Canada Markets

There is no way to report on this subject matter without sounding political, given politicians created this mess and failed to deal with the ramifications of their actions. I must stress any opinions are my own and in no way are a reflection of DTN's views.

Simply put, the halfhearted, poorly thought-out announcement from the Canadian agriculture minister over the weekend almost certainly does more harm than good.

The Government of Canada announced March 22 a proposal to increase compensation through its AgriStability program from the previous 80% to 90%, and to double the current payment cap from CA$3 million to CA$6 million per entity.

While the cap increase was designed to get significant press coverage it is misleading and almost irrelevant specifically to this situation.

With a maximum incremental payment under the expanded coverage being about $8/mt (a proposed increase in the compensation rate by 10% X the $80/mt price decline triggered by the Chinese announcement to date) or $6.53/acre (based on the Canadian average yield of 36 bushel/acre) -- it would take over 150,000 acres of canola alone to gain just $1 million in the size of a payment -- let alone the $3 million increase announced. That's per farm, and only if the farm had remained in the troubled program and didn't have other more profitable diversified enterprises that would subsidize the canola losses -- all before any payments under AgriStability would be received. Misleading at best, in that it keeps support alive in Eastern Canada to choose protection for the EV industry over canola.

From a Canadian unity perspective, the announcement will only drive a wedge further between the East and West with the West realizing that the announcement contains no meaningful help, yet the East only hears the West complaining again.

It is worth noting that the increased cap on payments will be welcome news for the few remaining in the program with extremely large operations. But that is a change long overdue and not specifically related to the canola tariff war losses.

From a market perspective this gives the Liberal party the appearance of being helpful to the vast majority of the population (that are unaware of the complexity of the program), allowing the Liberals to do nothing to resolve the issue until well after the election --- if at all.

From a canola producer's perspective, it ensures seeding will take place with no hope of clarity on the potential for a resolution. It leaves growers frustrated over the illusion of support that amounts to very little actual compensation, and only for the few producers that remain in a flawed 26-year-old risk management program (including its predecessors).

As background, AgriStability is a margin-based, whole-farm, business risk management program funded by the federal and provincial governments on a 60/40 cost-share basis. The intention of the program is to provide income support for producers who experience large margin declines. By the federal government's own analysis of the shortcomings of the program (released Oct. 13, 2022) the lack of predictability, issues with timeliness of payments and the complexity "continues to be a major barrier to participation for producers, in particular small producers." Actual participation rates are seemingly impossible to find while anecdotal estimates are in the 25% to 30% range.

From a canola industry perspective, it does nothing to offset the market signals that suggest farmers should cut back on canola seeding intentions. And if that happens, the current lack of adequate supply to look after both export and crush requirements at the current pace will only get worse. Once seeding is complete, it will be the fall of 2026 before there can be any increase in supply regardless of demand or price. There is also no recognition of the damage being done to the canola crushing industry and its beneficiaries or attempts to address it.

A few of the problems with this approach -- beyond the obvious of having so few farmers enrolled in the program -- are the lack of consultation with the provinces in developing the plan, considering the provinces' cost-share the program. The whole-farm approach means if anything else on the farm is profitable enough to offset (subsidize) the losses the tariff war causes, little to no payment would apply, harming those who try to diversify for risk management purposes. Cash flow would be a problem with it likely being late 2026 or early 2027 when a producer would know if they were eligible for a payment and when it might arrive. Advance payments could be received in 2025, but most remaining participants are unwilling to use the advance due to the unpredictable nature of the program, often resulting in the advances having to be repaid (that too from the government's own analysis). And possibly the most important of all as previously mentioned, it does nothing for the remainder of the canola industry while giving the Liberal government an excuse to delay any real progress.

For reference, according to the Canola Council of Canada, "Canola is a significant contributor to Canada's economy and the livelihood of approximately 40,000 Canadian farmers, as part of an industry generating $43.7 billion annually. China is the second largest market for Canadian canola with exports of canola seed, oil and meal valued at $4.9 billion in 2023."

For background information on the Chinese tariff surprise see "China Deals Western Canada a Severe Blow, But Why Now?" at https://www.dtnpf.com/….

I welcome feedback along with any suggestions for future blogs. My daily comments can be found in Plains, Prairies Opening Comments and Plains, Prairies Quick Takes on DTN products.

Mitch Miller can be reached at mitchmiller.dtn@gmail.com

Follow him on social platform X @mgreymiller

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