It is that time of year again. If they were playing baseball since April, they’d call it the dog days of summer. In southwestern Ontario crops are hitting their stride, some people haven’t had enough rain, but most people have. Needless to say, there have been a myriad of conditions across the province, which leads to an uneven crop. However, when the chill of fall finally comes, all things equal going forward, I expect Ontario to have some very good crops this year.
The hard part of course is marketing that crop in a profitable manner. You know the drill. Risk management never gets old, have those standing marketing orders ready. We’ve been down that trail so many times before. With Covid still stalking our country, it’s made things a little more challenging. We produce so much and finding a home for it is such a quandary. Cheap of course, is the great equalizer. The question is in the 2020 world of Covid, how cheap will be enough to keep that agricultural commodity pipeline going?
It’s been tough in 2020 aside from Covid because grain demand has taken such a shellacking. We know the problems we’ve had with the demand for grain in the United States. However, it’s no secret that Canada has had its own problems when it comes to exporting agricultural commodities over the last few years. China has been a problem, with two Canadians being held and Meng Wanzhou still being held in house arrest in Vancouver waiting for the judicial process to see a way forward. Meanwhile, Chinese demand for Canadian agricultural commodities teeters on the outcome.
Of course, the biggest agricultural trading relationship in the world is between Canada and the United States, which got a kick in the pants last Thursday. That’s when President Trump reimpose a 10% tariff on most Canadian aluminum coming into the United States. These tariffs will take effect on August 16th. The President is using a US Act which allows the President to impose tariffs for “national security” purposes. Sound familiar? Yes, and you thought CUSMA or USMCA was going to solve all our trade problems.
Of course, if the Americans can do it with aluminum, then they can surely do it with agricultural commodities too. I cannot imagine the cross-border trade in cattle to be a “national security” concern, but stranger things have happened. Canadian aluminum is in fighter jets under the NORAD command. However, we’re a national security threat.
Before tariffs were applied in 2018 when aluminum tariffs first applied, Canada exported 80% of our aluminum to the United States. The US doesn’t produce enough aluminum to satisfy their own needs, so it’s pretty obvious American manufacturers will have to pay more. Its hard to figure out the perspective of our American friends other than that November 3rd election date getting closer. As we look to the south, it’s pretty clear, much of the economic posturing has a renewed political bent. The political atmosphere down south is white hot and scapegoats must be found. It was Canadian aluminum for the time being, next it might be Canadian dairy.
It makes the idea of “free trade” such a flyer. It’s interesting, none of this much surprises me especially with the present American administration. Much of what is happening with aluminum doesn’t add up. There have been other examples in the past, maybe not as blatant as Canadian aluminum. I’ve written on the subject of Canadian American free trade for 34 years now. Over time, I’ve seen 3 different “free trade” agreements signed. During this time, I’ve always believed, that free trade is whatever our American friends deem it to be. The present Administration is extreme in that interpretation.
Obviously, this reality is tough medicine for those in the aluminum business. Canada has responded by saying we will respond with tariffs dollar for dollar. We’ll see how we muck through this. It might take a new American administration to see some resolution. Who knows whether that will happen or not.
For Canadian farmers there are some renewed lessons here. Global trade might be important, especially for Western Canadian agriculture, but it is not a panacea. That’s one reason why Canadian supply management is such a good idea, concentrating on the domestic market. Ditto for Ontario corn ethanol. Needless to say, it can’t be done all that way, and that’s why we export. The United States is our holy grail market and China represents that on the world stage.
As we look ahead, we’ve got to get this crop home. Next weekend will be mid-August, the crop is almost made. The challenge will be to find a way to build demand in a trading world swirling with distrust and bombastic threats. China and the United States hold a lot of cards. Finding our way unscathed in this new geopolitical world will be daunting. However, if we were honest, it’s always been that way. This week it was Canadian aluminum producers turn. Let’s hope Canadian agriculture can avoid the same treatment.