Canadian Farmers Face Their New Farm Input Reality

We’ve got an inflation problem.  I think you know what I mean and if you don’t you haven’t checked fertilizer prices lately.  I got a note from a reader last week exclaiming a tonne of MAP was being priced out at $1400.  Does that mean $5 corn is the new $2 corn?

Has it been all stolen away?  Or is our new economic reality being transformed to put us back in a box?  Are farmers across North America reaping the vestiges of better prices or it simply being eaten up by “the inflation problem”?  Or am I simply grandstanding, playing the devil’s advocate on some real problems I see on our greater agricultural economic horizon?

There is something very wrong when MAP costs $400 last year and now in the summer of 2008 it costs $1400.  There is simply something wrong when two years ago it costs $50/acre for nitrogen on corn but in 2008 it costs $100/acre.  However, the wrong doesn’t lie with your local farm supply guy.  No, it lies with the very few firms producing and distributing fertilizer in this world.  There oligopolistic market behaviour has really kicked in.

It would all be “not so bad” if we got 250 bushel corn, 65 bushel soybeans and 120 bushel wheat.  However, as we all know “producing food” has its ups and downs.  Last year I was decimated by drought.  This year I’m not so bad, but you never know what’s around the corner.  We’re still a long ways until we get the 2008 crop into the elevator.  So just going out and shelling $1400 for MAP is more akin to rolling the dice at the Dresden Casino.

However, what choices do we have?  You can soil sample and that might help you fine tune things.  You can cut back, a likely scenario for many people.  You can pay the bill and hope for a bumper crop or you can begin lobbying government to do something about the price gouging.  Oligopolies have some social responsibility too.

It is like one farmer told me last week.  He said, “$5 corn is now the new $2 corn!”  Now, that might be a stretch but I think you know what he’s saying.  A year and a half into this demand driven commodity boom, almost everything you touch is more money.  Those making the most it would seem are the big corporate agricultural interests delving out much of the new technology.

It leaves the individual farmer in a precarious position.  Costs have tripled for some fertilizer and other inputs.  We might be all right for another year, but eventually, this is really going to bite us.

This is happening in an agricultural policy world which last week resembled a shambles.  The WTO talks once again broke down last week over the issue of agricultural subsidies.  This time India, Indonesia and to a smaller extent China couldn’t agree with American conditions.  The dispute was over a special safeguard mechanism that would have enabled developing countries to raise import tariffs on farm imports in case there was a sudden surge of imports.

For Canadian producers fighting with these high costs the breakdown at WTO was significant but surely not as much as it was to farmers in the developing world.  The Canadian position remains as hypocritical as always, wanting protection for our supply managed commodities but at the same time demanding everybody else reduce trade barriers.  Having written about this for over 20 years, I don’t think there will ever be agreement.  In the white hot 2008 agricultural atmosphere, something tells me “domestic food security” means much more than getting a trade agreement.

Still, we are where we.  However, accepting the tripling of input costs shouldn’t be done so lightly.  Both the federal and respective provincial government have a role in containing these costs.  There are competition laws, which need to be enforced.  At the very least cost indexes like the Farm Input Price Index needs to be emphasized.  Farmers need to push government to do something about this.

Pretending its not happening is an end game.  However, there are those especially in the agricultural corporate world who don’t get it.  Case in point is all these technology forums and expos currently being promoted by “big Ag.”  I even read about a new hybrid being developed that had “eight traits”, like the triple stack had become “old hat.”  Of course each trait comes with a cost and the choices are becoming fewer and fewer if you don’t want them.  As one Ontario corn dealer/farmer lamented to me last year, “I’m getting teched-out!”

Needless to say, it’s a fine line I’m walking regarding this issue.  Yes, Canadian agriculture needs new technology, but at what cost?  Is $5 corn the new $2 corn?  If $1400 MAP the reality in 2008 is $2400 MAP good for 2009?  Or is there something very, very wrong here with the market structure for farm inputs?  Clearly, I stand on the latter.

Canadian farm groups, as a whole should be making public stands about this price gouging.  Yes, supply and demand matter, but regulation is needed when the supplier isn’t acting responsibly.  There are limits to profits even in our capitalist world.  However, at the present time, much of this cost is being past onto farmers.  Don’t give me this India and China garbage.  What’s going on now has a lot more to do with corporate greed fostered within an oligopolistic market environment.  Canadian farmers should never accept that.