Economists say farmers will likely be OK during COVID

Should we have been better prepared for a shock like COVID-19?

Is the present jolting rollout of emergency farm support programs, like the federal government’s $252 million and $100 million recently announced packages, Farm Credit Canada’s much-boosted lending capacity, and the extension of payback deadlines for cash advances, an alarming proof that we should have been better prepared?

The somewhat counterintuitive answer is probably no.

No doubt much of our farm safety net system and overall national disaster response approach could be improved, but in terms of being prepped for COVID-19, it’s probably better to react to circumstances than to have spent much time pre-designing apocalypse packages.

That’s just one of the conclusions I take out of a fabulous package of analysis in a special edition of the Canadian Journal of Agricultural Economics looking at the impacts of COVID-19 on Canadian farmers, agriculture and food.

“Governments have the option to deal with black swan (unpredictable) events as they arise,” write Alan Ker of the University of Guelph and Ryan Cardwell of the University of Manitoba in the special edition’s introduction.

“This is almost always more efficient, as black swan events cannot be predicted as to their specific form, their timing or the most appropriate policy response.”

In a separate article in the journal, Ker looks at the adequacy of Canada’s safety net of business risk management programs and finds most farmers won’t even need to use them this year unless there are bigger disruptions to world grain trade than expected.

“My expectations are that any resulting losses are not going to be of sufficient magnitude to trigger claims under the current BRM program. Farmers will, and are by default, self-insuring against these losses.”

That view from Mount Olympus will likely infuriate some individual farmers who are under incredible stress as COVID-19 rips its way through the hog production and cattle-feeding industries, as well as sectors like greenhouse and mushroom production.

But it’s likely accurate for the situation of most grain farmers, who are so far coming through this crisis without a radical worsening of their outlook. Many went into the crisis suffering from a piling up of bad crops and bad harvests, so that doesn’t mean they’re doing well, of course.

Crop prices been resilient in the face of the worldwide crisis, highlighting the differences between food commodities and non-essential commodities, and between food production and other areas of economic activity.

Many dangers still lie ahead and the situation could worsen. Just some of the dangers discussed in the special edition are threats to trade, of consumers having reduced incomes and less ability to pay for food, and specific risks to certain products.

Just one bad-case scenario looked at contains a 40 percent decline in the price of cattle as consumer income declines and higher packer costs hammer demand.

Much of this special edition of the Canadian Journal of Agricultural Economics is available free and online and I recommend you check it out. Economics has been called “the dismal science” and technical matters can be awfully opaque to non-economists.

However, all of this research is not just relevant to the situation of Canadian farmers, but also shockingly timely. Academic work often involves long lead times and much delayed publication, but this special edition shows our agricultural economics community rising to the challenge of providing crucial analysis when it is most needed.

Farmers might not like everything they read. It certainly does not support a demand for any general mega-bailout for grain farmers.

But for understanding the economic and financial situation of the Canadian farm and food systems, you can’t find anything more relevant.

About the author

Markets at a glance

explore

Stories from our other publications