ONTARIO GRAIN FARMER GOVERNMENT RELATIONS 25 volume obligation (RVO) under the Renewable Fuel Standard (RFS) from the current 3.35 billion gallons to 5.25 billion gallons for 2026 and 2027. The proposal also includes adjustments to Renewable Identification Number (RIN) credit allocations that could restrict eligibility for fuels produced with foreign feedstocks. This substantial increase in RVOs is expected to strengthen domestic demand for soybean oil as U.S. crush capacity continues expanding. Tariff uncertainty has already caused Canadian canola oil and BBD exports to the U.S to decline by 33 and 85 per cent, respectively, since March 2025. In parallel, federal tax changes under the Inflation Reduction Act—specifically, enhancements to the section 45Z clean fuel production credit—are improving incentives for low-carbon ethanol producers. Under modified lifecycle assessment rules that address indirect land use factors, qualifying corn ethanol producers may receive credits of up to $1 per gallon, depending on carbon intensity scores. Lastly, ongoing regulatory efforts to permit nationwide, year-round sales of E15 (gasoline blended with 15 per cent ethanol) by eliminating current summer vapour pressure restrictions are expected to further support biofuel consumption and corn demand. Taken together, these U.S. policy measures create a highly supportive environment for American producers while placing Canadian farmers at a competitive disadvantage. By stimulating domestic demand and providing substantial direct payments, the U.S. is effectively insulating its farmers from global price pressures, allowing them to capture market share and stabilize incomes. Meanwhile, Canadian producers—without comparable federal support—face lower prices and reduced ability to compete on the global stage, even as some provinces have implemented domestic biofuel mandates. In Ontario, at least 75 per cent of the renewable content required in diesel and 64 per cent in gasoline must be produced domestically. In contrast, in British Columbia, renewable content in diesel is set to rise to 8 per cent by 2025 and in gasoline to 5 per cent by 2026, with both requiring domestic production. While these provincial mandates offer some limited support, they do little to offset the broader competitive pressures, leaving Canada’s grain and oilseed farmers highly exposed to global market shocks and long-term financial uncertainty. ONTARIO'S CHALLENGING GROWING SEASON Meanwhile, the current growing season in Ontario has been challenging. Early estimates for corn and soybean harvests present a mixed picture. In some areas, particularly southwestern Ontario, yields for both crops are expected to be normal or slightly above the 10-year average. However, conditions appear far worse in the eastern and central parts of the province. This yield variability is mainly due to dry weather throughout the core growing months of June, July, and August, with some areas receiving less than 60 per cent of average rainfall. Estimates suggest that over 950,000 acres in Ontario were affected by some level of drought this year. Looking ahead to spring 2026, most Ontario producers planting corn and soybean crops are currently filling their input inventories. This may prove challenging, as the cost of primary inputs— particularly fertilizers—remains near record highs in Eastern Canada. Compared to the previous year, urea is nearly 20 per cent higher, UAN is up 23 per cent, MAP is 16 per cent more, and potash has increased by 15 per cent. Fertilizer applications can account for up to 30 per cent of the total production cost in any given year. According to Grain Farmers of Ontario’s Model Farm, if growers stock their fertilizer inventory at current prices for next year’s planting, the average corn grower’s margin would be reduced by nearly $48 per acre—approximately 16 per cent of this year’s operating margin. This does not include potential price declines for corn heading into the next season, which are already low. (Note the Model Farm does not include land rent costs when calculating margin). Other costs, such as capital expenditures on machinery and equipment, have also risen, increasing 5.27 per cent over the previous year. This is likely driven by tariffs on steel and aluminum imposed by the U.S. on several global trading partners, with Canada heavily affected. The rising machinery costs are reflected in increased depreciation values as well, which have grown by 12 per cent compared to last year—typically a sign that the underlying asset values have risen. INCOME IMPACTS The bottom line is that Ontario farmers’ real income (inflationadjusted) in 2024 fell below 2013 levels, effectively aligning with the 2014–2017 period in real terms, and is far lower than what was achieved during the 2021–2023 growing seasons (see the chart above). This distinction is important: some detractors point to net cash income—also shown in the chart—as evidence that incomes have either increased or remained relatively stable in recent years. However, when depreciation and other adjustments are factored in, the decline in real income between 2023 and 2024 is striking. Early forecasts indicate that 2025 could see an even further deterioration, underscoring the ongoing financial pressures. Ontario’s farmers face rising trucking costs, overreach by conservation authorities in some regions, municipal stormwater fees, increased obligations under Source Water Protection regulations, and proposed new restrictions on dicamba use, all of which could further challenge their ability to manage their operations efficiently. Ontario - Real Farm Net Income ($) ('000s) 3,800,000 3,300,000 2,800,000 2,300,000 1,800,000 800,000 300,000 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 Net cash income Real Net Total Income continued on page 26
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