Food, Farmers and Government Interference in the Agri-Food Sector

Over the past year, there has been a growing chorus of world leaders, economists and agricultural experts warning the world of a global shortage of food.  Those of us who are living in the world's so-called advanced economies are already seeing evidence of this with shelves in stores looking like this:

 

 

While the power brokers and mainstream media in the West are doing their best to blame food shortages and the accompanying rise in prices on Vladimir Putin and his military operation in Ukraine, in fact, as you will see in this posting, it is the leaders of these Western governments and their misguided policies that are and will be responsible for dropping agricultural output.

 

In this posting, we'll look at recent policies enacted by three governments around the world:

 

1.) The United Kingdom: On February 8, 2022, the following notice appeared on the U.K. government's website:

 

Farmers who wish to leave their farms will be supported by the new Lump Sum Exit Scheme which is part of the government's Agricultural Transition Plan which outlines plans for a new, fairer system of farming. The Lump Sum Exit Scheme is due to run from April to the end of September 2022 and the payment will be based on the average direct payments made to the farmers who apply for the 2019 to 2021 Basic Payment Scheme years.  The referent figure will be capped at £42,500 multiplied by 2.35 which means that farmers could receive up to £100,000, hardly a sum worthy of retirement.  In return for this payment, farmers will be expected to do two things:

 

1.) surrender their entitlements

 

2.) surrender their tenancy

 

Farmers who accept the payment will be expected to either rent or sell their land.  The government claims that this will create opportunities for new entrants to farming or will allow existing farmers to expand their businesses.

 

Unfortunately, there is a downside.  This will mean that farming could well become even more concentrated in the hands of Big Agriculture (think Bill Gates etcetera) as smaller family-run farms either are shut down or sold, a group that isn't necessarily known as environmentally conscientious, being driven by the profit motive rather than a "love for the land" as is typical in most small farming operations.

 

2.) The United States: Here is an announcement dated April 21, 2021 as found on the USDA website:

 

In this press release, the Biden Administration announced plans to add 4 million acres to the Conservation Reserve Program or CRP.  In January 2022, the USDA Farm Service Agency announced that farmers could sign up for the general program from January 31, 2022 to March 11, 2022 and for the grassland program between April 4, 2022 and May 13, 2022.  

Here is a quote from the announcement regarding the benefits of these programs:

 

"General CRP helps producers and landowners establish long-term, resource-conserving plant species, such as approved grasses or trees, to control soil erosion, improve water quality and enhance wildlife habitat on cropland.  

 

Meanwhile, Grassland CRP is a working lands program, helping landowners and operators protect grassland, including rangeland and pastureland and certain other lands, while maintaining the areas as working grazing lands. Protecting grasslands contributes positively to the economy of many regions, provides biodiversity of plant and animal populations and provides important carbon sequestration benefits to deliver lasting climate outcomes."

 

In 2021, producing farmers and landowners enrolled 4.6 million acres into the program , brining the total to 22.1 million enrolled acres.  The Farm Service Agency is aiming to reach the 25.5 million acre cap set for fiscal year 2022 and 27 million acres by 2023.

  

The program is being driven by the Biden-Harris Administration's efforts to address climate change and achieve other natural resource benefits.  Here is a quote from the April 2021 announcement with my bold:

 

"With CRP, the United States has one of the world’s most successful voluntary conservation programs. We need to invest in CRP and let it do what it does best—preserve topsoil, sequester carbon, and reduce the impacts of climate change...

 

CRP is a powerful tool when it comes to climate mitigation, and acres currently enrolled in the program mitigate more than 12 million metric tons of carbon dioxide equivalent (CO2e). If USDA reaches its goal of enrolling an additional 4 million acres into the program, it will mitigate an additional 3 million metric tons of CO2 equivalent and prevent 90 million pounds of nitrogen and 33 million tons of sediment from running into our waterways each year."

 

As you can see, it's all about retiring farmland as a response to reducing the environmental impact (i.e. climate change) of raising food.  While some of this land may be marginal, much of it is still capable of producing crops that are part of the current global food shortage.

 

In another example from the United States, California farmers have been given a financial incentive not to plant crops as a response to the ongoing drought in the Western United States.  Under the $2.9 billion plan,    thousands of acres would be left unplanted, all in the name of protecting and enhancing the state's watersheds.  The rice cultivation sector will be most impacted by the program with 35,000 acres of rice fields lying fallow, representing approximately 6 percent of the state's crop in a normal year.   The agreement was signed by state and federal officials as well as representatives of some of the state's largest water agencies without consulting with indigenous or environmental groups.  Only time will tell whether the program expands and becomes mandatory, further negatively affecting agricultural output from the nation's largest food producing state.

