Farmscape for October 1, 2020
Agri-Food Economic Systems is sounding the alarm over the impact of ad hoc U.S. agricultural support-programs on Business Risk Management programs in place in Canada.
Agri-Food Economic Systems released an Agri-food Policy note yesterday which examines the impact of ad hoc U.S agricultural supports on Business Risk Management programs in Canada.
Research Lead Dr. Al Mussell says billions of dollars in agricultural subsides announced since 2018 through the U.S. Market Facilitation program and the U.S. Coronavirus Food Assistance program have upset the normal supply demand balance.
Clip-Dr. Al Mussell-Agri-Food Economic Systems:
It blunts adjustments that free markets would otherwise facilitate.
For example, when you've got low or falling prices, it's a sign for people to cut back supply and, as that happens, that will bring the price back up.
But, when you've got subsidies in place, people don't have the same incentive so they don't.
In fact, some people will take some of the subsidy money and leverage that into investments in productive capacity and make the low prices even worse.
The thing we worry about is, in virtually every non-supply managed product in Canada, we share a price mechanism run through trade and arbitrage and you could think of all of the various grain commodities, oilseeds, livestock, horticulture et cetera, this is how they're priced.
If these programs continue to go on, and we're quite concerned that they may, that's just going to have a price depressing effect and here in Canada.
Our producers get the same prices but we don't have the benefit of the subsides.
Dr. Mussell says the worry is that these U.S. subsidies will erode producer reference margins under AgriStability reducing the ability of the program to counter the effects of the U.S. funding.
He says we need to adapt our programming in Canada to address this threat.
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