May 31, 2018

Northwest FCS News

I trekked to visit our neighbors to the north during my winter and spring travels. My visit to the Prairie Provinces and Ontario, Canada, included interchanges with leaders, producers, government officials and agribusinesses. These meetings provided interesting perspectives on Canadian agriculture at unique locations such as Regina, Woodstock, Saskatoon and Moose Jaw, the vacation spot of gangster Al Capone. Yorkton and Tisdale provided a grassroots and, in this case, snowbank view from the front line.

Canadian agriculture producers are doing quite well because of a weaker currency compared to the dollar, euro and yen. This currency weakness is a result of low energy prices and government spending on social programs. This has ballooned the Canadian federal debt above $1 trillion. I chuckle when this number is compared to the U.S. student debt of $1.4 trillion and the growing U.S. federal debt of $21 trillion. In some sections of Canadian agriculture, up to 65 percent of the product is exported; the weaker currency is a strategic advantage.

Farmland values are remaining very stable to slightly increasing. In the Prairie Provinces, farmland that is adaptable to technology, specifically for grain farming, is in high demand. The prevalence of Ontario’s urban population is supporting the entrepreneurial value-added sectors. Additional capital is coming from European farmers who have sold their farms and are creating competition for good-quality Canadian farmland.

Canada has approximately 200,000 farms and ranches with 20 percent of the largest farms generating 80 percent of the revenue. The social license to farm, driven by the urban-based population, is a major issue in strategic decision-making of agriculture sectors in Canada.

In the dairy sector, supply management, otherwise known as the quota system, is a fact of life. Securing quota can result in up to $30,000 invested per cow. This means a 100-cow dairy will have $3 million invested in quota. Numerous dairy farmers and industrial representatives indicated that U.S. producers have been interested in the Canadian program due to the prolonged low milk prices and mass consolidation of the industry here in the United States. One disgruntled U.S. dairyman recently said, “The quota system guarantees the Canadian producer a profit.” This statement is false. There is always a top third and a bottom third of producers, regardless of marketing conditions.

A windshield view across Ontario reminded me of my youth in upstate New York in the 1960s and ’70s. The landscape was dotted with small, well-manicured dairies interspersed with poultry and hog farms with thriving rural communities. Agriculture in the U.S. is and will continue to be affected by global agriculture trade. That is why it is so important for U.S. producers to keep abreast of what is happening in the world, particularly with our trading partners.