There is quiet optimism across Canada’s agriculture industry as Bill C-234 begins review by the Senate.
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The bill is seen as potentially providing carbon pricing relief for a vast number of farmers but many Ontario grain farmers will shoulder the burden of exclusion.
“People think that because we’re supporting the bill, that GFO put the bill forward, or GFO put the language of the bill forward, and we did not,” said Brendan Byrne, Grain Farmers of Ontario chair. “In terms of the grain side, we know the bill is not perfect.”
Why it matters: The bill does not exempt natural gas and propane used for grain drying off the farm.
If passed into legislation, the bill would provide a full carbon tax exemption for natural gas and propane used for necessary on-farm practices, such as heating or cooling of barns, greenhouses and other agricultural growing structures, irrigation, feed preparation and grain drying. It excludes commercial drying operations.
According to Statistics Canada, Canadian corn farmers grew 14 tonnes of corn for grain in 2021, 60 per cent of which was produced in Ontario.
Russel Hurst, Ontario Agri-Business Association executive director, said unlike their western counterparts who mostly use on-farm grain dryers, 50 to 60 per cent of Ontario farmers have their corn dried by commercial enterprises.
He said Bill C-234 would create a cost-of-production discrepancy of approximately $18 per acre by 2030 between Ontario corn farmers who dry commercially and those who dry on-farm and qualify for the proposed tax exemption.
“We can’t support when policy results in winners and losers for a process that needs to be done regardless,” he said. “In terms of grain drying, on the farm or not, the farmer ultimately owns the grain in both scenarios.”
Canadian Federation of Agriculture president Keith Currie said commercial operators could have argued for inclusion if C-234 was a government bill. However, it is a private member’s bill and he was told the parties would not support commercial grain elevator inclusion.
“There’s a lot more good in this bill, and we don’t want to take the chance of having it killed altogether because we didn’t get commercial grain elevators in it,” Currie explained.
He said there had been discussions on lobbying for inclusion, but it’s critical C-234 passes because of the greater good it provides to Canada’s farm community.
Senator Rob Black said there is an opportunity for the Senate to ask questions, look for clarification and ask for amendments to the bill, but it would be challenging to include exemptions for Ontario grain elevator operators.
Black applauded the foresight of incorporating a sunset clause for 2030 because a lot can change in the next seven or eight years.
Currie said modifications to the bill are akin to a slippery slope, and clarification won’t likely extend past acknowledging multiple farm or member-owned co-op situations where only member grain is dried.
“(Required)” indicates required fields
“I’ll look into that, but I haven’t seen the language in the bill myself,” he said. “But if you’re in the business of drying grain, you’re a commercial operation, and you’re not going to get the exemption.”
Hurst said the pollution pricing philosophy is designed to motivate migration from old technology to newer, more efficient technologies through the cost of production.
“If this bill goes through, do we think there’s going to be a huge migration to on-farm grain drying? No,” he said.
It would take more than two years and a major investment to plan, get permits and establish on-farm drying capacity. That compares to a $65,000 to $70,000 annual carbon cost for drying 1,500 acres of grain at $46 to $50 an acre by 2030.
London Agricultural Commodities president and grain farmer Richard Smibert said margins are incredibly tight in the grain elevator business.
Ontario has 357 licensed grain elevators that can store approximately 8.1 million tonnes of grain, he said, and most of the province’s grain goes through the commercial grain elevator network.
“It’s another one of those many things that pushes the small producer out of the business and I don’t think government tax programs should be pushing small producers out of the farming business,” said Smibert.
He suspects the ma-and-pa-sized licensed commercial grain elevators will suffer the most initially, but within a few years the impact will be felt by corporate and large co-op systems.
“A lot of our marketing partners are those small family grain elevators that have made a major investment,” Smibert said. “And suddenly now they can’t handle the neighbour’s grain the same as an on-farm storage operation. They can’t offer the same rebates.”
Mike Ondrejicka, owner/operator of Ondrejicka Elevators Ltd. in South Huron, has updated his infrastructure, including a new $2 million high-efficiency drier with solar and cogeneration integration to lower his carbon footprint. But there’s no replacement for natural gas.
“It’s not as straightforward as just looking at the carbon footprint of burning natural gas because there are impacts of using other technologies,” he said. “I’m actively seeking solutions, (but) I don’t see a technology that’s going to take us beyond where we are commercially viable at a large scale.”
Ondrejicka said he fully supports a bill providing farmers with a carbon pricing exemption, but it isn’t the government’s job to choose winners or losers through tax policies.
By 2030 his carbon tax will exceed his gas cost, reaching about $1 million a year.
“On an equal playing field, I’m more than competitive with on-farm drying. But if you’re going to charge me twice as much for my gas, it makes it very difficult,” he said. “We cannot absorb that cost ourselves.”
Corn has remained at historically high prices over the last few years, said Don Kabbes, general manager at Great Lakes Grains. He questions the impact of the proposed bill if prices drop.
“If that price goes down, the percentage of gross margin has just been reduced dramatically,” he said.
From 2013 until 2019, corn was worth $4.50 to $5 a bushel but has been around $9 per bushel for the past few years.
“Twenty-five cents on $10 corn, you can weather the storm, and it doesn’t feel as bad,” he said. “But if corn drops back to its traditional five or even $6 … that’s a huge, huge deal.”
Doing some quick math, Kabbes said if Ontario produces 360 million bushels of corn and 40 per cent is dried at grain elevators, that’s approximately 150 million bushels.
“At $50 an acre (by 2030), that’s $50 million that one sector of the corn farming economy has been affected,” he said.
“(Bill C-234) needs to include all commercial grain elevators because it’s just pitting one farmer against another, and it’s creating an unlevel playing field for two farmers.”
Farmers understand, for the most part, Byrne said, but they are hopeful that amendments will include commercial grain elevators.
“They do point out, obviously, that there’s some inequality in the bill, and we’ll certainly be making sure the government knows that as well,” said Byrne.
“(But) we want to make sure (Bill C-234) gets past the finish line. We don’t want food production to be sacrificed for a kind of ideology of government and how this carbon tax should work.”
Black said it isn’t often a private member’s bill reaches the Senate, and he’s cautiously optimistic the bill could quickly return to the House of Commons so farmers don’t head into another drying season without the exemptions.
“I will be up and speaking to the bill when I have the opportunity, whether’ I’m a friendly critic or not,” he said. “I’d love to see this bill pass before the end of the session in June. Is that a pipe dream? I’m not sure.”
