8 The Food and Agriculture Organization Food Price Index does not reflect the full impact of the Invasion of Ukraine by Russia yet. It is estimated that 25 per cent of the global grain supply comes from the regions affected by the conflict and the retaliatory sanctions. Since the war began, Russia has blocked all ships in the Black Sea from leaving Ukraine, forcing the country to resort to transporting grain west via rail. Land mines, input shortages, and military assaults have impacted farmers, and according to the Ukrainian agriculture minister, the total 2022 harvest could be reduced by 50 per cent. The International Committee of the Red Cross says that 25 per cent of Africa's population of 346 million is now food insecure due to price inflation and shortages driven by Russia's invasion of Ukraine. In April 2022, the government of Canada stated that "the invasion of Ukraine — and the significant sanctions imposed on Russia's economy — have jolted commodity markets with a surge in prices. With sanctions likely to remain for some time and a longer-term strategic shift away from Russian resources in some parts of the world, certain commodity prices are poised to remain elevated and volatile. Due to global demand, prices and markets for Ontario grains and oilseeds are high. Political unrest from food insecurity and geopolitical position will continue to create volatile markets for Ontario grains." RECESSION IS POSSIBLE The U.S. yield curve is threatening to invert, which can be a sign of a U.S. economic recession. A yield curve inversion happens when the interest rate on long-dated treasuries is lower than on short-dated U.S. treasuries. This is unnatural and usually occurs when investors sense the U.S. economy is in trouble and demand a higher return on short-term investments. Previous U.S. recessions were preceded by the yield curve inverting, with a downturn arriving after 17 months of the inversion. Historically, recessions in Canada have followed U.S. recessions since the Depression except for 1969 and 2001. While recessions are a natural part of the economic cycle, the government of Canada and the Bank of Canada (BOC) try to ease the impact through investments and monetary policy. The BOC's April 2022 economic continued from page 6 THE CARPATHIAN COUNTRYSIDE IN UKRAINE. statement forecasted growth in Canada's economy for 2022 before a gradual slowing in 2023 and 2024. Since the post-pandemic recovery, inflation has been rising, and too much inflation can cause a recession. The BOC's primary mandate is to keep inflation at two per cent by employing monetary policies by adjusting the policy interest rate over time. On April 13, the rate was increased by 0.5 per cent, with further rate hikes projected. The intended effect of the rate hike is to restrain borrowing, lowering consumer spending and inflation. The impact of interest rate hikes and recession is another uncertainty for Ontario's grain farmers. Commodity prices typically decline in a recession, but that may not be the case with the fragile geopolitical climate. Depending on the interest rates increases, servicing farm debt, which has doubled in Ontario in the last 10 years, could become challenging. FINAL THOUGHTS Farmers are accustomed to managing uncertainties in their farm businesses, and they rely on government support to manage risks outside of their control. Geopolitics, the ongoing invasion of Ukraine, and the postpandemic economic recovery make the risks outside of farmers' control greater than we have seen in the recent past. Farmers need the government to provide risk management solutions to help them grow more food in Canada as threats to global food security mount. AgriStability is not responsive to grain farmers facing the volatilities in the marketplace. Grain Farmers of Ontario has advocated for better BRM programming targeting price and margin decline and asked the Ontario government to increase the money available in the Risk Management Program (RMP). Ontario's direct competitors in the United States have programs that work for them and give them a competitive advantage in the global market. In a world with so many uncertainties, a sustainably funded BRM program that responds to the risks grain farmers face would provide the security they need to invest in their business and grow the crops that produce food for people in Ontario and around the world. Sankalp Sharma is the senior economist at Grain Farmers of Ontario. l
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