Be conservative and plan on 2020-21 prices of US$3.20 per bushel corn and $8.50 soybeans.
That was the advice of University of Illinois farm management specialist Gary Schnitkey when talking to Midwestern and Great Plains farmers in late July.
If you can make it on those prices you should be OK if you get a crop, he said.
That might be true for American farmers, but Canadian farmers don’t have it quite so easy because U.S. farmers are able to harvest a huge crop that Canadian farmers have no access to: the U.S. treasury.
“Talk to your accountant,” advised Schnitkey, naming a number of programs that are likely to make substantial payouts to American farmers this year and next.
“Make our operations cash-flow this year.”
One of the continual frustrations for Canadian farmers is the relative lack of support from the federal government when farmers fall into hard times caused by competitors’ behaviour.
Farmers don’t want government handouts, but when their closest competitors (American farmers) are receiving dollops of aid, it isn’t just vexing, it’s actually a competitive threat to their existence.
Here’s why: hefty subsidies help American farmers limp by at break-even when they should, according to the laws of economics, be losing money. That means they’ll still plant and till and plan for another crop, regardless of real-world losses. If they were losing money, a lot of marginal U.S. acres would go out of production, world production would fall, prices would rise and the world’s profitable producers would carry on. In all likelihood, that would include most prairie farmers.
That, indeed, was what a number of U.S. agricultural economists and analysts have been telling me since 2015 is likely to happen. That’s when the long-term commodity bull market ended and the U.S. ended up with higher costs of production, high land prices and a seemingly always-strong U.S. dollar as long-lasting disadvantages. If anybody, anywhere in the world was going to see their acreage shrink due to competitive pressure, it was going to be in the U.S., they told me.
But in the real political economy in which we live, the profits and economic signals within North America are being skewed by the U.S. government’s willingness to throw money at its farmers when they get in trouble, and the Canadian government’s unwillingness to do likewise.
Now, with the 40 percent of the Senate permanently set aside for representatives of “farm states” combining with the U.S. president’s desire to reward and protect one of the few parts of U.S. society that doesn’t consider him to be a blundering boob, and a U.S. presidential election a few months away, aid has been flowing freely.
For the grains and livestock that trade in continental markets, glutted U.S. supplies drive down the prices Canadians receive because there is almost perfect arbitrage within North America.
But Canadian farmers are also failing to find compensation in export markets cut off to American product, even with China sucking in Canadian pork at high rates as it grapples with African swine fever and a desire to avoid buying from the U.S.
Canadian meat companies are making good money exporting the pork, but they’re buying the pigs at domestic prices, so farmers end up supplying a high-value product and receiving a discount price.
Prices and price signals are being badly undermined by Trump’s war with China, something that is undermining Canada’s long-term ability to produce crops and livestock.
Facing the same market prices as U.S. farmers, but not receiving the same government support, Canadian growers are likely to be slower adopting new technologies and more likely to park marginal acres.
U.S. farmers who should be idling acres or getting out of the business are able to limp along into “next year country,” propped up by a committed national treasury.
I don’t think the Canadian government has an excuse for this negligence toward farmers. I always hear the argument that “They’re 10 times larger and have a much larger treasury.”
Yes, and they also have to fund aircraft carrier battle groups, run a real space program, deal with chronic underprivilege in their cities and a meth crisis in rural areas, as well as coping with a medical system that sucks in an obscene amount of their nation’s wealth.
Canada chooses to not support its farmers, and that’s been something that has become an odd item of unification for Canada’s left, right and centre: farmers are struggling, it’s not fair, but we’re not going to do anything about it.
So that leaves Canadian farmers in the Darwinian situation of trying to be fittest and to survive until next time things are profitable.
The government’s failure to support farmers is making them the weakest on the continent.
There are no friends in the jungle, and farmers are finding few friends in Canada. With any luck they’ll survive long enough to make it out onto the plains, where they can deal better with the predators.