Fertilizer tariffs appear to be here to stay as Russian sanctions continue

Some eastern Canadian crops got even more expensive in 2022 thanks to Canada's tariffs on Russian fertilizers.  There is no sign of easing Canada's overall sanctions for the next growing season either.  (Sean Kilpatrick/The Canadian Press - photo credit)

Some eastern Canadian crops got even more expensive in 2022 thanks to Canada’s tariffs on Russian fertilizers. There is no sign of easing Canada’s overall sanctions for the next growing season either. (Sean Kilpatrick/The Canadian Press – photo credit)

As the federal budget approaches, calls for a refund of $34 million in tariffs paid by eastern Canadian farmers last spring following Russia’s invasion of Ukraine seem to have fallen on deaf ears.

As part of the economic sanctions imposed on Russia last February, Canada immediately imposed a 35 percent tariff on all Russian imports – including nitrogen fertilizers already ordered for the 2022 crop season.

Last December, Treasury Secretary Chrystia Freeland said at a conference in Paris that Canada is sending the money raised from the tariff – estimated at $115 million – to Ukraine to help repair Kiev’s power grid.

That alarmed farming groups, who had called for a rebate of about a third of that total — just over $34 million, according to government statistics tracking fertilizer imports through July 1 — to compensate Canadian growers at a time when where inflation is already straining food supply chains.

“Canada is the only G7 nation that is punishing its own farmers with this tariff,” Ryan Koeslag, chief executive officer of Ontario Bean Growers, said in a press release earlier this month. “Direct compensation for the costs Canadian farmers have already incurred from these unfair fertilizer tariffs is right.”

Farmers continue to stand by the people of Ukraine, Koeslag said, but on the eve of Canada’s Agriculture Day on February 15, they don’t feel heard by the federal government.

Since last summer, Koeslag has been campaigning for a tariff reduction together with the Atlantic Grains Council, the Christian Farmers Federation of Ontario, the Grain Farmers of Ontario and the Grain Growers of Quebec. They all argue that their members are bearing an unfair share of the burden imposed by the Trudeau government’s desire to punish Russia.

The farm groups also argue that Canada — a global farming superpower — is failing to heed the United Nations’ call not to impede fertilizer trade during an ongoing food crisis that has been fueled, at least in part, by supply chain disruptions in Ukraine.

With few alternative fertilizers available in the short term, grain, bean and corn growers face a significant increase in their top input costs.

Although Canada has its own fertilizer resources, the government acted without ensuring there was enough domestic processing, shipping and storage capacity to meet demand for last summer’s growing season. Some farmers still feel insecure about the supply of their next and future crops.

When asked about Freeland’s announcement in December, Prime Minister Justin Trudeau suggested aid or relief.

“We remain committed to making an announcement about reinvesting the money in the sector as soon as possible,” wrote Marianne Dandurand, a spokeswoman for Agriculture Minister Marie-Claude Bibeau, late last week.

But that doesn’t mean refunds are coming.

Nick Iwanyshyn/The Canadian Press

Nick Iwanyshyn/The Canadian Press

In December, Bibeau said she was “in talks” to “determine the best mechanisms” to reinvest the equivalent of that tariff in the farm sector.

There are still no signs that the federal government will reverse its blanket tariff on Russian imports anytime soon.

Adding more inflation

Tariffs weren’t the only reason for high fertilizer prices, but imposing an additional state tax certainly didn’t help.

Research from the University of Guelph’s Ridgetown College suggests that the cost of urea (nitrogen) fertilizers rose 97 percent in 2022, while monoammonium fertilizers rose 47 percent.

The government’s decision to use a current tariff to deter a previously price-competitive bid for eastern Canadian importers continues to impact this year’s fertilizer market. Global demand for food for export remains strong, so the impact of constrained fertilizer supplies has led to general price inflation for alternatives to Russian nitrogen.

“There’s no reason why farmers can’t be reimbursed directly – they have surcharge bills that can be presented for compensation claims,” ​​Victoria Berry, communications manager for Grain Farmers of Ontario (GFO), told CBC News.

And yet, for reasons they say they do not understand, the government believes it cannot issue refunds directly to producers without incurring excessive administrative costs that it appears unwilling to bear.

Berry shared the results of a recent survey of GFO members. More than half of the 560 respondents stated that they had to pay a surcharge for their fertilizer last spring. Most attributed this surcharge to the Russian fertilizer tariff.

About half of those surveyed said they would end up using less fertilizer because of the higher costs, which could limit crop yields and productivity per hectare of farmland. A quarter changed their crop rotation to reduce the amount of fertilizer needed in 2022, and about the same number said they also adjusted their 2023 crops.

The survey asked members what alternatives to reimbursement they would support, and suggested options such as spending on environmental programs, rail transportation, storing fertilizer on the farm, or expanding domestic fertilizer production. More than half of respondents said they would not support any of the above.


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