Farmers find themselves under a cloud

PALM SPRINGS, Calif. — In the long run, Canadian farming appears to be cruising into a beautiful future as growing world population and Canada’s bountiful farmland and water make a rewarding equation.

But today’s farming is facing headwinds that are slowing its progress and creating a much less pleasant journey than just a few years ago.

That was the mood underlying the Canola Council of Canada’s annual meeting, as farmers and others heard about challenges with trade, about how consumers’ divergent demands are growing and about a world market glutted with crops and growing competition.

“He’s winning,” former Conservative interim leader Rona Ambrose said about U.S. President Donald Trump’s harassment of Canada’s export industries.

“Economic uncertainty is the new normal for us.”

Ambrose pushed back against notions that Trump’s protectionism was fated to fade away simply because it is heresy to economists and the mainstream of the Republican party.

Trump has held his views for many years and has packed his administration with committed protectionists.

“These guys believe this,” she said of Commerce Secretary Wilbur Ross and U.S. Trade Representative Robert Lighthizer.

And it doesn’t matter whether or not protectionism actually undermines the U.S. economy overall because Trump’s populist appeal grows if he can appear to bully foreign companies into building facilities in the U.S., as Bombardier is now doing.

And if Trump can coerce some investors to build in the U.S., his protectionist approach also causes investors to shy away from trade-dependent nations like Canada.

“Comparatively speaking, they come out on top,” said Ambrose.

The challenge of consumers’ escalating and contradictory demands was explained by Kristie Sigler, a consultant and professor with Ohio State University, revealing a marketplace that is breaking into thin shards of preferences in product attributes, claims, styles, communication and delivery.

“This next generation is not going to buy Miracle Whip,” said Sigler, noting the threat to long-time consumer staples and approaches that are failing in the face of millennial and generation Z sensitivities.

Terms such as “organic,” “sustainable” and “natural” have become mainstream, while low-carb, gluten-free and non-GMO are commonly sought and advertised.

“Clean” labelling has recently evolved out of “clear” labelling, adding further demands and complexities to food companies trying to produce products and farmers trying to supply ingredients for those products. Consumers demand many things to be “free-from,” as well as few ingredients and no chemical-sounding names.

Yet at the same time consumers tell surveyors that they are not willing to compromise on taste or eating experience and are still highly focused on the price of food.

And while consumers appear to be demanding organic food and free-range food, and food companies have made lofty promises to supply them, there don’t appear to be nearly enough organic farmers to supply the materials to meet the promises.

The retail structure has also been shattered, with the big-box revolution being now compounded by the online revolution, with Amazon’s recent purchase of Whole Foods a sign of intensifying disruption, as is the growth of convenience stores from minor players into major players.

All of these changes push back demands to the farm level, and how they all balance out in the end is hard to predict, Sigler said.

In an era of rising prices, the escalating trade tensions and consumer market demands might be less vexing for farmers, but that isn’t what farmers are dealing with.

Nor are farmers likely in the medium term to see much more enriching conditions, said Warren Preston, deputy chief economist at the U.S. Department of Agriculture.

The department’s seers are forecasting 2018 prices (in U.S. dollar terms) to be only slightly better for wheat and corn and slightly weaker for soybeans.

That makes for another lean year for U.S. farmers and a weak one for Canadians whose crops and livestock are based off U.S. prices. American net farm income is only half of what it was in 2013, and Canada’s shield of a weaker loonie has been falling apart recently.

Heavy stocks of all major crops kill off most chances for any substantial rally, unless a disaster strikes somewhere.

“We are not expecting to see that bump up in any significant way,” Preston said of long-term crop returns, in the dry phrasing of the economist.

While margin pressure has been greater in the U.S. than Canada, its impact can be seen in Canada too, said David Dzisiak of Dow AgroSciences and chair of the canola council.

There are lots of mergers and acquisitions occurring in Canadian and world agriculture, and that’s usually a symptom of weak returns for most companies.

It’s also the source of much of the pressure on the CCC, which has seen one major grain company quit and others complaining about the council’s spending and priorities.

“There are a lot of sectors that are under a lot of margin pressure,” said Dzisiak in an interview. “They’re not as profitable as they once were.”

There was no feeling of euphoria at the convention, even though farmers produced a big canola crop, appear to be on target for the lofty 2025 production goal of 26 million tonnes and are still making decent money with the crop.

Clubroot wasn’t a topic discussed during the official sessions, but it’s what farmers turned to when chatting about their concerns.

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