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How the farm sector can mitigate losses from global trade wars

APAS proposes a federally funded Trade Mitigation Program for Canadian grain farmers

The Agricultural Producers Association of Saskatchewan (APAS) has become increasingly concerned about global trade action. The Canadian grain industry is an export oriented, trade-exposed sector. All Canadian grain farmers have been financially hurt by the current “Trump/China Trade War.” China has targeted Canadian canola and soybean exports, but trade action is affecting other commodities as well. Pulses have been impacted by the actions of India; durum by the actions of Italy; barley by the actions of Saudi Arabia. The agricultural business risk management programs in place were not designed to address a trade problem of this magnitude or duration.

The Canadian government has provided financial assistance to other sectors impacted by trade issues. Dairy farmers have been promised compensation over the next eight years for “anticipated hurt.” Canadian steel and aluminum manufacturers have received financing and direct support in response to U.S. tariffs on Canadian exports. Equivalent support is required for Canadian grain farmers.

U.S. farmers, our competitors in the global grain trade, are receiving Market Facilitation Payment (MFP) payments in the range of $15 to $100 per acre in the corn/soybean/wheat areas of the U.S. It is important that Canadian farmers receive equivalent compensation to allow us to remain competitive in global markets.

APAS’s Economics and Trade Committee has given this considerable thought and has drafted a proposal for a trade war mitigation pro- gram for Canadian grain producers. We believe a program should be implemented immediately to compensate farmers for market losses. As trade is a federal responsibility and the current trade wars are affecting commodities across the country, we believe the program must be national in scope and fully federally funded.

It would be expensive and time-consuming to provide payments based on each farmer’s individual sales and yield history. Instead, we propose to compensate farmers with regional per-acre payments. We believe these payments should be based directly on the U.S. MFP commodity rates, with the Canadian government providing farmers with payments equivalent to only 85 per cent of the U.S. payment amounts, in recognition of the fact that Canada has not initiated the trade war.

When payments are not tied to individual farmers’ input and crop choices, and particular selling prices, the program will not change producers’ economic decisions and distort Canadian markets.

We believe program payments should be based on a five-year yield history, based on a representative “basket of crops” in each crop insurance risk zone. Further, payments should be adjusted based on soil zones, with producers with more-productive acres receiving higher payments.

After calculating payments based on these prices and a hypothetical Saskatchewan risk zone with Class A soils, we have reached a figure of $42.50 per acre. Of course, this payment would vary by region, and by soil class. For full details on this hypothetical calculation, and our recommendations on implementation and administration, please see the APAS website.

Canadian farmers are efficient and able to quickly respond to market changes. However, we cannot compete in an environment of distorted markets, when our competitors are receiving direct government payments. The Canadian government has committed to assisting dairy farmers through this difficult time, and has assisted the steel sector. The principle of compensating for the demonstrated hurt from trade must equally apply to Canadian grain farmers that create jobs and economic growth across Canada.

Ken Rosaasen is an APAS rep, a member of the APAS Economics and Trade Committee, and a farmer.

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