OFA outlines the impacts on farmers as price-takers

We’re all feeling it. Whether fueling up at the gas pump or making a trip to the grocery store, increasing costs of these basic goods have never been more apparent. Putting food on the table and fueling transportation, while recovering from a global pandemic, has created serious financial strain on all of us. But the price spikes don’t end there. On top of groceries and fuel, farmers are experiencing a major increase in the cost of input supplies. Not only is this increasing financial pressure on farm businesses, but also impacting stress levels and overall mental health for the farming community.

The Ontario Federation of Agriculture (OFA) wants to reassure Ontarians that farmers are committed to bringing healthy and quality food to your table. Saying that, farmers are not responsible for increased prices at the grocery store and are facing their own rise in costs across the supply chain. A multitude of factors are contributing to inflated food prices, including an increase in employee wages, production costs, input supplies, and shipping and transportation costs. Costs to farmers are increasing just as they are for everybody else, and that undoubtedly has a ripple effect throughout the food supply chain.

Despite the additional financial strain, Ontario farmers continue to grow food, fuel and fibre with our best farm management practices.

Inflation is impacting all aspects of our lives right now, and food is no exception. In fact, it has created a shock to the entire food supply chain and these impacts are being felt everywhere. The business of farming is one that is already financially and mentally straining in a normal year. With the added challenge of managing increased input costs, it has never been clearer that many farmers are price-takers and are forced to pay what the market sets.

Many farm products are sold as commodities or even in international markets. Many farmers are locked into contracts or have already committed to selling their products at a certain market price. Therefore, they cannot modify the cost of their farm product. While every day inputs like fuel and energy, feed and containers have risen in price, farmers cannot easily pass along the increases. Especially during the critical growing season, when we see increased use of tractors and harvesting equipment, farm business expenses continue to rise at unnatural rates.

It isn’t just about simple inflation, either. Geopolitical events are affecting the situation as well. Earlier this year, in response to the Russian invasion of Ukraine, Canada placed a 35% tariff on fertilizer imported from Russia and Belarus to deter Canadian support of these economies. However, some fertilizer suppliers had already purchased from Russia and could not avoid this tariff. Beyond farmers’ control, this price was passed from fertilizer companies to farmers, who had to absorb that high cost, rather than passing it to the next stage of the supply chain.

In addition to this global crisis, we are also experiencing the lagging impacts of the COVID-19 pandemic. In advanced economies, lower interest rates and government support programs increased consumer spending power. Simultaneously, as a demand for goods rose, a bottle neck in the world supply chain materialized as a demand for physical goods skyrocketed and factory and manufacturing closures prevailed. The imbalance between supply and demand led to a large increase in shipping costs which further raised the price of imported goods.

Interest rates that continue to climb alongside inflation has also significantly impacted financing costs of farm businesses putting further financial strain on farmers. It all adds up to a perfect storm, in a sense.

As Ontarians, there are ways to help. We know that you have choices of where to source your food. Ontario produce is lush and fresh and delicious. We know you have choices. We hope that you choose Ontario foods.

Source: OFA