There Is No $28 Billion Coming to Canadian Farmers

I took a walk in my soybeans again tonight. On August 20th, I thought I might see some signs of ripening. I grew a variety that was a bit earlier than usually for my area, which I believed might let me get my wheat planted earlier. However, on my field walk tonight, I saw no sign of that. I’ll give it another week for another walk through. Generally speaking, by the end of August, early soybean verities should show signs of ripening in the deep south west of Ontario.

As it is, my soybean crop looks so much stronger than it did in 2019 when I struggled to get it planted. It’s been such a strange year, shaped by Covid but generally benign weather. It almost seems eerie now looking back at preparing to plant this soybean crop. Covid 19 was consuming all the oxygen in the room. Most of us ever thought we might have to risk our lives to produce Canada’s food. Now that we are into late August, it looks a lot different. The virus still doesn’t lie, but at least as a society we’ve proven that we can flatten the curve. That gives us a fighting chance before a vaccine becomes available.

Aside from the very tragic loss of life here in Canada and worldwide, the damage to the economy has been swift. Never before have we legitimately tried to shut the economy down with everybody locked down. Needless to say, in Ontario, we’re in Stage 3 reopening of the economy across the province. Kids will be headed back to school soon, amid controversy. Even the Canadian economy is on the long way back.

In fact, according to BMO Capital markets, Canadian economic activity has recovered to about 95% of pre pandemic levels. That’s based tangibly on a surge in employment, surging housing sales and increased credit card spending. To go further, it was almost telegraphed. As we all know, in Canada we follow public health orders a bit better than our American friends. When you combine all of this, there is a much better chance of a vigorous snap back for the Canadian economy.

Of course, it helps when there is a huge infusion of capital pushed into the economy. That’s actually what we got, as governments started spending aggressively to help ppl as the economy contracted in the 2nd economic quarter of this year. The federal deficit is ten times what it was in December 2019. That kind of stimulus along with other stimulus from other western countries has a lot of cash sloshing around the world’s economy. Central bank’s printing machines have been in overdrive.

The results have the Canadian economy now growing at an annualized rate of 36% in the third quarter compared to 20% in the United States. Of course, those positive rates are smoking hot, but it’s being compared to the moribund second quarter, making it look higher than the optics warrant. Needless to say, it’s in the right direction and if we can ever tame Covid 19 into submission, our central bankers have helped save things. However, as of August 20th, Covid 19 is still stalking the land.

Down on the farm, it’s a bit different. I saw a report from Farm Credit Canada agricultural economist Isabelle Nkapnang this week talking about the health of the Canadian farm sector. She quoted the current ratio for Canadian farms to be 2.2, the lowest since 2006, but much higher than the 1.93 recorded in 1993. Current ratios measure the ability a farm unit uses to cover its short-term liabilities with its current assets. In the same study, current assets decreased slightly in 2019 by 0.2%, but current liabilities increased by 5%. In other words, in 2019 Canadian farms as a whole were moving backwards. We can assume with Covid 19, it got accelerated a bit.

That’s the way it feels. A few months ago, at the height of Covid 19 I said Canadian farms needed a boost from government. What we got was an increase in the carbon tax on grain drying. The collective sector was ignored on a large scale at the time, and it caught up with society as there was initial food shortages and problems on farms with offshore labour. Our Canadian minister of agriculture Marie-Claude Bibeau has rightfully pointed out our agricultural safety nets are not working. However, that’s been true since 2006 and both the Conservatives and Liberals have refused to fix them. It’s meant that for the last several months, Canadian agriculture has been on its own at a time when federal spending has increased ten-fold.

Of course, that fight is old and ongoing. Farm organizations like the Grain Farmers of Ontario and the UPA in Quebec continue to lobby. I also believe Minister Bibeau understands the ineptitude of the Canadian agricultural safety net envelope. I always thought it would take a female Quebec minister to change it. However, farmers are still waiting. Maybe the departure of Bill Morneau for Chrystia Freeland might help. I know, I’m stretching here.

Needless to say, there is no $28 billion coming to Canadian farmers like it already did in the United States. The Canadian non-farm economy might be on the comeback, but our agricultural economy relies on our own labour and the gyrations of the Canadian dollar. Covid has been our bane. Fighting it off will continue to be one of our greatest tests.