Canadian Wheat Farmers Facing Uphill Struggle : Bystanders but Victims in Agricultural Trade War Between U.S. and Europe
Every spring, Canada’s western farmers take a deep breath, cast a worried glance at the sky and plant their land in wheat. In some years, their harvest brings them thousands of dollars, but often what they reap is despair.
For this is the Saskatchewan prairie, a land where there is plenty of room to look but nothing much to see, an expanse of varying shades of brown as often covered with grasshoppers or cracked open by drought as it is crowned by the grain known as prairie gold.
Harsh and unforgiving conditions are part of every farmer’s life, here and elsewhere in the world. Nature is both enemy and ally, and the successful farmer learns to live with it.
But this year has brought new and strange elements that threaten to do what insects and flood and drought have not been able to do--drive Canadians from the land.
According to experts, up to one-quarter of Canada’s 140,000 grain growers will be out of business in the next two years, and that is a conservative estimate. Even those who survive will make no profit in that time.
Caught in the Middle
“The plate isn’t very full,” said Roy Cusitar, first vice president of the United Grain Growers in Winnipeg.
The irony and the frustration of these new obstacles are that they come from unsuspecting quarters that do not intend Canadians any harm.
Canada’s grain farmers are caught in the middle of an agricultural trade war between the United States and the European Economic Community. And as with innocent bystanders in any war, Canada suffers the most and is virtually helpless to fight back.
The base problem is surplus. For six straight years, world wheat production has surpassed consumption, leaving about 148 million tons of wheat left over, two-thirds of it held by the United States.
In addition, the Americans have seen their share of the world’s wheat market decline from 47% to about 25% since 1981. This has been due partly to the strong U.S. dollar but also to aggressive marketing by the EEC, which has transformed itself from an importer into a major exporter, largely by paying huge subsidies to its farmers.
The U.S. Congress answered the European challenge last fall with a five-year farm bill that aims to reduce surpluses and reclaim markets by forcing the price of wheat down by 27% to a modern record low $2.40 a bushel. But, as a cushion, the American government will pay U.S. farmers a subsidy of $1.98 a bushel, making the price to the farmer $4.38.
The EEC has approved subsidies that guarantee its European wheat growers $4.77 a bushel.
In order to keep Canadian wheat competitive in the world market, the Canadian Wheat Board, which buys nearly all of the wheat grown in Canada, set the price as of next Aug. 1 at $2.54 a bushel, including some minor subsidies. This represents a decline of 20%, and it leaves the American and EEC farmers with a subsidy-induced profit, while the Canadian farmer is guaranteed a loss.
Hugh Campbell, who farms 1,500 acres near Regina, said recently: “I’ll get just over $2.50 a bushel, but it will cost me more than $3 to plant. I have to lose.”
Campbell, who has non-farm income and approaches farming as an industrial business, says he can survive. “I’ll develop some alternate crops and try to cut my costs,” he said. “And I don’t owe any money.”
Heavy Debt Load
That may be true of Campbell--and, according to bank figures, about a third of all Canadian wheat farmers--but for the rest, the low price is an added burden to a heavy debt load.
John Murphy, vice president of the Royal Bank’s Regina operation, said in an interview that so far only 5% of Saskatchewan’s 14,000 farm families are behind in payments.
But fully a third will not be able to keep up over the next two years, he said, and another third are in serious danger of falling behind, unable to borrow more money and faced with no way of buying seed or even maintaining equipment.
For these troubled farmers, the problems caused by the United States and the EEC are the least of their worries. They are in trouble because they misjudged their business.
A farmer near Moose Jaw, who asked to be identified only as Jim because he is embarrassed by his situation, said: “I was raised on a farm, but I went to college, and I decided that I wanted the life of the city, and I got a job in Toronto in insurance. That was OK, but I missed the farm, and when my dad started making money in the late ‘70s, I decided to go back. I got some easy loans and bought my dad out and expanded the place (from 900 to 2,000 acres).
Millionaire, on Paper
“At the time, it seemed easy. I paid $800 an acre and the interest rates were high, but we were having bumper crops and land went up to $1,000. I was getting 40 bushels and more an acre. I was a millionaire, on paper.”
But then the trouble started. The market value of Jim’s land dropped to $300 an acre. His wheat earnings slipped steadily as his costs increased. He also found out that 27 to 30 bushels an acre were the normal yield, not the record 45 bushels that he had harvested for a couple of years.