  

3.) Canada: In a recently released "discussion document", Canada's Agriculture and Agri-Food Canada entitled "Reducing emissions arising from the application of fertilizer in Canada's agriculture sector", the Trudeau government outlines its plans for the farming sector as part of its overall plan to achieve a greenhouse gas emissions reduction target of 40 to 45 percent below 2005 levels by 2030.  Under the plan, the government proposes to lower greenhouse gas emissions from the agricultural sector by implementing a "fertilizer target".  Here is a graphic from the document showing the growing emissions from mythic fertilizer applications:

 

According to the researchers, N2O emissions from fertilizer applications in Canada rose by 64 percent Here is a quote:

 

"Increased N2O emissions on cropland are driven by the combined effect of a continued increase in area under annual crop production (e.g., conversion of pasture to land for annual crop production), an increase in the area under fertilizer intensive crops, and an increase in soil degradation which has contributed to carbon (C) and N losses from soils. The area under more fertilizer-intensive crops such as canola and corn has expanded considerably since 2001, while the area of some crops requiring lower fertilizer rates, such as wheat, barley, oats and tame hay has decreased.

 

As well, the intensity of N2O emissions per hectare has nearly doubled since 1981. This is a result of increased fertilizer application rates coupled with only a minimal expansion of the total Canadian agricultural area. This intensification of production, supported through increased fertilizer use and improvements in breeding and pest and disease control, has resulted in higher yields on a per area basis."

Farmers grow crops that are the most profitable after their input costs.  That's why they plant what they do, a concept that seems beyond government.

 

The authors also note that, while Canada accounts for only 1 percent of global agricultural greenhouse gas emissions, Canadian cereal production "likely" has one of the highest levels of emissions intensity among major exporting nations as shown here:

 

 

The document also states that the European Union aims to achieve a 20 percent reduction in the use of fertilizer compared to 2020. 

 

The authors propose the following farming practices (4R) to reduce fertilizer emissions:

 

1.) Right source matches the fertilizer type to crop needs. This encompasses the use of synthetic versus organic fertilizers, as well as fertilizers with different nutrient compositions and different formats (liquid, granular, seed-banded, slow release, manure etc.) and products that include additives such as nitrification and urease inhibitors;

2.) Right rate matches the amount of fertilizer to crop needs. This entails only applying what can be taken up by the crop over the course of the growing season. This recommendation can include precision application technologies (including those that address in-field variability), and the use of soil tests to make nutrient management decisions accounting for existing soil nutrient levels;

3.) Right time means nutrients are available when crops need them. This could include practices such as split application (applying at seeding as well as later at critical crop growth stages) or avoiding applying fertilizer in the fall when there is a higher risk of loss through spring runoff; and,

4.) Right place means nutrients are placed where crops can use them. This recommendation includes practices such as banding whereby the fertilizer is applied in concentrated strips; side dressing whereby fertilizers are placed in a row adjacent to the crop, or seed-placed, where fertilizers are placed in the same furrow as the seed. This includes practices such as broadcasting where possible, whereby nutrients are spread on the surface of the soil (or growing crop) and which can lead to inefficiencies and losses to the broader environment.

 

According to their calculations, the 4R program could reduce fertilizer-related emissions at the same time as it improves crop yields although, given that much of Canada's soil has become little more than a sterile growing medium, without the application of significant volumes of chemical fertilizers, crop yields would certainly drop under the implementation of a Fertilizer Emissions Target.  Stakeholders who have already commented on the idea of a reduction in the use of fertilizers have noted that there are several issues which will be barriers to the implementation of this program including a decrease in crop yields (as I noted above) which means that the Government of Canada's export growth targets for the agricultural and agri-food sectors will not be met.  They also noted that Canada's diverse geography and resulting farming practices do not lend themselves to a single solution and, most importantly, that there is a lack of technology that can accurately measure the emissions associated with fertilizer use.

As is typical, when governments interfere in a sector of the economy, there are a series of unintended consequences that are unforeseen by the "chair jockeys" who imaginatively create solutions to what governments feel are critical issues.  Given that there is significant stress in the global agri-food sector, one would think that governments would take actions that would increase food output rather than creating additional, supposedly voluntary (at least for now) programs that have the potential to reduce agricultural output.  In addition, at least some of these programs are targeting agricultural greenhouse gas emissions, blaming farmers for practices that governments now see as "unsuitable for their needs".  One has to wonder how long it will be before these voluntary programs become mandatory.  

So, if you think that this is going to improve over the coming months and the situation gets worse:

...now you know that you can certainly can lay at least some of the blame for food price inflation at the feet of meddlesome  Western governments.

There are only a few sentences more frightening to business people than "I'm with the government and I'm here to help you."  The agri-food sector is no exception.