Canadian farm groups are displeased with the subsidies being doled out to their American counterparts and plan to approach the federal government about getting some assistance of their own.
The U.S. Department of Agriculture revealed details of its US$12 billion aid package last week. It is designed to help offset losses caused by trade wars.
About half of the total is being distributed now and there may be more to follow in the coming months if warranted.
The bulk of the money will be dispersed to farmers through $4.7 billion in direct payments. Soybean farmers will receive the lion’s share of that money through a $1.65 per bushel subsidy totalling $3.63 billion.
There is also a $1.24 billion food purchase and distribution program, a $200 million agricultural trade promotion program and $175 million set-aside for almond and sweet cherry producers.
The Canadian Federation of Agriculture isn’t happy that U.S. farmers are being propped up by government payments.
“We’re definitely concerned because it’s going to give them a competitive advantage,” said CFA president Ron Bonnet.
“It is going to hurt.”
Grain Growers of Canada is equally perturbed. It said farmers depend on open, predictable access and a level playing field in domestic and foreign markets.
“The U.S. agriculture bailout is another unfortunate step towards disrupting the global market that grain farmers all around the world rely on for their livelihoods,” president Jeff Nielsen said in an email.
“We will work with the government to review the details of the bailout and support the government taking whatever steps are necessary to ensure the U.S. is respecting its international trade obligations.”
The USDA said the aid package does not violate World Trade Organization rules. Bonnet said that is malarkey.
“They are violating, but they don’t care,” he said.
The CFA has forewarned the federal government that Canadian farm groups will be knocking on the door at some point looking for financial support of their own.
“I don’t know if direct payments are the best way to do it or not yet,” said Bonnet.
Sometimes ad hoc programs miss the target and some commodity groups are concerned they would trigger countervailing duties from the U.S. or other countries.
Before farm groups approach the government with hat in hand they need to figure out the magnitude of the harm caused by the trade wars and the subsequent U.S. subsidies. That means closely monitoring futures prices and basis levels.
“When you get a tariff war going on, Canada is going to be affected just because of the way most commodities are priced out of Chicago,” he said.
Bonnet said Canada’s existing business risk management programs don’t deal well with damage caused by trade wars. AgriStability is too slow to respond, and there needs to be a 30 percent drop in a producer’s reference margin to trigger a payment.
He said this is a good opportunity to discuss getting a nimbler program in place because it’s a different world than when the programs were designed.
Canadian farm groups weren’t the only ones expressing displeasure with the U.S. aid package.
The National Association of Wheat Growers was not thrilled with its 14 cents per bu., or $119 million, share of the package.
It noted in a news release that U.S. Agriculture Secretary Sonny Perdue forewarned that the aid package wouldn’t seem equitable.
“This was made clear today when the administration introduced a proposal which poorly reflects the reality that all farmers are being harmed by tariffs,” said NAWG president Jimmie Musick.
The National Corn Growers Association was also miffed with its one cent per bu., or $96 million, share of the package.
It estimates the trade disputes have lowered corn prices by 44 cents per bu., amounting to $6.3 billion in losses.
“This plan provides virtually no relief to corn growers,” association president Kevin Skunes said in a news release.