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FARE-talk is to provide an enduring conversation about contemporary topics relevant to food, agricultural, and resource economics.

An Early Assessment of COVID-19 and the Canadian Agriculture and Food Sector - April 20th, 2020

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Dr. Brady Deaton: Welcome to Fare Talk where we set out to provide enduring discussions on contemporary topics relevant to our economy with particular emphasis on food, agriculture, and the environment. My name is Brady Deaton Jr of the department of food, agriculture, and resource economics at the University of Guelph. I'll be your host. [music ends]

Dr. Brady Deaton: Today is April 20th, 2020. And I will be speaking to Alan Ker, professor in the Department of Food, Agricultural, and Resource Economics at the University of Guelph about COVID-19 and its effect on Canada's agricultural sector. Alan is the OAC Research Chair in Agricultural Risk and Policy. He is also the Director of the Institute for the Advanced Study of Food and Agricultural Policy. In addition, he is the managing Editor of the Canadian Journal of Agriculture Economics where he has recently co-edited with Ryan Cardwell of the University of Manitoba, a special edition of the journal titled COVID-19 and the Canadian Agriculture and Food Sectors: Thoughts from the Pandemic Onset. Alan, welcome to Fare Talk.

Dr. Alan Ker: Oh, thank you very much for having me.

Dr. Brady Deaton: And I just want to say right off the bat for the listeners, we will provide links so that you can link to the journal and the articles. It will largely be touching on our conversation today. One of the goals of our conversation is to introduce this journal in this special issue. I will say Alan and I are doing this over Zoom. We are colleagues. Normally we would just be talking face to face and recording a podcast such as this. So it's really a real sign of the times. Alan, did this all take you a bit by surprise? I mean it seems that we're sitting here on Zoom, but a month and a half ago, I don't think either one of us would have expected such a change in the world.

Dr. Alan Ker: No, it's been a remarkable six weeks. And there isn't a piece of a society that hasn't been affected and infected in a big way by what's going on now, whether personal, economic activity, social, everything. And so it's pretty remarkable what's happened in the last six weeks. And on that, it's been also just as remarkable how the Canadian food and ag system has continually provided food throughout this. We haven't seen, there have been a few stock outs here and there, but they've been quickly rectified. And so it's pretty impressive of the system, really a global system that has maintained food supply at reasonable prices over this six-week span. It's very remarkable.

Dr. Brady Deaton: Many of the articles in this special issue really underscore the ways in which the food system has been challenged by COVID-19, and to your point are adapting to it. Certainly there are glitches, but these papers really look at it at each sector. And you can see that these glitches and these challenges vary by sector. And that's an important thing that comes out in the issue. I wonder if you can give me and the listeners a quick introduction to the Canadian journal of agriculture economics and this special issue.

Dr. Alan Ker: Sure. Well first off, the journal, Canadian Journal of Agricultural Economics is an academic journal, the premier academic journal for food, agriculture, resource and environmental economics in Canada. And so when COVID-19 came along and was becoming as big of a tidal wave as it was, we thought that it was very important to harness the expertise in the Canadian academic system that have worked for decades on these issues in the food and agriculture sector, to harness their expertise as to what might be the implications of COVID-19. And so we've done that. We've got 18 articles dealing with very different aspects of the Canadian ag system, from food security all the way to pork, beef, to the supply chain, to the food retailer, food processor, to labor issues, land values, to risk management.

And so the journal issue is really covering pretty much a gamut of everything out there in the Canadian ag and food sectors, and how COVID-19 may play out in these sectors.

It's in the context of the Crown making a decision, and so when I say the Crown making a decision, we're really talking about an administrative decision by government in the context of usually something that's guided by legislation, that there's a decision about by decision makers within the administrative state on behalf, in the Canadian context, of the Crown.

Dr. Brady Deaton: I should emphasize from the start that you and all the authors of the articles in this special issue caveat your discussion of COVID-19 by recognizing that we're at the outset of a pandemic and that no definitive conclusions can be reached at this early stage. In addition, I think that all of the authors recognize COVID-19 as a unique health threat and that has placed all of society, particularly the agriculture sector presently under tremendous stress. And that health challenge differs by culture sector, and by where the particular individual or the firm is located on the food supply chain.

But given that tremendous strain and the novelty of COVID-19 you remarked at the beginning of the podcast that you were impressed with the capacity of the food system at least over the last month and a half to ensure food availability.

Dr. Alan Ker: As I said, if you really look at the glitches beyond the headlines, there've been few of them, and they'd been rectified very quickly. You could argue that this is a natural test for the current food supply system, not only in Canada but much of the world. And so far over these last six weeks. It'd be hard pressed not to give the system an A-plus.

