Unless you’ve been trapped in a barn for the past three years, you have likely heard how the end of the Crow means a new beginning for the livestock industry.
Leave it to an economist to debunk something that has become almost an article of faith in the prairie farm economy.
Daryl Kraft, head of agricultural economics at the University of Manitoba, has taken a look at what the loss of the western grain transportation subsidy has meant to farmers so far:
- The end of the Crow hasn’t caused feed grain prices to bottom out.
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- The end of the Crow hasn’t spurred farmers to build hog barns and feedlots and feed the barley they once would have exported.
As it turns out, the end of the Crow is no big deal.
What has really made a difference in the past couple of years, according to Kraft, is the lack of the Export Enhancement Program, that much-loathed subsidy sword wielded by the American government.
“We’re talking about a post-EEP environment, and in the case of barley, I would argue we’ve been there for the past 15 years,” Kraft told a group of agrologists last week.
Just a few months after the Canadian government killed the Crow, the United States government tucked away its EEP program.
The Canadian government took away the grease that slid grain to port, but the Americans took away the millstone that weighed on the neck of export prices.
From 1985 to 1995, 75 to 80 percent of export markets for wheat and durum were depressed by bargains made possible by EEP. The more the U.S. paid out, the wider the gap between Canadian and U.S. prices, Kraft said. For every dollar per tonne the U.S. put into EEP, the Canadian Wheat Board lost a dollar from the price it could receive from its export customers.
The average U.S. subsidy during the decade was $37 (Cdn) per tonne for wheat and $22 per tonne for durum.
But feed barley was a different game. For one thing, half the wheat board’s exports of barley went to Japan, a market the U.S. did not target with its export subsidies.
For feed barley, EEP reduced prices by an average of $19 per tonne. Meanwhile, the Crow subsidy increased prices about $18 per tonne.
The two subsidies cancelled each other, said Kraft.
“We didn’t give up something and not get something in return.”
For the past decade, feed barley prices in Manitoba have tracked corn prices in unsubsidized markets, said Kraft. And while the livestock industry complained it was held hostage by the Crow, the EEP subsidy was offsetting its effects all along.
Hog numbers started to grow in Manitoba around 1985. Feedlots started filling up in Alberta around the same time. The buzz around livestock expansion is simply an extension of that trend, said Kraft.
He expects the trend will continue. But he warned that as grain companies square off for market share by building big concrete elevators, they may bid up feed grain prices.
