Canola crisis exposes weakness of farm safety nets

American and European farmers have the world’s best risk management system: political support from sympathetic governments.

When a crisis appears, these governments scramble to find a way to prop up their producers.

Western Canadian farmers will never have that kind of a safety net to fall into. Partly by the design of confederation (the sparsely populated rural West has little of the political power enjoyed by the U.S. Great Plains and Midwest) and partly by the fractured nature of Canada’s farmers (split between free market and supply-management ideologies), there’s just not a huge amount of political will to prop up financially ailing farmers with ad hoc support.

That means farmers in Canada must rely upon the safety net programs that governments offer on an ongoing basis; multibillion-dollar emergency bailouts are far less likely in Canada than in the U.S. or Europe.

As evidence, look at U.S. President Donald Trump’s sensitivity to midwestern American farmers’ upset over the China trade war. He might have backed off his wing-nutty idea of buying up all their crops and dumping them on world markets, but he seems willing to find ways to take drastic actions to help those caught in the mess.

Here in Canada, canola growers now get the ability to borrow more money through a beefed-up cash advance program, as they face a scary near-term future. Yup, a loan. A bigger cash advance is a good thing, but it’s no answer to the ongoing impact from China’s canola blockade and the U.S.-China trade war.

And for expanding this loan, farmers and farm groups are praising the government. That’s not dumb. That’s farmers realizing that in Canada, this is about as much as you could hope for outside of a disaster. It doesn’t matter if the sitting government is Liberal or Conservative, support for massive bailouts hasn’t been there for years. It’s hard to imagine an NDP or Green party being much more willing to pony up better support.

How about the rest of the safety net?

  • AgriStability: The Grain Growers of Canada just issued a call, in the light of the China situation, to overhaul that program, which many farmers consider irrelevant.
  • Crop insurance: Works great (mostly), but it doesn’t address market issues.
  • Other programs: All incremental gains on having nothing, but little impact in a disaster.

We haven’t much needed a robust safety net system for market risk since the early 2000s. The commodity bull market and the years of acceptable profitability since have meant all we needed were Band-Aids, not surgery.

But if we’re possibly entering an extended period of low crop prices, a robust safety net is essential.

The GGC call for a quick overhaul of Canada’s safety net might seem naive, since these programs are both bureaucratic and inherently political. But what nobody can deny is that most farmers are anxiously leaping from one trapeze to another above a suddenly hostile world market, and they don’t know if that thin safety net beneath them will break their fall, or simply snap.

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