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

As the federal budget approaches, calls to refund the $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 economic sanctions imposed on Russia last February, Canada slapped an immediate 35 per cent tariff on all Russian imports — including nitrogen fertilizer products already ordered for the 2022 crop season.

Last December, Finance Minister Chrystia Freeland told a conference in Paris that Canada is sending the money collected through that tariff — estimated at $115 million — to Ukraine to help repair Kyiv's power grid.

That alarmed farm groups who had advocated for a rebate of roughly one-third of that total — just over $34 million, according to government statistics tracking fertilizer imports up to July 1 — to compensate Canadian growers at a time when inflation is already taxing food supply chains.

"Canada is the only G7 nation that is penalizing its own farmers with this tariff," said Ryan Koeslag, executive director of the Ontario Bean Growers, in a news release earlier this month. "Direct compensation for the costs Canadian farmers have incurred already due to this unfair fertilizer tariff is the right thing to do."

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

Koeslag has been lobbying for a tariff rebate since last summer, alongside the Atlantic Grains Council, the Christian Farmers Federation of Ontario, the Grain Farmers of Ontario and the Grain Growers of Quebec. They all argue their members are shouldering an unfair share of the burden created by the Trudeau government's desire to punish Russia. 

The farm groups also argue that Canada — a global agriculture superpower — isn't heeding the call from the United Nations not to impose barriers on the fertilizer trade during an ongoing food crisis traceable at least in part to Ukraine-related supply chain disruptions.

With few alternative fertilizer supplies available on short notice, grain, bean and corn growers are coping with a significant hike to one of their largest input costs.

While Canada has its own fertilizer resources, the government proceeded 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 supplies for their next and future crops.

When questioned about Freeland's announcement in December, Prime Minister Justin Trudeau suggested assistance or relief would be provided.

"We are still committed to making an announcement as soon as possible about reinvesting the money in the sector," wrote Marianne Dandurand, a spokesperson for Agriculture Minister Marie-Claude Bibeau, late last week. 

But that doesn't mean refunds are coming.

In December, Bibeau said she was "in discussions" to "determine the best mechanisms" to reinvest the equivalent of this tariff in the agriculture sector.

There's no sign yet of the federal government reversing its across-the-board tariff on Russian imports in the immediate future.

Adding more inflation

Tariffs were not the only cause of high fertilizer prices, but piling on an extra government tax certainly didn't help. 

Research by the University of Guelph's Ridgetown College suggests the cost of urea (nitrogen) fertilizer spiked 97 per cent in 2022, while monoammonium fertilizer jumped 47 per cent.

The government's decision to use an ongoing tariff to deter what had been a cost-competitive supply for Eastern Canadian importers continues to have effects on this year's fertilizer market. Global demand for food export crops remains strong, so the effect of a constricted supply of fertilizer has been across-the-board price inflation for alternatives to Russian nitrogen.

"There is no reason that farmers cannot be reimbursed directly — they have invoices showing surcharges that can be produced to use in requests for compensation," Victoria Berry, manager for communications for the Grain Farmers of Ontario (GFO), told CBC News.

And yet, for reasons farm groups say aren't clear to them, the government believes it cannot issue refunds directly to growers without incurring excessive administrative costs that it's apparently unwilling to shoulder.

Berry shared the results of a recent survey of GFO members. Over half of the 560 who responded said they had to pay a surcharge for their fertilizer last spring. Most attributed this surcharge to the Russian fertilizer tariff.

About half of the respondents said they ended up using less fertilizer because of the higher costs, which could limit crop yields and productivity per acre of farmland. One-quarter changed their crop rotation to reduce the amount of fertilizer required in 2022 and roughly the same number said they were also adjusting their crops for 2023.

The survey asked its members what alternatives to a refund they would support, suggesting possibilities like spending on environmental programs, rail transportation, on-farm fertilizer storage or expansion of domestic fertilizer production. Over half of those surveyed said they'd support none of the above.