“I’m still paying up to 20% on loans,” Jim said, “and I can’t borrow any more money. I need $85,000 to get my crop in this year, and I can’t get it. I won’t be able to plant. I don’t know what to do.”
He is trying. He has sought other loans, he fired his three employees and he does his own equipment maintenance. His wife secretly goes to the Salvation Army in Regina for clothing. But it isn’t enough.
“Unless the government comes through,” Jim said one rainy day as he looked over his unplowed field, "(and) unless I find some money, I’m going to just walk away and give it to the bank.”
The chances of major government help are, as farmers here say, little and none. Prime Minister Brian Mulroney cites the federal deficit of $34 billion (more than twice the U.S. deficit on a per-capita basis) and says there is no way that Canada can match the American and EEC subsidies.
Nor can Canada do much in the way of increasing production or selling more overseas. It already has 20% of the world market, but that takes up 85% of its production. There simply is no way it can reduce its domestic consumption enough to make a difference.
On the other hand, the United States exported only 59% of its wheat over the past five years and the EEC just 26%, leaving both with plenty of room for expansion.
About all that Canada can do is keep its prices at whatever level the United States and the EEC set in order to keep its share of the market and hope that some agreement can be worked out with the Americans and the Europeans.
$700-Million Sale to Syria
But while the U.S. government denies that it wants to hurt Canada in its fight to regain markets and stabilize the price of wheat, Canadians are growing a bit skeptical in light of recent American actions. Last month, the Americans made a bid to sell $700 million in wheat to Syria, traditionally a Canadian market.
“We can’t match, let alone beat, the American price,” the United Wheat Growers’ Cusitar said.
Then, late last month, U.S. sellers put in a bid to sell $400 worth of barley to another country that traditionally buys its grain from Canada.
“The key is the American surplus,” said John Morriss, a spokesman for the wheat board. “Until that surplus is eliminated, I don’t think there is going to be any relief from the States.”
The Canadian government’s response, the farmers believe, has been to supply Band-Aids where major surgery is required. In April, the government sent out checks averaging $3,180 to 130,000 farmers under an insurance program to make up for losses caused last year by crop failures. The government has also rebated fuel and fertilizer taxes and is considering a higher price for domestic wheat.
Seeking Alternate Crops
“Canadians now pay only 14% of their income for food,” Campbell said. “That’s the lowest in the world. We can afford more.”
But he acknowledges that the crucial problem of low prices and high costs will not be overcome by adding a few cents to the price of bread.
Campbell and other farmers are seeking alternate crops, but this is difficult because of the severe weather on the prairie. Besides, said Keith Hutchins, another Regina area farmer, “once you find a new crop, everyone else jumps in and we’re right back where we started.”
Another farmer told of planting canary seed and noted that “so much canary seed is being planted this year that maybe the best thing to grow is canaries.”
Where does this leave Canada’s farmers and the nation’s future? On a personal level it is devastating. A study done by Brandon University in Manitoba found that farmers are desperate.
“Living on a farm is like being in a pressure cooker,” said psychologist Jim Walker, who conducted the study. “I’m afraid the lid is about to blow.”
Walker said the survey found that 11.4% of those studied had thought of suicide and that half complained of unusual illnesses and mood swings.
“The stress is incredible during peak periods and more than I can handle,” a Manitoba farm wife told Walker. “I hope our marriage makes it, but I don’t know if it will.”
When talking about the shape of Canadian agriculture in the future, many farmers interviewed were deeply pessimistic.
“Over the five- to 10-year term, I don’t see any improvement,” Hutchins said.
With the weak and underfinanced farmers forced off their land, some, like Campbell, who can support themselves by outside sources see opportunities because the abandoned land will be cheap.
“If I can hold out, I can see a good investment,” he said.
But that will mean an end to the small family farm of 1,000 acres or so, and it will have a serious effect on the nation’s economy as a whole.
One in five Canadian jobs is related to agriculture, and a consolidation of farms will cut into related business. That is already under way in towns such as Moose Jaw, where the two largest retail outlets have closed, the main street has several empty stores and many other businesses are just hanging on.
But the biggest sense of both the present and the future is one of frustration and helplessness.
“What will happen here is a matter of global politics,” Keith Hutchins said. “We sit here hostage (to the Americans and Europeans), and there is nothing we can do, no outside route we can take.”