OCPA's FARM INCOME SAFETY NET BRIEFING POINTS

Ontario grain and oilseed producers (25,000 producers generating $2 billion in farm gate receipts annually) are plagued by prices artificially depressed for years on end by the negative impact of U.S. agricultural subsidies. We had a program that offset that damage to some extent, but the Market Revenue Insurance program was terminated in December 2004. We need a replacement program.

• The WTO Court recently ruled in favour of a Brazilian complaint against U.S. subsidy programs. The WTO found that U.S. Loan Deficiency Payments and Counter-Cyclical Program payments caused "significant price suppression" and "serious prejudice" resulting in loss of market share and loss of investment. The same is true in Ontario where, for example, corn acreage has been declining since the turn of the century while corn acreage has expanded in both the U.S. and Quebec.

• Another U.S. study found that U.S. subsidy programs permit U.S. soybeans, corn and wheat to be exported at anywhere from 24% to 48% below their cost of production thus depressing price in the receiving country. The USDA quotes the current cost of production for corn in Michigan at US$2.56/bushel or Cdn$3.11/bushel. Exports of U.S. corn into Ontario are currently more than 4 times their long-term annual average volume. U.S. corn is currently being sold in Ontario for about Cdn$2.64/bushel, far less than the USDA's own quoted cost of production. The difference is made up through subsidy payments in which U.S. corn producers are essentially guaranteed US$2.63/bushel or Cdn$3.20/bushel.

• Agriculture and Agri-Food Canada's own research states that at least 29% of the decline in prices for Canadian grains and oilseeds between 1995 and 2000 was caused by foreign subsidies. That represents an artificial depression of income costing Canadian grain and oilseed producers about $1.3 billion annually, of which about $454 million is out of the pockets of Ontario producers. And we think AAFC's estimate is low.

• In 2005, prices have once again plummeted for Ontario corn, soybeans, and wheat with current price offers for delivery in the fall of 2005 far below the cost of production. Corn acreage will once again decline this spring.

• Government assistance is essential to stave off a complete financial meltdown of the grain and oilseed sector in Ontario. In 2004/05, a typical Ontario corn producer would have received Cdn$126.55/acre under U.S. programs, Cdn$130.77/acre under Quebec programs, but will receive about Cdn$26/acre under the only two current Ontario programs: final Market Revenue Insurance (MRI) payment, and Canadian Agricultural Income Stabilization Program (CAISP).

• The CAISP program is incapable of offsetting this long-term artificial depression of grain and oilseed income because it merely stabilizes production margin at the average of the previous 5 years. Only the MRI program acted to offset artificial price depression, but this program has been terminated. A replacement program for MRI is urgently required.

• Adequate funding is essential for a MRI replacement program; but we are advised no new funding is available. Moreover, Ontario government-imposed criteria make the design of a replacement program virtually impossible: no new funding; cannot be triggered by price decline; cannot be commodity specific; must be national. It is important to note that none of this criteria applies to either U.S. support programs or programs offered to Quebec corn producers. It is also important to note that corn is imported into Ontario from both the U.S. and Quebec.

• Alberta offers a program (Revenue Assurance) that might be reworked to serve the needs of Ontario grain and oilseed producers, but the Alberta government funds its program itself without Federal assistance. A similar program in Ontario would currently cost perhaps $300 million.