Ontario’s soy farmers are facing a ticking time bomb thanks to Chinese tariffs that weren’t even aimed at Canada.
On July 6, in response to tariffs introduced by the United States on Chinese goods, the Chinese government imposed 25 per cent tariffs on soybean imports from the U.S. That left exporters scrambling — in one case, a ship loaded with soy tried and failed to make it to a Chinese port before the deadline.
The initial chaos has subsided, but the trade war between the two giant economies continues, and Canadian farmers have been caught in the crossfire.
The immediate problem is that the U.S. government has offered its country’s farmers US$12 billion in aid to offset the costs of losing the world’s biggest soybean customer.
Canadian producers, then, are now competing against subsidized U.S. farmers.
“We’re currently getting C$400 a tonne, and the U.S. farmer is getting US$50 on top of that,” says Markus Haerle, chair of the Grain Farmers of Ontario.
The U.S. aid package is exacerbating another result of Chinese tariffs: the soy crop south of the border didn’t simply disappear as a result of the trade dispute, and those farmers are still looking for global customers. Priced out of China, American soy is finding markets where Canadians had existing buyers.
“Those soybeans will be brought to market in places where the Canadian producers already had a share — Europe, some of the other Asian countries. We’ve got to compete directly against cheaper U.S. soybeans,” he says.
Ontario grows nearly half of Canada’s total soy crop — 3.8 million tonnes of the country’s 7.7 million. Of that, nearly 5 million is destined for export. Exports to China, in particular, have grown rapidly, from 800,000 tonnes in 2012 to just under 2 million in 2017, but Haerle says infrastructure constraints limit how much more can be shipped out of Pacific coast terminals — meaning Canadian farmers can’t easily fill the gap left by U.S. exports in China.
“We need long-term investments in transportation and shipping infrastructure,” he says. “But the impact is now … We’re looking at 400,000 jobs that are in jeopardy here from trade impacts.”
The GFO is asking the federal government for an aid package to help farmers through the current mess, and the clock is ticking: it doesn’t know what will happen when soy farmers start harvesting their crops over the next two months, when prices naturally fall anyway.
Lawrence MacAulay, the federal minister of agriculture, has heard from grain farmers, but the Canadian government doesn’t currently have any plans for an aid package.
“Under the Canadian Agricultural Partnership, farmers continue to have access to a robust suite of business risk management programs,” the minister’s spokesperson Oliver Anderson told TVO.org in an email. “These programs help farmers manage significant risks that threaten the viability of their farms and that are beyond their capacity to manage.”
Translation: farmers have access to the current programs designed to cushion them, but nothing new is coming.
Haerle, however, says the current programs don’t cover the risks farmers are currently facing from shifts in global markets.
“Trade risks are not covered in any business risk management program,” he says. “They’re only a system to cover short-term losses — not long-term losses.”
For now, the GFO isn’t asking the new Progressive Conservative government at Queen’s Park for any money; it wants the Tories to advocate on behalf of Ontario’s soy farmers with the federal government. The provincial Ministry of Agriculture, Food and Rural Affairs said, in response to an inquiry from TVO.org, that international trade is Ottawa’s responsibility, and it encouraged farmers to keep up the pressure on the Liberals.
Ottawa has made aid available to the country’s steel and aluminum industries, which were directly targeted by U.S. tariffs earlier this year. But it’s offered no new aid to the indirect victims of roiled global markets. If Ottawa did want to go that route, it could get expensive quickly, since soy farmers are hardly alone: this week, Canadian pork farmers said they face a 30 per cent decline in sale prices relative to last year.
If the feds can’t make cold hard cash available to farmers, the GFO would like to see them quickly ratify the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, the successor agreement to the trade pact the U.S. abandoned early on in President Donald Trump’s tenure. Haerle says ratifying the CPTPP quickly would let Canadian producers start trying to cultivate new export markets.
“That’s where Canada has a chance, being first out of the gate … it gives us the foot in the door in those marketplaces where others will have to fight for it. It’s an easy thing that won’t cost the government.”
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