Dr. Brady Deaton: One thing that I've read in the commentaries is, and you've probably read similar stuff, is this sense that after we get through with this, we're going to have to revisit whether we need a more regionally stable or more regionally self-sufficient system as opposed to what we might refer to as the global system that we have. Do you agree with that?

Dr. Alan Ker: I don't see that. In fact, I see the opposite. Right now, the fact that we have a very integrated food supply system. And that integration has stood up against this unprecedented test. And so to walk away from that and say we can do better because of a glitch here and there, very short-lived glitches I might add, doesn't make sense to me. And moreover we'd be very susceptible the next time around if we are more regional and that our system is not as integrated. So what happens when a processing plant goes down because of COVID-19. Well, right now production shifted and moved around in places. Well if we can't move it around as many places, then we're probably going to feel those effects a lot more. And so I actually think very differently in that I think that the more diverse we are, the more secure we are.

Dr. Brady Deaton: Bill Kerr, in one of the chapters or the journal articles in the special issue, goes kind of over the history of this kind of tension between more isolationist tendencies and regionalism and one of the things that I thought was interesting that he brings up there, and listeners if this is a debate that you're interested in, this is a really, one of the interesting articles and in this special issue. He talks about the history of it and the response after the 1929 crash, and that the rise of regionalism or isolationism and the rise of terrorists led to the extension of the Great Depression. And he goes through that whole history. And he going to weighs both sides of the argument so that there's a lot of interesting insights into that issue that we're talking about in this special issue.

Dr. Alan Ker: Yeah, and I'd agree with a lot of what he had said. And there's a lot of literature out there showing just in general over the last 50 years and even more, economies that are more open have flourished to a much greater extent than economies that are less open. And I mean a couple of examples, and these are at the very end of the spectrum would be North Korea, and another example would be how much China has flourished since they started opening up their economy multiple decades ago. The transition has been phenomenal. There's always calls for this protectionism. But generally they don't pay off in the long run.

Dr. Brady Deaton: We've been talking in really broad terms throughout this podcast so far. But I should say in the articles there are lots of nuances that are very important. I know in terms of food security in the article that I was working on, it was very important for me to distinguish from the income shock that left people food insecure as distinctly different from the issue of would food be available in the near term. And throughout all of the articles that are focusing on the agriculture sector, there's this careful attention and nuances that come out that are particular to the particular sector that's being examined. So that's true whether we're looking at vegetables or whether we're looking at the beef sector or whether we're looking at the dairy. Those nuances are really important in this special issue.

Dr. Alan Ker: It is. All the articles are very good. And you're right, there's things like take for example the food security. It is very important to understand if this is coming from income loss versus food supply. Because policy responses and what we should do, are two very different things. If it's income loss, then we need to deal with that. Which is very different than food availability. If it's food availability, then we need to deal with that. In a time of crisis of any crisis the most vulnerable populations tend to become more vulnerable.

Dr. Brady Deaton: And there's nuances like that in every one of the articles that are in this special issue. I wonder if you have the special issue, the articles in front of you there, if you might just read off the titles of the articles that are in special issue.

Dr. Alan Ker: Yeah, I do. So food security and Canada's agriculture system challenged by COVID-19. Framing consumer food demand responses in a viral pandemic. The impact of COVID-19 on food retail and food service in Canada. A preliminary assessment. Economic thoughts on COVID-19 for Canadian food processors. Food supply change during the COVID-19 pandemic. Information which wheat markets in the early days of COVID-19. The impact of COVID-19 on the grains and oil seeds sector. COVID-19 impact on the fruit and vegetable markets. Economic thoughts of the potential implications for COVID-19 on Canadian dairy and poultry sectors. Implications of COVID-19 on the Canadian pork industry. COVID-19 in the Canadian cattle and beef sector. Resilience test of the North American food system. COVID-19 pandemic in trade, and the COID-19 pandemic and short-run long-run implications for international trade relations. Labor issues in COVID-19. Transportation issues in COVID-19. The impact of COVID-19 on farmland markets. It's something very important to our farmers. And risk management in light of COVID-19 so a real gamut here of articles that are meant to really blanket the ag and food sectors, and the important aspects of it.

Dr. Brady Deaton: I'd like to turn now to explore one of the articles that you wrote actually, exploring the suite of policies that were in place prior to COVID-19 that might help a farmer manage risk. And then maybe we can explore where those policies might be going or what changes might be needed. So prior to COVID-19 what set of policies were in place that might help a farmer manage the risks that's so inherent in agriculture?

