A commodity price can be an honest, pure and shockingly efficient signal.
Through that one number, posted and based-off around the international marketplace, farmers, marketers, shippers and processors can figure out whether they can make money producing, procuring or selling something. A single price number can contain hundreds of variables, but they all add up to what buyers and sellers across the world think a basic something is worth.
Canadian farmers are great at figuring out what to produce for the world market. They all have unique costs of production, as do farmers everywhere, but with Canada’s abundant land, water, lawfulness, educated farmer population and relative efficiency, Canadian farmers can produce many commodities they can sell in the international market at long-term profitable prices. Many countries can’t do this.
It’s easy to do in a commodity bull market, like that of 2006-2014, but it’s a lot harder now, with prices far below those lofty levels – and likely to stay so for years. Still, if anybody in the world can produce oilseeds, cereal grains, pigs and cattle at profitable prices, it should be Western Canadian farmers.
However, one part of the equation seems to be going out of whack these days: Canada’s self-imposed costs on farm production. Canada can’t do much about its distance from overseas markets and the unique challenges of our mountainous territory, nor our short growing season, but there are many areas where Canadian farmers’ cost of production threatens to rise compared to that of our chief competitors, who are the people who mostly determine world prices.
This is something Robert Arnason and I looked at in a two-story package a couple of weeks ago called “Death by a Thousand Cuts.” What does it mean for Prairie farmers that some new costs, such as the federal carbon tax, and new regulatory burdens, like the threat of losing approved pesticides, or tough regulations on foreign workers, are being imposed when those same costs aren’t necessarily being dumped on the farmers we compete with? In times of hefty profits, it probably wouldn’t mean much, but in times of thin, non-existent or negative margins, those incremental cost increases can mean a lot. At a certain point, with enough time, they could push some farmers out of production, some commodities off Canada’s list of possibilities, and some economic growth out of Canada’s future.
If this was a deliberate policy it would be one thing. However, from what I can tell, these little costs piled up on farmers are not part of any comprehensive approach to agriculture, but instead the product of disparate policies being applied without a holistic appreciation for their impact, or their impact on other national priorities. That’s what our stories took a brief look at.
It leaves Prairie farmers facing a reality of internationally set prices, but domestically imposed costs, that could potentially lead to an economic head-on collision at some point. Clean international arbitrage versus messy domestic ad hoc-ery and parochialism. Bad combo.
Farmers deserve better policy development than this.