From Why to How
To borrow a phrase from today’s Major Projects announcements, supporting vulnerable industry is all about the timing, i.e. current context and long-term outcomes.
Funding support for practices like cover cropping, intercropping and rotational grazing are a perfect example of projects that make sense in the current context, and deliver long-term economic stability to family farms. Already, thousands upon thousands across western Canada have successfully sidestepped today’s market risks and turned fortunes in their favor with regenerative agriculture.
Whether in response to supply chain disruptions, tariffs, extreme weather, or any other risk in agriculture, adaptation is about re-establishing financial resiliency, and nothing else. Luckily, one goal that politicians share across party lines is to preserve family farm businesses.
Resiliency = Survival
In this week’s interview on Real Talk with Ryan Jesperson, Prime Minister Mark Carney explains his government’s economic commitment to help industries evolve towards lower emissions, lower costs, and lower prices for consumers. This transition will be crucial for businesses in high-emitting industries to survive.
Survival, in the business of western Canadian farming, starts with cutting back on canola production. Not only is the current context one of export demand destruction and equity drawdown, canola’s long-term cost structure makes it extremely expensive and risky for family farms to carry on with, compared to the alternatives.
Upping domestic biofuel production via mandates might help support the market, but at some point, the politicians are going to realize that canola is mainly responsible for the grain industry’s emissions (via nitrogen fertilizer manufacturing and escape). Just like when Maple Leaf Foods discovered that theirs is mainly in the barley fed to the pigs, it will be necessary to decouple manufacturing from emissions reporting to be compliant with regulations.
Follow the Money
You can’t swing a cat in the Canadian Prairies without hitting someone who’s made a generation of new wealth in the canola industry. Those folks, and the associations surrounding them that are funded by levies paid by producers, are the ones facing an existential crisis right now.
Family grain farms are already adapting to deteriorating canola economics. They stop planting it as part of regenerating their lands and livelihoods, offering a model for change that every neighboring farm can implement as well.
It begs this question of Canada’s political leaders: do you see where any taxpayer-funded canola market relief payments will ultimately land? In a vicious cycle of seed, chem and fertilizer bundles, conventional agronomy, grain company financing, checkoff payments, and private seed breeding research, the canola economy will ensure that new money ends up everywhere across the agriculture industry but at the farmgate.
Not All Farms Are Created Equal
Note too, that even though they appear to be similar operators, farmland investment funds are entirely different business constructs than family farms. Investment funds are highly motivated to plant canola, especially if they can get away with it on virgin Prairie landscapes where it delivers the highest short-term return on investment (and the greatest negative environmental externalities).
Investment funds tend to have a ten-year turnaround on the land they purchase. Family farms, on the other hand, have a multi-generational view to earning a return on their investments.
The pitfall for policymakers is in taking a traditional commodity mindset; treating all of the operators on Prairie farmland as the same. That might have applied in the early 1900’s when the grain industry was getting established, but today there are very different contexts playing out from one farm to the next, and markets that value them differently too.
Conclusion
If the current government wants to continue parking new wealth on the best Canadian farms, it can just carry on with programs like the On Farm Climate Action Fund (OFCAF). Better yet, start publishing data on the number of acres of Canadian farmland that have been restored to a functioning ecological state as a result.
If instead, our goal as a nation is to preserve redundant positions in administration and resource-extractive agronomy, the federal government should go ahead and bail out canola producers. That way, taxpayers can also deliver long-term economic benefits to holders of publicly-traded agriculture stocks like Nutrien and Maple Leaf, and to the high-net-worth private equity owners of farmland investment funds.