Reality and the Reason for Action

1. The US Farm Bill artificially depresses grain prices.
a) US production and pricing are major factors in determining world prices.
b) World prices for grains are therefore artificially depressed. That's not opinion; that's the legal decision from the WTO Brazilian upland cotton case, is the proof of the linkage and causality, and has withstood legal challenge.

2. Artificially low grain prices benefit all grain buyers in the US by artificially lowering the cost of their major expense.
a) Whether those benefits are passed upward through the food chain is very unlikely. The extreme concentration in the processing and value-added sectors ensures benefits are retained as artificially inflated margins;
b) The same lack of competition ensures that the benefits are not passed downward to the grain producer; but US Farm Bill subsidies insulate US producers.

3. Because of scale and volume, US production and pricing for livestock, livestock products, and processed grain products are major factors in determining world prices for these products of grain.
a) Thanks to artificially low grain prices, US pork, beef and processed grain products are likewise artificially lower priced;
b) This means world prices for these same products are artificially lower.

4. Canadian corn users and processors compete against world prices for products of corn that are artificially lower thanks to the US Farm Bill.
a) But, just as US buyers do, they benefit because their major expense, grain corn, is also artificially low-priced in Canada due to the impact of the US Farm Bill on domestic Canadian grain pricing;
b) And because of the lack of competition, they can ensure their margins by both pushing down on grain pricing and pushing up on their output pricing;
c) Canadian grain buyer margins are artificially inflated (including those Canadian pork and beef producers who purchase feed) because of the artificial depression of grain corn prices both internationally and domestically;
d) Being heavily export-oriented, Canadian grain processors (and livestock producers are simply feed grain processors) are extremely reluctant to challenge the US Farm Bill. It is easier and more profitable to buy artificially cheap grain than to fight the US Farm Bill.

5. Canada is heavily export dependent in many sectors, not just agriculture, and is especially dependent on trade with the US. Therefore, Canadian governments at all levels are reluctant to take any action or initiative they can conveniently interpret as potentially enticing US retaliation (the fact that the US launches such retaliation regardless is apparently irrelevant).
a) Canadian governments are conveniently swayed by export-oriented ag sector players who do not want to ruffle the US or any other trading partner;
b) Canadian governments are, therefore, anxious to be seen as complying with every sentence in ag trade agreements, but are very reluctant to initiate trade complaints using the tools those agreements make available. Therefore, Canadian governments "talk the talk", but they don't "walk the talk";
c) Canadian governments are reluctant to implement farm income support programs they can interpret as a target for retaliation (saves money too).

6. As a net importer, Ontario corn producers don't fit with this scenario.
a) We used to be an exporter, but 20 years of successive US Farm Bills have forced us out of production while buyers enjoyed artificially cheap corn;
b) Governments refuse to take action against artificially low prices because the majority of ag & food sector participants benefit from low grain prices. Of course, taking action against low prices would also cost governments money;
c) Governments refuse to offset the injury caused to grain producers by artificially low prices because they claim to do so through safety net programming could incur trade actions from the US and others, which would threaten export-oriented domestic players. Of course, the fact that not one Canadian ag export to the US is of sufficient volume in the US marketplace to cause legal-defined injury is conveniently overlooked;
d) Governments, therefore, impose allegedly trade-friendly programs such as CAIS, supposedly designed to provide benefit without triggering trade actions (regardless, the US filed against CAIS anyway in their recent hog countervail complaint). Because of artificially cheap prices, grain buyers enjoy artificially inflated margins and CAIS provides support based on historic margins; therefore, CAIS benefits grain buyers far more than grain producers;
e) Governments, therefore, cancel programs such as Market Revenue Insurance
f) Governments, therefore, reject programs such as the Risk Management Program

Canadian governments (both federal and provincial) are the real problem. They chose not to take action against the injurious and illegal subsidy policies of the US. They chose to put the interests of export-oriented sectors and processors who benefit from cheap corn above the interests of those who produce the corn and are hurt by artificially cheap prices. The obvious message is that corn producers are expendable, corn buyers are not. When all around you refuse to help, you help yourself. We are. Steve Thompson wrote the following about taking action in a desperate situation:
" if by helping yourself your best customer disappears, that's collateral damage;
" if by not helping yourself your best customer remains but you disappear, that's stupidity.

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