Influence of government policy on farm commodity prices

It appears agriculture could once again be headed to a time when government policy determines the market for commodities with little consideration given to supply and demand.

It was not that long ago Canadian producers were nearly crushed as this country fought for market share with the coffers of the United States and the European Union literally buying market share via subsidies to buyers, and dollars to their producers.

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The world had seemed to evolve past such craziness with numerous free trade deals inked between countries, most notably in Canada the initial North American Free Trade Agreement.

The basic premise of free trade is simple at its heart; countries that excel at the production of an agricultural product should have access to markets without mounds of tariffs impeding such trade.

For a country such as Canada that is an important concept because producers here are good at production, and exporting product is essential.

But governments are again starting to muddy the waters of such trade with policies that are purely political in nature.

In part, no doubt, the change is being fostered by a more protectionist attitude, which we see south of the 49th parallel under American President Donald Trump.

And of course there is the startling decision by the United Kingdom to leave the European Union, a decision that will have effects rippling well into the future regarding trade, including in agricultural products.

Canola prices declined for days in a row recently following a tweet from Trump. Trump tweeted he would hike tariffs on imports from China, accusing China of dragging out trade negotiations. The tariffs were threatened as a way to speed up the trade talks, in other words impeding the usual movement in trade as a hammer to get what the American president wants.

Perhaps because of its importance, agricultural trade has always been an area that is dealt with differently than the trade in other commodities.

Take for example the European Union’s decision to exclude agriculture from current free trade talks with the United States. European Union members have given the European Commission the go-ahead to start free trade negotiations recently, but only on eliminating tariffs on industrial products.

There is significance in that tactic by the EU that reflects back to a European desire to control farm production after the starvation that occurred through two World Wars, and of course with farm products outside the framework of a larger agreement, there is still the ability to use it as a political chip.

Most things are cyclical and we can only hope for a return to an atmosphere of freer trade soon for the good of the farm sector.