Canadian wheat growers hit by subsidy effects

Advanced developing nations subsidize wheat growers, 
hurting farmers from exporting nations

Canadian farmers are among those being disadvantaged by wheat subsidies in advanced developing countries like China, India, Turkey and Brazil, according to two U.S. groups.

The U.S. Wheat Associates and the U.S. National Association of Wheat Growers (NAWG) pegged the annual cost to Canadian farmers at about 249,000 tonnes in lost sales and $251.9 million in lower prices.

Previously the groups commissioned a similar study which found subsidies offered to Chinese farmers lowered American wheat prices by $550 million a year, predicted to rise to $653 million for 2016.

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Close-up of a bundle of wheat

That earlier study on Chinese subsidies sparked a lot of interest from Canadian farmers, Wheat Associates spokesman Dalton Henry said.

“(They were)… wondering if these developing country programs were having a similar impact on their exports and prices,” he said.

The group did the additional analysis and came up with the impact figures for Canadian, Australian and European farmers.

Alan Tracy, U.S. Wheat Associates’ president, said in a statement that of all the trade-distorting policies U.S. growers face, wheat subsidies in China and other developing countries have the most serious effect on farm gate prices and trade flow.

“The studies we have sponsored clearly show the problem is growing more serious at the worst time for farmers who are already facing unprofitable prices,” he said.

Cam Dahl, head of Cereals Canada, said Canadian farmers are unquestionably feeling financial pain from domestic subsidies developing countries offer their wheat growers.

“There is no doubt that production and trade-distorting domestic support in other countries is costing Canadian farmers,” Dahl said.

In large part that’s why the industry supported the failed Doha round of WTO negotiations, which aimed to move towards the elimination of domestic support programs, he said.

Canada has done its part through various agriculture policy eras including the Agriculture Policy Framework, Growing Forward and Growing Forward 2, he said.

“Canada has moved away from production-distorting and trade-distorting support programs,” he said.

Chinese subsidies

Gordon Stoner, president of NAWG, said international wheat prices have collapsed in recent years, and at least in part he blames countries that fail to play by the rules. He warned losses will accelerate if China doesn’t rein in subsidies to wheat growers as it has promised in the past.

He wants the Obama administration to challenge the Chinese subsidy through the World Trade Organization.

An Iowa State University study said that removing China’s domestic wheat support would have significant benefits for farmers in wheat-exporting countries. It would have to increase imports to more than 9.6 million tonnes per year, a volume that is about equal to the Chinese wheat tariff-rate quota.

“That would increase wheat exports and farm revenue in the United States, as well as in Europe, Canada and Australia,” the report stated.

A 2014 study by DTB Associates showed that China effectively pays its farmers a minimum procurement price of more than US$10 per bushel for wheat and subsidizes input costs. In wheat alone, China provides support of at least US$15.4 billion or 36 per cent of the value of production, which far exceeds the 8.5 per cent limit set when it joined the WTO. China also agreed to allow wheat imports at a one per cent tariff rate, up to a quota of 9.64 million tonnes. The out-of-quota tariff rate is 65 per cent. China rarely administers this tariff-rate quota as agreed and imports invariably fall far below the quota, even when its domestic prices are far above world market prices.

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