If there has been one constant over a 22-year career of writing this column it’s the US Farm Bill. With the new $43 billion 2008 US Farm Bill fresh on stage after over riding President Bush’s veto, here we are again. Canadian farmers look south and marvel at how the United States supports their farmers. As I’ve said many times before, “that’s what I want too.”
It is reasonable to say I don’t totally understand the US Farm Bill. I say that because I think it’s pretty hard for any Canadian agricultural economist with dirt firmly under his or her fingernails to get a hold of it. Our agricultural worlds are just so different, relating a 30 cow dairy herd in rural Quebec to an Indiana dairy farm with 30,000 cows sometimes doesn’t work. Nonetheless, in my position 20 kilometres from the border gives me a bit of a head’s up. Still, when you have top US senators pushing each other out of the way to comment on the farm bill, versus what happens in Canada, it’s a total cultural change. Someday in my dreams I’d like to see Canadian politicians “get it” like their American counterparts.
The 2008 US Farm Bill was built with a backdrop of higher food prices, biofuel hysteria and a Presidential election in the offing. All of the usual crop subsidies stay in place, but one of the most interesting changes from my perspective was the shift in U.S. policy on biofuels. Corn based ethanol is still in, but cellulose ethanol is getting a boost. The new farm bill cut the ethanol blender’s tax credit by 6 cents (12%) down to 45 cents/US gallon. On the other hand there is a new $1.01 a U.S. gallon tax credit for ethanol made from cellulose.
So next year at the Louisville Farm Show will I see a “Switch Grass Expo” fostered by the subsidy to push biofuels from the great unwashed world of wood chips and prairie grass? I dunno, but the policy move to cellulose versus corn I deem significant.
How it will play out in terms of ethanol going forward will be anybody’s guess. In my mind at the end of the day corn based ethanol has such a head start in this game, it will be hard to buttress. Simply put “big corn” has a built up marketing infrastructure, which isn’t going away. Corn ethanol plants will rise and fall, but at the end of the day this infrastructure will be maintained and strengthened. Certainly cellulose will have it growing pains too. Critics of the new US policy will surely come out of the woodwork.
In Canada the federal Liberals and Conservatives are supporting ethanol in Canadian gasoline. However the Bloc Quebecois and the NDP are riding the popular myth that biofuels increase food prices, AND WE SURELY WOULDN’T WANT TO DO THAT! I think the next time any federal leader coddles up to me I’ll put him in a headlock and wrestle them off the stage. Well, maybe not, that would get me arrested, but some of these people told me directly on stage in Ottawa that they’d never let Canadian farmers down. It just shows you if there is a choice between cheap food and expensive oil, politicians will choose cheap food every time and if farmers have to pay for that, so be it.
At least our American friends want cheap food, but to get it they put together a farm bill to sustain rural America. Clearly though, there are critics on the American side too. President Bush did veto the bill, citing subsidies going to millionaires and higher supports going to wheat, soybeans and sugar. However, the bi-partisan 2008 Farm Bill was deemed “veto proof” and at the end of the day, that held true. American farmers have their blue print for the future.
It wouldn’t be totally fair to say in Canada we could do the same thing. Sustaining a dairy farm in Quebec versus a beef ranch in Alberta versus the horticultural sector in Ontario is a tall order and it takes a unique Canadian policy. However, in our Confederation, there is both provincial and federal responsibility. So it gets a bit messy. Unfortunately, that messiness has led to policy with only short-term vision, mostly focused on keeping food cheap.
It is a long and winding road. For instance today Prime Minister Harper announced that the government would change Canada’s moribund food labeling laws. No more orange juice with a “Product of Canada” label. So there is in fact progress. However, compared to our American friends who boldly espouse their new 2008 US Farm Bill, we are close to nowhere. Yes, it has to do with their 2 senator one state political system. However, it should serve as a model. In Canada we need an agricultural policy that works. Someday, I hope we get there.