Is it a winter of discontent? Well, I don’t think so. I haven’t got any calls to mount any hay wagons to speak in any farm rally. Sure we are in a bearish market environment but so far it has not translated into severe revenue cutbacks. So when I heard from an Ontario farmer this past week regarding the federal provincial agriculture ministers meeting in Toronto, I was feeling a little bit of déjà vu. He was very active in the farm protests of 2006 and not too happy about the lack of progress regarding the dysfunctional safety net programs we have here in Canada. His words were, “surprise surprise more stall study stall.”
For those of you too busy to take notice of our federal agriculture Minister Gerry Ritz met with his provincial counterparts last week in Toronto. At the end of the day, nothing happened. Of course there has been a wide chorus of calls for a revamping of Agristability and there was some hope that the Minister would say something positive after that meeting. What federal agriculture Minister Gerry Ritz said was the ministers would need to wait until their respective treasury boards let them know how much money they could spend.
Of course if you have spent any time in the agricultural safety net trenches in Ontario you will know these meetings discussing safety nets have become almost comical. For my American readers, Agristability is a agricultural safety net program modeled after the previous program, which was called CAIS. These programs attempt to stabilize gross margins based on a complicated formula, which has proven to be a complete failure. These programs resulted in widespread protest across Québec and Ontario in 2006. Farmers were told at the time the change was coming.
Little did we know at the time that change would be the ethanol gold rush. What government could not do in stabilizing farm revenues, the ethanol gods did. With Canada’s agricultural safety net equation including a provincial component the chances of getting something worth anything were low at the time. In Ontario farmers got there risk management plan or RMP and were hoping to combine with a federal program to stabilize farm income. Four years after the big protests in Québec and Ontario, we’re still not there. Ontario farmers still don’t have a safety net, which works. However, because market conditions have been buoyant since then, if there had been an effective safety net in place over the last four years, it wouldn’t have cost the government a dime.
The optics going forward are obviously very bad especially when you look at market conditions. One major difference between American analysts and Canadian analysts like myself has to do with safety net programs. For instance at the present time the market is turning fundamentally bearish. Into this void we hear of many American analysts talking about how crop insurance and other subsidy programs are going to help their producers. It’s all a trade-off between price and the US Farm Bill. In Canada on the other hand it’s all about lower prices and we do not have an agricultural safety net that works.
So as we head into what some grain analysts are calling very bearish market conditions Canadian producers are at risk for very hard times. It must be remembered though that up-and-down price movement, hills and valleys and low returns are what we sign on to when we are involved in the farming business. So that is not a surprise. Risk is that constant on the farm and managing it is our challenge. In Canada, helping farmers manage that risk with effective agricultural safety net programs has always been the goal of both our commodity organizations and general farm organizations.
Of course the road ahead on this in Canada is about as clear as mud. Keep in mind some of my American analyst friends are talking about soybeans starting with a $6 or $7 and corn sub $2.90. It’s scary isn’t it? Regardless of the that and regardless of any grain contracts you may have had at a better price, keep in mind the important thing is to have a policy, which supports Canadian producers in times of great price volatility. It’s not rocket science. However, as former Conservative agriculture Minister Chuck Strahl said in 2006, it helps when farmers are protesting in the streets and get on the front page of the Toronto Star.
I have never forgotten that. Would our current agriculture Minister Gerry Ritz feel the same way if farmers launched protests and get their picture on the front page of the Toronto Star? I dunno. What he said was the ministers were going to wait until July and try again. Something tells me over a period of four years we’ve lost something in the translation. It’s now all about surprise, surprise, more stall study stall. Maybe we should be getting those hay wagons ready.