Canadian producers can expect at least six more years of chronically low feedgrain and oilseed prices because of provisions in the 2002 US Farm Bill, says a new report from the George Morris Centre.
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The report says the Farm Bill guarantees enough subsidy to more than cover direct costs for producers of all major crops, which will cause US farmers to increase yield and production. Contrary to what US government officials have said, including the President, this legislation will impact production decisions.
“The higher the yield, the higher the subsidy,” say report authors Holly Mayer, Larry Martin and Anna Staciwa. Bigger harvests will put negative pressure on chronically low corn and soybean prices, which will impact the income of Canadian producers of feedgrains and oilseeds.
Canadian livestock producers will not fare any better. Country of Origin Labeling will impose additional costs on US packers and grocery chains, which will most likely be reflected in the form of lower prices for Canadian livestock, especially cattle and hogs.
The Centre also anticipates aggressive retaliatory efforts by the US government against competitors it believes are trading unfairly. This could include markets served by the Canadian Wheat Board, or by European countries that have effectively shut out certain US crops through regulations concerning genetically modified organisms.
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By GlobalDataGlobally, the farm bill “appears to fly in the face of everything the World Trade Organisation is trying to do,” the report charges. It imposes new trade barriers that are not justified by science, it distorts prices and production, and it fuels the international export subsidy war.
“We believe the US either has no intention of making trade in agricultural products more free, and plans to return to isolated aggression,” the report says, “or the US thinks that it can bully the world to better policy by enacting the opposite.”
The report concludes with a discussion of Canada’s potential strategic response to the Farm Bill. These include the dispute settlement process, unilateral action and coordinated multilateral action.
For more information about the report, entitled “The 2002 Farm Bill: Implications for Commodity Markets and Canada’s Agri-Food Sector”, visit the Centre’s website.
