hurt by the global trade disruptions.

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