How Russia's invasion of Ukraine is affecting Canadian farmers
Canadian farmers are already seeing the effects of the war in Ukraine as the prices of commodities like fuel and fertilizer, needed to grow a large healthy crop, surge and chip away at producers margins.
Marty Derks is already thinking about the spring. In about two months, tractors will be rolling through his multi-thousand acre Chesterville, Ont. grain farm, sowing seeds.
But for Derks, this year’s almanac is all about the financial climate.
“We’re forecasting about a 20 to 30 per cent increase in fuel costs,” says Derks, adding that he uses nearly 140,000 litres of diesel each year. ”Prices have been just kind of steadily climbing and fertilizer prices are going to be dramatically increased this year. Supply may be an issue for farmers.”
The rising costs and potential shortages have to do with the fact that Russia, a top-three oil-producing country and leading global fertilizer manufacturer, has been pushed out of the worlds trading economy through sanctions brought on by its decision to invade Ukraine.
On Monday, the Canadian government further clamped down when Prime Minister Justin Trudeau announced that Russian crude oil would be banned.
Dan McTeague, president of Canadians for Affordable Energy, says Canada does not need to suffer the financial consequences. It has the capability to ramp up its own oil production and needs to begin producing more barrels.
“There is no telling how bad it’s going to get,” McTeague said. “There is one thing that is clear: it is going to get bad and it’s going to become very expensive,” says McTeague. “Russia’s war of aggressions is fuelled by our need to buy their gas. I think it’s pretty clear we have to change our course.
“There are very few countries that can match what Canada is doing and the potential to upgrade and create greater output.”
The cost of grains is also in turmoil and uncertainty. Russia is the number one wheat producer while Ukraine leads the planet in sunflower seed oil production. Brendan Phillips, vice-chair with Grain Growers of Canada, says while demands to fill the gap may shift onto other countries, it’s too soon to tell for Canada.
“The removal of those supplies is sure to increase demand from other nations and in turn increase costs to Canadian farmers,” says Phillips. “Canada’s crop of hard red wheat, canola barley, etc. is not yet seeded let alone what quantity or quality will be available for export.
“Our concern is with Ukrainian citizens who will be navigating an upcoming growing season while facing Russian violence and acts of war.”
Derks says, like many other farmers, he has already purchased many of the supplies needed for the upcoming growing season. The true impact of the price hikes will likely be felt the following year.
“Coming in to the end of 2023 I’ll be very exposed. I sell my crops before they’re even planted and then I know what my cost of production is, I know what my margin is. But I’ve already locked in my cost of production. I’m about 70 per cent covered,” says Derks. “In Ukraine, planting starts in about 40 days there and if that crop doesn’t get in the ground it’s not on the market for a whole year, and that will drive commodities even higher.”