Carbon cost increases concern farmers

Ontario grain farmers spent more than $12 million to pay the federal carbon tax to dry their grain in 2019, mostly drying corn.

Grain Farmers of Ontario calculated that the cost was close to double in 2019 compared to a normal year, due to the high moisture levels in the corn crop this year.

Why it matters: There are no alternatives for farmers to use gas to dry grains and oilseeds, so any tax on the use of those fuels is a cost for farmers.

Grain Farmers of Ontario (GFO) Board Chair Markus Haerle says that the amount of tax that showed up on farmer gas bills was “stunning”.

He felt it on his farm in propane payments.

He forward booked some of his propane, so had locked in a price. “When I saw (the) line item added on, it was stunning compared to cost of propane. I can’t offset that cost anywhere in my business. I have to assume it.”

The longer term issue, says Haerle is that the federal government plans to more than double the tax by 2022, increasing the rate from $20 per tonne in 2019 of carbon dioxide emitted to $50 per tonne.

“The greater concern is what’s to come,” he says.

GFO is calling for the federal government to reimburse farmers for the carbon tax on grain drying for 2019, and then exempt grain drying into the future.

There are increased costs across agriculture production.

Gary Stordy of the Canadian Pork Council says it’s estimated that by 2022, the carbon tax will cost hog farmers across Canada $21 million per year.

“Heating hog barns is not optional in Canada and, as with greenhouses, the only viable fuel options are natural gas and propane,” says Stordy, adding that hog farmers can’t pass on the cost of the tax.

Greenhouses were given an 80 per cent exemption on the carbon tax.

There are areas where greenhouse gas emissions relating to hog production can be more easily reduced, says Stordy, including sequestration of carbon with crops and limiting emissions from manure.

Why 2019 hurt

A wet spring meant late crop planting in 2019. That resulted in corn, and to a lesser extent soybeans, that wouldn’t dry to normal levels. Farmers usually harvested corn at about 22 per cent moisture, but in 2019, many harvest corn at 30 per cent or more. GFO economist Rob Gamble, who put together the numbers, used 28 per cent moisture for this year’s calculations. That meant about double the amount of fuel needed to dry the corn crop compared to a normal year.

The estimation is that the carbon tax would cost Ontario grain farmers $6 million in a “normal” year.

GFO calculations show that the carbon tax cost farmers about $5 per acre of corn and 3.2 cents per bushel. Put another way, a farmer with 1,000 acres of corn would be out $5,000.

Farmers, in response to a question posed on Twitter confirmed the cost of about three cents per bushel. Farmers who have their grain custom dried had the cost passed on to them in many cases, but in some cases it was not.

One of the challenges with the tax is that it is on volume and Canadians are used to paying a tax on value. So, even though natural gas was less expensive, they paid about 21 per cent of their gas bill in tax. Propane is more expensive and the tax represented eight to 12 per cent of propane bills.

There are other cost issues with the carbon tax that affect farmers, including transportation and fuel burned by suppliers. Add all that in and the escalating carbon tax could be worth $20 per acre in a few years. The total impact of the 2019 carbon tax on grain drying across Canada is about $35 million, GFO calculated. In a few years that could be $100 million, which is equal to the whole pot of money available for the Ontario Risk Management Program.

Drew Spoelstra, a member of the OFA executive, says that on his farm near Binbrook, they didn’t get all acres planted, so they actually dried less corn than normal.

He says that the carbon tax has negative effects on the income of farmers in the province, and that if the government wants farmers to continue to lead the way in mitigating climate change, then farmers have to have capital to invest in moving their farms in that direction. He says a reduction or elimination of the carbon tax would be welcome, but there could be some value to the money from the carbon tax being put towards stewardship programs for the agriculture sector.

It’s been a challenging year for grain growers in general, with trade issue impacts, low prices and the carbon tax.

Haerle says that with so many challenges, grain growers have to be cautious about how they request help. Should it ask for one fund to address all the challenges? Should a refund be in the form of a tax credit as the government doesn’t like to pay out rebates?

Cross-Canada calculations

Marie-Claude Bibeau, federal minister of Agriculture and Agri-Food has asked for help from the sector to provide information that can help her make the case for some sort of relief from the carbon tax on grain drying.

Other provincial farm groups have calculated the carbon tax cost on behalf of their farmers.

Keystone Agricultural Producers (KAP) in Manitoba estimates that the carbon tax cost corn growers in that province $1.7 million, with an estimate of $3.79 per acre.

In Saskatchewan, the Agricultural Producers Association of Saskatchewan says that in 2020, when the carbon tax will increase, a farmer with a 5,000-acre grain farm will have a bill of between $8,000 to $10,000 in carbon tax. Farmers in Western Canada also had significant challenges with getting crop to dry in the field in 2019 and as a result drying costs were higher there too.

GFO and other grain organizations across the country recently held meetings with Members of Parliament and Bibeau.

“They are quite receptive on having the dialogue. They are feeling the heat from opposition parties addressing this,” says Haerle.

Indeed even the Green Party has been vocal about calling for an exemption for grain drying, although it only identified Prairie farmers as needing the exemption, despite the large impact in Ontario.

“Minister Bibeau needs to speak on our behalf to the finance and environment ministries to get this done,” says Haerle. The carbon tax isn’t under the jurisdiction of the agriculture ministry, so in the end, the federal finance and environment ministries have to make any change.