Critics say federal support for Canadian farmers puts ‘water on a grease fire’ 

Click to play video: 'Bank of Canada forecasts nearly 6% average inflation outlook in 1st half of 2022'
Bank of Canada forecasts nearly 6% average inflation outlook in 1st half of 2022
Testifying to Canada's Finance Committee on Monday, Bank of Canada Governor Tiff Macklem said the organization's latest outlook for inflation in the first half of 2022 is an average of nearly six per cent, adding that it'll remain above the one per cent to three per cent range throughout the year. "High inflation affects everyone," said Macklem – Apr 25, 2022

Ontario farmers shouldering record inflation-fuelled price hikes for gas, fertilizer and herbicides say the Canadian government needs to act now to keep farmers afloat.

While the federal government made changes to its existing agriculture program in April, farmers and economists explain there are downfalls to the current aid available.

“We’ve seen prices slowly creep up over the time as the pandemic was going on, but this year, it seems to be especially just off the charts — we’re getting hit on all fronts,” said Austin Mulock, a farmer in Kawartha Lakes, Ont.

Facing mounting pressure from the opposition about how the government would support farmers, Minister of Agriculture and Agri-Food Marie-Claude Bibeau announced a change to the agricultural Advance Payments Program in April. Instead of receiving advance payments in two installments, Canadian farmers can now receive all money upfront to help cover costs for the planting season.

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The move is a step forward, but Ontario farmer Mulock said he feels the government has put the agricultural community “on the back burner.”

In March, the federal government placed a 35 per cent tariff on fertilizer imported from Russia and Belarus amid the ongoing invasion of Ukraine. The tariff is intended to act as a sanction on Russia as fertilizer is one of that country’s biggest exports to Canada, but farmers say they’re facing the brunt.

“The suppliers are passing that on directly to the farmers so we’re literally getting the line on our bill that we’re paying the tariff,” Mulock said.

While Mulock said he understands the need to sanction Russia, he doesn’t think the tariff is achieving its desired effect since farmers didn’t have time to pivot to other fertilizer suppliers.

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“It’s more hurting the people that need to use it than the people who are selling it,” Mulock said.

Click to play video: 'What rising fertilizer costs may mean for Canadian farmers'
What rising fertilizer costs may mean for Canadian farmers

Tristan Skolrud, an associate professor of economics in the University of Saskatchewan’s agriculture department, said the cost of fertilizer may get even worse.

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“As (natural gas) prices go up, derivatives of that production process, like fertilizer, are just going to continue to get more expensive, and not only more expensive, but even harder to find — period,” Skolrud said.

The government’s changes to advance payments could also have unintended consequences, Skolrud explained. If farmers use payments to stockpile fertilizer, demand could drive prices further up.

“My big criticism of this change in policy is it’s putting water on a grease fire,” Skolrud said. “There isn’t a central bank in the world that would say, ‘OK, we have evidence of five, six or seven per cent inflation, let’s start pumping more money into the economy.’ It just doesn’t happen.”

Brendan Byrne, the chair of Grain Farmers of Ontario, said the government should be dealing with the fertilizer companies directly instead of having farmers pay the tariff.

As for the advance payments, Byrne said a better solution would be a partnership with the Canadian government to get inputs arriving on time and providing tariff relief for farmers.

“It’s helpful to know that (money is) there, but taking on more debt on the farm side in order to bridge through, we don’t look at as the answer,” Byrne said. “We’re trying to find active present solutions that work with the government side as well as us.”

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Efforts are being made to ensure inputs arrive on time, according to minister Bibeau.

“Working with other government departments and industry, we ensured the arrival of fertilizer shipments needed for the start of the season,” the minister said in a written statement.

Ian Lee, an associate professor at Carleton University’s Sprott School of Business, said the change to the advance payments program will “overwhelmingly benefit” small farmers. But Lee said he thinks the government could support farmers further by providing one-time relief to cover the costs of the fertilizer tariff.

“There’s things that governments can do there to mitigate the damage without saying ‘Well, we’re not going to sanction Russia at all,’” he said.

While no new supports have been announced, Bibeau said talks with farmers are ongoing.

“I recognize that rising input prices create challenges for producers and we remain in contact with the sector to give them the support they need,” the minister said.

Despite this, Lee said it’s unlikely other government supports will be created. This is difficult news during a stressful time for farmers, according to Mulock.

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“By the end of the season, (inflation) could definitely put a lot of people over the edge, like to the point where they might not want to farm anymore because it’s just going to be stressful from beginning to end,” he said. “And if they have not managed things to a T, then they might very well not be making their payments.”

Until inflation starts to decrease, which Lee said may occur in 2023 according to recent Bank of Canada forecasts, Byrne said he’ll stay hopeful.

“We are kind of a business that’s based on hope. You put a seed in the ground in the spring and hope that by the time you get there in the fall there’s a plentiful supply,” Byrne said. “So we can work with hope.”

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