AgriSuccess Journal November / December 2011 : Page 3
THE BIG PICTURE U.S. debt affects Canadian agriculture The U.S. debt problem is likely to spur American policy and program changes that will ripple across Canadian agriculture. Back in the summer, political wrangling over the U.S. debt ceiling created nervous investors around the world and the ramifications were far-reaching. While the debt ceiling was raised and America did not default on its commitments, the nation is still coming to terms with how to get its massive national debt under control. The yearly deficit has been running at around $ 1.4 trillion. The overall national debt is more than $ 14.5 trillion. That’s about $ 47,000 per citizen and more than $ 130,000 per taxpayer. If you’d like to view the most current numbers, go to www.USdebtclock.org. American politicians realize that spending needs to be curtailed, but they can’t seem to agree on how to balance the budget. The problem has been going on for years, and every year the country goes further into debt. Left unresolved, the U.S. debt issue has the potential to affect the worldwide economy, although there’s little agreement among observers on when and how this might occur. Of greater certainty is that government spending will be curtailed in an attempt to address the problem. Monetary incentives helped build an American ethanol industry that now consumes 40 per cent of their massive corn crop. American ethanol policy is hotly debated and political support for the subsidies and tax incentives is waning. Trimming or cutting American ethanol subsidies would generate a mixed reaction in Canada, depending on whether you’re a grain producer or a grain consumer. However, the ethanol mandate itself appears to be safe. Ethanol plants are expected to remain major customers for U.S. corn, even though the economics will be more difficult. The 2012 U.S. Farm Bill will set American farm policy for 2013 to 2018. While there have long been predictions that American farm subsidies would be reduced as part of overall cost cutting, it has never happened. This time is likely to be different. The largest portion of farm support programming has been aimed at the grain sector. In recent years, farm income has been robust with grain leading the way. Analysts such as Robert Thompson, Senior Fellow at the Chicago Council of Global Affairs, say there’s a lot of redundancy in programs and there’s an expectation that the number of programs as well as total spending will indeed be trimmed. Canada and many other competing nations have long complained about trade and production distorting American farm subsidies. U.S. fiscal restraint might accomplish what worldwide trade talks have failed to do. BY K E V I N H U R S H / Kevin is a consulting agrologist and journalist based in Saskatoon, Sask. He also operates a grain farm near Cabri, Sask., growing a wide array of crops. A G R I S U C C E S S |3
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