Last week, it looked like an agricultural prophecy had come true. Statistics Canada released its annual seeding estimates — a prediction about what's likely to be grown this year, across Canada — giving weight to the speculation that's been simmering about wall-to-wall corn this year in Ontario. Indeed, predictions suggest Ontario farmers' corn acreage will rise more than 32 per cent, to 2.2 million acres. That equals the previous record set in 1981, when corn prices were out of sight.
The dramatic acreage increase is being credited to two factors, says Ottawa. First, there's a steady demand from the livestock industry for corn for animal feed. The animals end up providing milk and eggs, or are processed as meat. And as mentioned here last week, our appetite for meat is on the rise.
Tied in with this is what Statistics Canada calls "an ever increasing demand from the ethanol industry." Many people are expecting ethanol consumption to skyrocket, and initially, this ethanol will be produced from corn. According to the rest of this prediction, corn normally used for animal feed and human food consumption will be used for ethanol instead. Everyone will be scrambling for corn, and the price will shoot up.
In the winter, all the pieces were falling in place. For example, in February, corn hit the equivalent of almost $5 a bushel. This was unheard of, and about $1.50 more a bushel than it had been selling for at the best of times. Farmers, laden by chronically low crop prices for decades, sensed a winner, and started making planting decisions based on prices they hoped would stay high.
However, that hasn't been the case. Corn for animal feed has competition from wheat and barley, and buyers started going to those commodities instead. As a result, the day Statistics Canada announced projected acreage for 2007, the price of corn had fallen back to $3.60 a bushel. That's about 75 cents less per bushel than it costs farms to grow it, so once again, they're in a deficit position.
And these prices are even before a massive harvest comes off, like the one that's projected for this fall, because of the additional acreage. If demand doesn't increase, prices could stay flat. And if the U.S. Farm Bill pours another $25 billion or so into commodities such as corn, allowing U.S. farmers to sell cheaply, we're right back to where we started.
Farm organizations recognize this and are keeping the heat on Ottawa and the province for a farm support program. This is a program farm organizations created themselves more than a year ago, and started shopping around to get broad support from across the farm sector. Then, they took it to the federal and provincial governments, and that's where it's stalled.
Basically, it's a program that would stabilize farmers' income. It's a shared program, with farmers, the province and the federal governments all contributing to a fund that would be drawn from when prices are below the cost of production.
It's likely to cost the two levels of government $1 billion a year. But they spend twice that much now on ad hoc support programs. These definitely help farmers through tough times, but as businesspeople, farmers need to be able to forecast with some certainty how they'll run their operations over a multi-year period. Having to count on government ad hoc programs takes that ability away, which affects their confidence in expanding to reinvest in their farms, not to mention the way bankers see them and the whole agri-food sector.
Earlier this month, Ontario and Quebec grain and oilseed farmers met and renewed their vow to work together toward this program. Peter Tuinema, manager of programs and policy at the Guelph-based Ontario Wheat Producers' Marketing Board, says farmers think their chances of success are reasonable. Ontario is facing an election this fall, and farmers won't miss the chance to make this an election issue. Federally, who knows, but it's clear that farm leaders are still not satisfied new developments such as ethanol or increased corn acreage will be the answer to their bottom-line problems.
Owen Roberts teaches agricultural communications at the University of Guelph.