Ahead of the Heard
Those long-time observers of the agriculture industry would know that there is never a shortage of issues, events and controversies that impact the sector every year – and 2014 was no exception. Suffice to say I can only cover just a few of the highlights. Interestingly what affects agriculture and rural Alberta rarely makes it into the consciousness of city folks as long as cheap food continues to appear in grocery stores. But that’s okay - no news is good news for the stability and viability of agriculture and food production.
The year started out with a crisis in grain transportation, a bumper crop across the prairies saw bins bursting with cereals, oilseeds and special crops. The problem was the rail transportation system is designed to ship average crops and its capacity only increases incrementally over time – it can’t handle a sudden surge. At the same time severe weather reduced train numbers through the Rockies and much increased oil shipments have taken up a lot of the rail companies’ attention. No wonder a backlog developed – however the rail companies predicted that with better weather they would have the backlog resolved which is what essentially happened. Politicians beat their chests and enacted draconian legislation to expedite grain shipping which was going to happen anyway. In the end everyone claimed victory – at least till the next time.
This year also saw the federal government crow about completing the EU/Canada free trade agreement. That agreement is supposed to open new markets to Canadian products and usher in a new era of unfettered trade with the EU. Most ag commodity organizations went along with the party line with the usual boosterism, but the reality is a bit different. For one thing it may take the EU with its 28 members a number of years to approve the principles of the agreement. Then there will be years of wrangling about the details – the EU will still not allow the importation of GE commodities, hormone added meats and has a host of other non-tariff barriers. The biggest reality check is that the EU market is already served by products from other competing countries like the USA, AUS, and New Zealand, all of whom want their own deals and will not let Canada steal their market share. In the end many years down the road there may be some increase in agriculture trade to the EU but it will be hard fought and probably modest in size. But it was a good news story at least on the surface.
In the livestock sector the WTO ruled again in favour of Canada in its long battle against American COOL legislation. It was the third time and although the decision was appealed, it puts Canada closer to inflicting retaliatory punitive tariffs against selected American imports to compensate for the damages done by COOL to the livestock industry. The federal Ag Minister has engaged in much sabre rattling but it is not entirely clear whether Canada has the courage and guts to actually apply such punitive tariffs to its largest trading partner. Canada tends to be a boy scout on trade issues and would be loath to act against the principles of the North American Free Trade Agreement. Much will depend on what Mexico will do being they are the co-complainant with Canada against the USA at the WTO tribunal. Interestingly, an unrelated event could push Canada to implement the retaliatory tariffs when the time comes. One could see Canada going ahead if President Obama rejects the Keystone pipeline – a sort of tit for tat response. In the end, at least on the short term, a wide open American cattle market could have a severe economic impact on the two giant meat packers in Alberta if Canadian cattle move in very large numbers across the border. It’s one of those “be careful what you wish for” situations. Besides with record high cattle prices COOL isn’t as critical now as it was a couple of years ago. All in all its still an important issue that could be settled in the new year – maybe.
The year 2014 also saw a significant swing in the fortunes of farm commodity prices – the year before in 2013 - cereals and oilseeds were at record prices but they moderated in 2014. But this year saw cattle prices reach sky high prices and hogs nicely recovering. Will we see those prices moderate in 2015 – who knows – its all part of the interesting world of agriculture. Happy New Year.