The return of government interference in agriculture

The impact of government interference in agriculture markets is most certainly in full swing again.

With China flexing its political muscles by using trade as a chip in the game, counter measures were naturally going to happen.

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The United States certainly reacted in a not unexpected way, recently announcing a major subsidy program the government south of the border is pointedly stating is a reaction to what China has done. The United States Department of Agriculture will implement US$16 billion in programs to pay out farmers hurt by what it says are retaliatory tariffs on U.S. agricultural goods and other trade disruptions.

While farmers here might have some sympathy for the idea of a government bolstering farm income in the face of political trade disruptions, it ultimately just muddies the water more when supply and demand should be the determining factor in trade.

While subsidies, primarily those spent by the United States and European Union through the years have hurt the free flow of trade internationally, and impacted farm revenues in countries such as Canada, the world has not learned from that history. We appear headed to another period of disruptions as governments spat and use trade as a tool to get what they want.

The situation will be impactful on agriculture moving forward, at least in the short term.

However, the bigger impact, at least on the 2019 crop on the Canadian Prairies might turn out to once again be the whims of Mother Nature.

Weather remains the biggest wild card in farming as neither farmers themselves, nor governments either, can do anything to impact the weather.

For much of the Prairies moisture conditions at the time of seeding, which started a few weeks ago, were tight at best. There is a limited reserve for new crops to draw on.

The generally dry spring has certainly allowed farmers to get the crop in the ground in a rather expedient fashion, with seeding ahead of the five-year average. The May 14 to 20 Crop Report from the Saskatchewan Ag department suggested “seeding progress is quickly advancing across the province, thanks to very few disruptions in the weather and relatively good seeding conditions. Seventy-three per cent of the crop is now seeded, up from 38 per cent last week and well ahead of the five-year average (2014-2018) of 59 per cent for this time of year. Crops are slowly emerging, but are mostly in good condition despite the lack of moisture.”

The key point being lack of moisture, as noted “provincially, cropland topsoil moisture is rated as 44 per cent adequate, 40 per cent short and 16 per cent very short.”

With a dry summer being suggested by at least some long range forecasts, the impact on farming may well trump anything governments do in the next few months.