Dr. Alan Ker: Well, the government or the federal and provincial governments handle agricultural risk or assist farmers in handling agricultural risk would be better stated. And in essence, in the past, they've stepped in to help farmers with weather related risks in the production of crops. And they have very strong programs for those. And those are very well utilized by farmers and they resemble much of the developed world, in fact. And it's allowed production farms to transition through some very bad weather years that otherwise may have not been able to. Particularly farmers starting out and things like that.

So they're government subsidized. And farmers have for the most part, very much appreciated the assistance of the government helping manage risks that they'd otherwise have to manage on their own. That said, just risk is part of any business. And the government does not step in and cover all risks, nor should they. And so there's a great deal of risk that is still with the farmer, that they need to essentially self-insure for.

Dr. Brady Deaton: Would the package of risk programs cover what's going on in the current crisis? Would the traditional? Not-

Dr. Alan Ker: No, I mean certainly this is exposing some things that are not covered or have not historically been covered. There is certainly a question out there of whether these will be augmented to try to cover some of these things that have not historically been covered. Like we talked about labor and the issue of temporary farm workers. So what happens when someone in the Holland Marsh and their temporary farm workers can't get in, or decide not to come or things like that and they can't plant or harvest.

In the past, the inability to secure labor has not been covered. Will it be now? Will it be this year as a one off? Should it be this year as a one-off maybe? And so certainly this is exposing risks that we've not seen before. And some of those are not covered, for sure.

Dr. Brady Deaton: Do you think that... So this is what they've referred to as oftentimes a black swan event. And when we say that we're just talking about an extremely low likelihood event. Do you see after this, us going back and revisiting policy to build this in or is this something that we have to deal with after they occur and just adjust to it?

Dr. Alan Ker: Right. Certainly I think the COVID-19 will expose some things that maybe should be dealt with. But having said that, black swan events are not something that are easily planned for. They're very different. You don't know the timing, the form they take. And 99% of the time the policy response, most appropriate policy response is best done after you see the black swan event. And so no, I would very much caution against government trying to overhaul policy to accommodate this particular black swan event. Because in all likelihood the next black Swan event is going to look very different. And so I do say that in my article. The government should be very cautious about changing the structure of the BRM program in response to one thing. Particularly when governments always have the option to do it ex-post like that's happening now, like the stimulus package and things like that.

Governments always have this option to handle these events. And generally particularly with black swan events that are very rare. And we want to solve this. If we had this conversation three months ago, what would be the black swan events? And I listed them or you listed them or a bunch of people listed them, I'm not so sure this pandemic would've been on that list. And so generally these things are better dealt with as one offs.

Dr. Brady Deaton: Do you have a sense of the current suite? So the government's responded in a variety of ways. What are your thoughts about how the response has gone so far?

Dr. Alan Ker: So the government's responded with three things. First of all, the temporary farm workers. And I think that was good to alleviate the cost of the pandemic with the 14-day isolation, that farmers didn't expect that cost. And that will have a real significant impact for those farmers that bring in temporary farm workers. The other one of increasing. They increased the credit by five billion to the farm credit corporation so that farmers could get access to credit. But we've seen no indication at all that farmers were constrained for credit before, and that this is opening up some constrain. I don't believe it is. If anything, I think private markets will be wanting to funnel money into essential services, which ag is. And so there may be more private credit available now than there was two months ago. So that's another thing. And they delayed some payments. But when you look at how many people qualify and the amount of the delay, it's really fairly insignificant.

Dr. Brady Deaton: Well, I want to thank you very much for spending time with us today. And I want to encourage all the listeners out there to take a look at the journal. And I just want to ask you to kind of leave us with any last thoughts that you might have about moving forward.

Dr. Alan Ker: So these articles are speculative in nature because we're right at the onset of the pandemic. But it was very important for us to get this out, to try to inform policy, inform industry, inform the public, harness this expertise of decades in these areas, and get this stuff out to the people. And in fact, I've already sent this to the federal government, provincial governments, industry, FCC Farm Credit Corporation, and this and that. And they're already being consumed there. And that's the important part. And that's what we're trying to deliver on.

Dr. Brady Deaton: Well, thank you very much for your efforts.

Dr. Alan Ker: Thank you for having me on the program.

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Dr. Brady Deaton: Thanks for joining us at Fare Talk. We hope you will continue to check our website for updates and the latest podcast.

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Podcasts sponsored by The Institute for the Advanced Study of Food and Agricultural Policy.