Written by Kelvin Heppner
U.S. lawmakers continue to work on hammering
out the country's new farm bill, which will set its agricultural policy for the
next five or so years.
The Agriculture Reform, Food and Jobs Act of 2012 is currently ready to be brought to the Senate floor. Before becoming law, it must be approved by both the Senate and the House of Representatives, before receiving approval from the President.
J.P. Gervais, Senior Economist with Farm Credit Canada, explains the bill can have a major impact on the ability of Canadian producers to compete in export markets.
"Before we sell or compete around the globe, we first have to compete in the North American marketplace. A lot of the commodities that Canadian producers sell are priced in U.S. dollars and just by it's sheer size, the U.S. has an impact on prices that Canadian producers get," he explains.
Legislators are looking for places to cut spending in the new farm bill.
"There's a bit more pressure to really come up with a new farm bill and not wait until next year If they don't come up with an agreement before the end of this year, the old farm bill will apply for 2013 and they'll have to come up with savings elsewhere," he explains.
The current farm bill, which came into effect in 2008, is the most expensive ever, costing $288 billion over five years.
Gervais notes it's possible there will be changes to direct payment subsidies for crop producers.
"Right now they're looking to take away the $5 billion that are given to crop producers every year. They get this amount of money without doing anything, even without planting," he says. "Prices are above historical average so it might be wise to get rid of them right now because producers don't need them as much."
"American producers are obviously not too thrilled, but they're saying they will accept giving them up if they get a program that will guarantee the profit margins they've seen in the last few years," explains Gervais. "So in some ways, they're giving up subsidies now to have a guaranteed return in the future."
"I think this is quite dangerous...what if in two or three years prices come back down? That will trigger subsidies, and it would mean Canadian producers would not be competing on a fair basis," he says.
The 2008 farm bill expires in September.
The Agriculture Reform, Food and Jobs Act of 2012 is currently ready to be brought to the Senate floor. Before becoming law, it must be approved by both the Senate and the House of Representatives, before receiving approval from the President.
J.P. Gervais, Senior Economist with Farm Credit Canada, explains the bill can have a major impact on the ability of Canadian producers to compete in export markets.
"Before we sell or compete around the globe, we first have to compete in the North American marketplace. A lot of the commodities that Canadian producers sell are priced in U.S. dollars and just by it's sheer size, the U.S. has an impact on prices that Canadian producers get," he explains.
Legislators are looking for places to cut spending in the new farm bill.
"There's a bit more pressure to really come up with a new farm bill and not wait until next year If they don't come up with an agreement before the end of this year, the old farm bill will apply for 2013 and they'll have to come up with savings elsewhere," he explains.
The current farm bill, which came into effect in 2008, is the most expensive ever, costing $288 billion over five years.
Gervais notes it's possible there will be changes to direct payment subsidies for crop producers.
"Right now they're looking to take away the $5 billion that are given to crop producers every year. They get this amount of money without doing anything, even without planting," he says. "Prices are above historical average so it might be wise to get rid of them right now because producers don't need them as much."
"American producers are obviously not too thrilled, but they're saying they will accept giving them up if they get a program that will guarantee the profit margins they've seen in the last few years," explains Gervais. "So in some ways, they're giving up subsidies now to have a guaranteed return in the future."
"I think this is quite dangerous...what if in two or three years prices come back down? That will trigger subsidies, and it would mean Canadian producers would not be competing on a fair basis," he says.
The 2008 farm bill expires in September.
Original Article Here
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