Canadian farmers facing harvest cash-flow crunch, talking support

Opinion

Canadian farmers are understandably disappointed the federal government’s response to China’s punishing import tariffs on canola, pork, peas and seafood hasn’t so far included direct compensation.

After all, the duties are widely seen as retaliation for Canadian tariffs effectively locking Chinese electric cars out of the local market — a policy decision that had nothing to do with agriculture. This is the second time in recent memory China has targeted Canadian farmers to score points on unrelated issues. It’s unlikely to be the last.

While the full impact remains unclear, when Canada’s second-largest canola customer imposes tariffs of 75.8 per cent on seed and 100 per cent on oil and meal, it’s a safe bet demand will be curbed and prices will be lower than they would have been otherwise. Industry estimates place the eventual costs in the range of $2 billion.

However, commodity prices this year are depressed across the board — for a host of reasons. Much of the new-crop canola has yet to be harvested and very little has been sold.

So, at this point, while damage is sure, it’s difficult to quantify.

It’s a little like that nauseating feeling investors get as they watch the stock market crash, even though they haven’t lost a penny until they cash out. In that scenario, remaining invested and waiting out the downturn is usually the wisest course of action.

Provincial farm management specialist Darren Bond points out harvest-time markets are typically at the low end of pricing for the marketing year, so there is a possibility — but no guarantees — prices will improve. As it is, returns for most crops are hovering just above or below the break-even level.

The difference for farmers is they have limited ability to wait and see. They need cash flow to pay production costs. Storing inventory that depreciates over time can be costly, too. “Where’s the cash flow going to come from?” Bond said.

Farmers do have access to government-sponsored, interest-free cash advances on their crop sales, and the upper limits for those advances have just been expanded to $500,000 for canola farmers. But that’s essentially replacing one loan with another, albeit at a zero per cent interest rate.

As Canadian Canola Growers Association spokesman Rick White put it: “Farmers should not be expected to borrow their way out of this situation.”

He has a point.

Meanwhile, U.S. policy changes will now exclude Canadian biodiesel and renewable diesel from incentives and tax credits, which will reduce sales to Canada’s biggest export market.

The U.S. is also going after Canada’s wheat customers in foreign markets, locking countries into multi-year purchase agreements that are likely to reduce their demand for Canadian grain.

It’s all part of a wider global shift away from decades of freer trade to spur economic growth to protectionism and charging for market access through tariffs and other concessions.

“This is not a transition, but a rupture,” Prime Minister Mark Carney said in a Sept. 5 address, adding this break from rules-based trade is happening against a backdrop of wider economic disruptions, geopolitical realignment, the growth of AI and other technological transformations and the imperative of moving to a greener economy.

The federal government has promised to grow Canada’s domestic biofuel market and invest more towards diversifying export markets — both of which are positive steps, but neither of which will fully make up for lost sales.

Eliminating Canada’s tariffs on China’s EVs might temporarily appease the Chinese (until the next time) but would flood the domestic market with inexpensive electric vehicles, smothering Canada’s bid to build its own EV sector. It would likely elevate tensions with the United States, not to mention eroding the market for renewable fuels.

In this crazy new world, farm organizations would be wise to reframe their ask of government, dropping the word “compensation.”

While there is no denying that direct support should be part of the equation to help the agricultural sector chart a new course, there is little to be gained from stabilizing the status quo, hoping sanity will prevail.

Laura Rance is executive editor, production content lead for

Glacier FarmMedia. She can be reached at lrance@farmmedia.com