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Low Prices May No Longer Cure Low Prices

A new report from Guelph, ON-based Agri-Food Economic Systems is sounding an ominous warning about the challenges facing Canadian agriculture as the world increasingly turns away from rules-based trade.
 
The 12-page report documents evidence of fundamental global change, from a return to agricultural protectionism, evolving gaps in trade policy and major geo-political shifts. It contends there is little chance of ag markets, domestic policy and trade relationships returning to normal as defined by the past 20 -25 years.
 
“We are not facing market misalignments where low prices will eventually cure low prices; stable and open markets facilitate adjustments that resolve these issues,” says Douglas Hedley, Agri-Food Economic Systems Associate and co-author of the report. “Rather, in this environment, low prices could be an indicator that markets as we have known them are badly impaired or simply collapsing, with unknown points of traction and stability at much lower price levels”.
 
Quite simply, the report said, no government stabilization payment package, nor crop disaster or livestock disease emergency elsewhere that shocks supply and temporarily lifts Canadian farm prices can change the fact that the world is turning away from liberalized, rules-based trade. “Canada needs to face and adjust to this reality,” it said.
 
As harvests come off in Canada, Canada faces ongoing restrictions to market access in some foreign markets- notably China, India, Saudi Arabia and parts of the EU. The crop sector, particularly the oilseed sector, is facing a bitter economic scenario, and livestock returns have waned, even as expectations existed for much better returns, the report said.
 
The report contains a number of suggestions to help offset the damage being done to Canadian ag sector, including pursuing a revamp of the World Trade Organization (WTO) or a new trade policy alignment and rules with “willing countries,” and finding and developing alternative crops to lower dependence on a few large ones.
 
“Canadian agri-food cannot stand still, uphold free market/WTO principles in isolation, hope for supply disruptions elsewhere, nor “ad hoc support” its way out of this; the global environment has already changed too much,” added report co-author Al Mussell, Agri-Food Economic Systems Research Lead. 
Source : Syngenta