When politics steps into the arena of farming and food, things can become tense. Politics is built on negotiations. We are in the season of nationalism on a world level. Farmers deal in a world that moves with the seasons of nature, not political elections and national sentiment. The natural resources of land, timber, and mineral deposits were formed long before any nation staked a claim to it. The local and regional soil types and climates allow for a native diversity of animals and crops adapted to the area.
I know I am making what seems to be a complicated issue simple, perhaps too simple. But, I do know this: farmers and some of those who supply them deal in cycles and systems that are still as old as life itself. They deal in the planting of trees, crops, sunshine, rain, hailstorms, and floods. They deal in the birth of calves, pigs, lambs, and a host of other animals. They are fisherman and oysterman, people who work with the tides and streams; waters that were put in motion long ago. These are systems that will outlive them and their children’s’ children. Yet, their actions today will have post humus effects for generations to come.
A Hundred Year Management Plan
The same principles apply for those who deal in minerals and forestry. A potash mine can’t simply up and move when trade policies would make it beneficial to do so. Farmers around the world need access to potassium sources for increasing and maintaining crop yields. Foresters deal in management plans that take a century to play out. These forest assets produce some of the cleanest water are inseparably linked to and fisheries. When was the last time your company did a 100-year asset management plan? Supplier consolidation is driven in part because of the economic uncertainty that exists as governments work on agendas that have abbreviated timelines or engage strong diplomacy as we are currently involved in. Suppliers consolidate and thereby spread their risk across national boundaries, farmers rarely have such an option. However, in the process of national and international wrangling, long horizon assets like farming, minerals, and forestry can become swept up and forced into difficult positions. It is in no continents best interests to see such assets distorted as it directly affects the farmers that each nation tries to protect.
The situation at hand is that the fertilizer industry and the farmers of the United States find themselves in the same dilemma. For the farmers of America, we want to see our biggest export customers remain open to us. Canadian fertilizer producers surely desire the exact same thing in return as the United States is their largest customer. In 2013, Canadian manufacturers supplied America with 85% of its potash needs. It would be a sorry state of affairs for neighbors to disrupt such a delicate system. Meanwhile, the countries of Brazil and Argentina are seeing to it that they become a competitive supplier of corn and soybeans around the world, including to our neighbor to the south, Mexico. These world class competitors push already revenue reduced crops into an even more tricky situation. Without in injection of different crop rotations to spread out revenue risk, farm numbers will continue to decrease at a national level.
The Starvation of Farming
The farmers of the United States are looking for value. In terms of 2009
dollars, current estimates on net farm income are on par with incomes of 1939, 1980, and 2000. Even with strong exports, profit will be thin to non-existent for corn and soybean growers. Federal program payments in the form of Direct Farm Program Payments are forecasted to make up 19% of net farm income for 2016. The upcoming potential resetting of the farm economy in the United States will garner a lot of attention from a citizenry that chose to walk away from farming as a way of life long ago. However, we still expect cheap food. Hence, a Free Market style of farming has evolved as compared to the Supply Management System for Canadian farming.
According to Progressive Dairyman, the United States has lost 33,000 family dairy farms (44.5%) in the past 15 years alone while the average herd size has increased by 181%. Today, United States dairy farmers milk 9.3 million cows. In 2002, with almost twice as many herds, they milked 9.1 million cows. Meanwhile, our harvests rely more and more on the efforts of migrant workers with over 1 million of these hard working people being undocumented according to a recently published report from Johns Hopkins University. Meanwhile, Canada has a larger ag employee base than the United States while having seven times less farm land. We can cry “unfair” regarding Canada’s policies on milk, eggs, and poultry, but in the process, they do protect their farming heritage so that consolidation perhaps does not progress at such a rapid pace. It’s a delicate balancing act. Short term results or long term stability?
Given that food and farming are mostly global, very powerful forces like the currency exchange and weather events can quickly alter the supply and demand for wheat, corn, meat, and dairy products. These are issues that rise far above the issues between neighbors that are otherwise very good to each other. Farmers would share with neighboring farmers when disaster hit. Who knows, one day one country’s excess wheat could help the neighbors next door. Candidly, the farmers and those who support them have seen such things coming for a while. We just keep quiet and do our jobs. We tend to be a quiet, driven bunch of folks.
The Consolidation Response of an Industry
The fertilizer industry and the retailers who supply the farmer have seen consolidation as rapid as the farmers they serve. Driven largely by the commoditization of a world market and the desire of nations for food stability, the value is often found not in the eye of the buyer but in the increase in volumes by consolidating while driving down costs of production to be more competitive. In this philosophy, there is not a better way. We just continue doing what we currently do even better, even cheaper. This assumes one very crucial thing. It assumes we know all there is to know about farming and how land, crops, and animals interact. There is no more truth to be found about this complex system and how we can better manage it. However, this is far from the truth. We still have much to learn in how such a large, powerful and yet delicate living system interacts. Those discoveries continue to be made every month.
You may say, “What does this have to do with trade policy?” It has much to do with trade policy. There comes a point when old policies cannot continue to be supported in a long-term manner. Monocropping, soil degradation, loss of organic matter, and increased water pollution are all parts of a business stress that farmers can not economically afford to carry. Des Moines, Lake Erie, and others are just the initial water quality collision points between potable water for large population centers and farming. It’s the ecosystem’s way of saying we cannot support this for much longer. Maybe I will be dead before the full effects are felt. But like I said, what farmers do today have post humus effects that last long past their children’s children lives.
In today’s world political climate and high tensions, I would think that we who live on this continent should do our best to work together to reduce the demands to and allow those who are feeding us to figure out how to best interact with the land, make a decent living, build diversity and feed us in the process, all during good times and bad. The process is slow, it is thoughtful, it is painful. Sure, we will always need to compete for exports. Let’s just not fight ourselves in the process. While a zero-sum gain for North America, it is a non-zero-sum gain that our stewards of natural resources cannot afford to pay.