The 2007 US Farm Bill Will Once Again Change Canadian Agriculture

If there is one constant over a 20 year career of writing this column, its the US Farm Bill.  The 2007 US Farm Bill is currently being debated and fought over.  With the ethanol gold rush just getting started, it’ll be intriguing from a Canadian perspective to see its final shape.

I believe the 2007 US Farm Bill will be the greenest ever.  More support for US corn producers.  More support for ethanol and bio-fuels.  There will be more grief for Canadian producers.  There will be more, more, more.

You have to admire the Americans when it comes to their agricultural policy.  They have a big, big, big picture for their agriculture and food system.  Yes, they have their cheap food policy too, but they support their agriculture in good times and bad.  The American public pays for this in their taxes, but food is plentiful and cheap.  Off the farm nobody much thinks about food and agricultural policy.

It’s ditto in Canada but for much different reasons.  Contrary to what some farmers believe Canada does have large direct and indirect transfer to it farmers.  However, it’s uneven and not as rich as our American friends.  Farmers are constantly frustrated.  Governments are constantly trying in their own bizarre way to satisfy them.  Our British parliamentary system ensures us that Canadian farmers will never have the political influence American farmers do.  Two senators form each US state enshrines the US farmer’s political power.

What’s intriguing about this current 2007 US Farm Bill debate is it’s going on with the ethanol gold rush swirling around us.  With corn prices at or near 10-year highs, what’s the US Farm Bill suppose to do?  There is a myriad of opinion in US farm country.  Making it greener and sharing the wealth while setting up for future years will be the key.  When the next big downturn in agriculture takes place, the American farmer wants to be ready.

Key in the current debate is the higher corn prices.  What would the current US Farm Bill debate be like if the nearby corn futures month was $2.00/ bushel.  We’d be talking about massive movements of American capital into the Corn Belt to shore up corn production for ethanol.  However at $4 per bushel corn, that argument doesn’t hold a lot of water.  It’s giving the protagonists of subsidies to American corn farmers a way out.  On the other hand some American commodity organizations are saying the current price climate is saving the American government a lot of money.

So what’s up? It would seem we are in the world where $4 corn will become normal.  It’s kind of funny.  I’m writing that even when only four short months ago, everybody was looking around wondering what to do about a glutinous world of $2.50 corn.  So I do that with a grain of salt.  I’m sure many of the policy makers in Washington who are shaping the 2007 US Farm Bill taste the same salt.  Getting used to this environment from a political perspective surely must make you feel queasy.

Our Canadian position is so different.  At the present time Canadian politics is full of green environmental talk.  Stephen Harper, Stephan Dion, Jack Layton, and Gillies Duceppe are tripping all over themselves trying to be a Leprechaun.  Bio-fuels are part of it, but it’ll never be like our American friends.  As a net energy exporter, the yearning to free us from foreign oil doesn’t have the same resonance.  However, in the US every American knows what it feels like to be held hostage for oil from an unstable part of the world.  They are damning the torpedoes, full speed ahead, building US agriculture with a policy, which is rich and takes no prisoners.  There are also no apologies to the many foreign agricultural critics like Canada, Brazil and Europe.

It is very important for Canadian farmers to realize how important this is.  As many of you know I do commodity futures analysis here and in other publications.  However, my passion has always been agricultural policy.  For years and especially in 2006 I took a very public role in trying to forge that policy.  So far Canadian farmers haven’t got there.  We have nothing in the big picture to drive agriculture like “freeing us from the tyranny of foreign oil.”  However, our American friends do.  It’s a policy, which drives many of them every day.

The challenge of course is to get as focused in our agricultural policy in Canada as our American friends.  However, the times we are in are changing.  Did somebody say $4 is the new normal?  I hear it everywhere.  It might even change the historical focus of the 2007 US Farm Bill.  It’ll be like a new twilight zone.  Adjusting to it for Canadian farmers will surely be the hard part.