Canadian farmers face trade wars, brace for leaner times

Hey there, time traveller!
This article was published 04/01/2025 (319 days ago), so information in it may no longer be current.

Canadian farmers have had lots of experience with trade wars, but in the past, it was usually because they’ve been caught in the crossfire.

Perhaps the biggest mess unfolded in 1985, when the Americans decided to go head-to-head with the European Union in a battle over who could sell grain cheapest to clear out huge stockpiles that had accumulated due to post-Second World War policies designed to restore food security.

Grain industry sources were speechless when contacted on the day the U.S. announced its Export Enhancement Program. They had no words for the economic bloodbath they knew was coming.

The EU and U.S. were subsidizing exports while simultaneously supporting their farmers, which drove global grain prices into the trenches, yet incentivized their farmers to keep on producing. Smaller exporters, including Canada, which lacked the budgetary capacity to play the same game, took it on the chin.

Ridiculously low grain prices combined with high interest rates drove thousands of Canadian producers out of business and spawned black humour jokes about parents being accused of child abuse for leaving their kids the farm. However, it pushed the remaining industry towards the remarkable efficiency it’s noted for today. If there was a silver lining, it was the eventual realization this so-called war was costly — and produced no winners.

When the dust had settled and the grain stockpiles cleared, global market share hadn’t changed a whole lot. Grain importers took full advantage of the cheaper prices, but they didn’t buy more; after all, there’s only so much the market can eat.

In the end, sanity prevailed and countries coalesced around the General Agreement on Tariffs and Trade, an effort to bring discipline into how exporters support their producers and manage exports. These were hard-fought gains that levelled the playing field and made it possible for export-dependent countries such as Canada to thrive in the global grain and oilseed business.

Fast forward 40 years and Canadian farmers find themselves on the cusp of an equally perilous trade war, but also in an unusually awkward position. Not only are their two biggest customers — the U.S. and China — scrapping with each other, they are both taking aim at Canada.

Sixty per cent of Canada’s agri-food exports go to the United States. More than half of our agri-food imports originate there, making it Canada’s biggest trading partner — by far.

In recent times, China has been Canada’s biggest customer for wheat and canola.

The difference this time round is these two heavyweights in the global grain business aren’t going after export markets: they are weaponizing access to their domestic consumers.

It turns out the many benefits from a more globalized economy didn’t flow equitably, which sparked a protectionist backlash and the rise of leaders such as U.S. president-elect Donald Trump.

Barriers that make access to either of these key markets more expensive will depress global prices and make it harder for Canadian farmers to sell their grain.

It’s uncertain whether Trump will carry through with his highly publicized tariff threats. The highly integrated cross-border flow of agricultural commodities and processed goods means any trade disruptions will hurt U.S. producers, consumers and processors as much as they do Canadians — unless the U.S. government steps in like it did the last time to offer compensation.

China is a different story. Outside observers have long debated whether the world’s second most populous country will be able to feed its 1.4 billion people and its leadership has consistently proven the naysayers wrong.

United Nations FAO data show China produces a quarter of the world’s grain and feeds one-fifth of the world’s population with less than 10 per cent of the world’s arable land. Late last year, it announced plans to dramatically increase domestic consumption of cereals over the next decade, while investing in modernizing its agricultural sector to stabilize output.

It’s a plan that implies further withdrawal from global engagement, rather than increased integration.

The global pendulum has swung decidedly into the protectionist zone. It could take years before a new equilibrium is established. Maybe world leaders will get it right next time.

Meanwhile, Canadian farmers had better brace for leaner times.

Laura Rance is executive editor, production content lead for Glacier FarmMedia. She can be reached at lrance@farmmedia.com