Rotten grain It may go down as a record year for grain spoilage. A lot of grain is still piled on the ground and in many cases it isn’t faring very well. The ground was wet, there were fall rains, and often the grain was tough or damp to start with. On top of all that, temperatures were way above normal for November, December and January. Storing grain on the ground is usually meant to be a short-term proposition. Some grain has been moved, but with spring approaching there’s still lots outside in the elements. In many cases, piles are heating. In some cases, there are rotten areas within the pile. Beetles and bugs are also prevalent. I haven’t heard too many reports of deer getting into grain piles, but deer excreta in grain is bad news. There also seems to be more problems than usual with grain that’s stored in bins. No one piles canola on the ground, but there have been many reports of canola heating in bins. The moisture and/or the temperature were too high at harvest or there was a problem with green weeds or pods that settled into one part of the bin. When stored canola starts to go bad, it can suffer a huge drop in value. The grain spoilage problems won’t put much of a dent in the overall grain surplus, but there may be some dents in the pocketbooks of individual producers. I’m Kevin Hursh.
Crop Insurance options remain limited Saskatchewan Crop Insurance has expanded a couple of program options for this year. While the options go in the right direction, the changes won’t help very many producers. One of the changes is the expansion of the Contract Price Option. This allows producers who contract all or part of their production to improve the level of their insured prices. The insured price will be an average of the contracted price and the Crop Insurance base price. Unfortunately, on commercial grain, the Contract Price Option only applies to canaryseed and the mustards. It probably has greater value for organic growers where it applies to organic oats, mustards, feed barley, flax and lentil crops. The other expanding option is the Crop Averaging Pilot Program. This is a basket approach to insurance coverage. You don’t get paid for a production shortfall on a particular crop unless the revenue from your basket of crops is lower than the guarantee. Since the risk to Crop Insurance is reduced, they are able to offer yield coverage greater than the 80 per cent maximum at no extra cost. The numbers will vary from one producer to another depending upon yield guarantees and the mix of crops. For some producers, it may be a good option. Unfortunately, the Crop Averaging Pilot Program will only be available for producers out of the Moose Jaw, Regina, Shaunavon, Rosetown, Saskatoon and Humboldt customer services offices. I’m Kevin Hursh.
February 25, 2006
Saskatchewan Crop Insurance 2006 Premiums for Saskatchewan Crop Insurance coverage will be largely unchanged from last year. Some risk areas are going up a bit, others are coming down. The 50 per cent coverage option will be more expensive. Governments used to pay a bigger portion of that base level coverage. However, government funding will pick up a slightly larger share of the 60, 70 and 80 per cent coverage levels, so those premiums will decline slightly. The biggest change from last year is a drop in nearly all the prices used for insurance purposes. Hard Red Spring wheat will be $2.97 a bushel, down from $3.13 last year. Durum will have an insured price of $3.40 a bushel, down from $4 in 2005. Barley is actually a few cents higher than last year at $1.96. Flax has dropped dramatically going from $7.75 last year to $6.22 this year. Canola has also tumbled going from $5.90 down to $5.06 a bushel. Field peas have slipped from $3.61 to $3.13. Large green lentils have gone from an insured price of 16 cents a pound last year to just 12 cents this year. Red lentils have dropped from 15 to 13 cents. One of the few increases is large kabuli chickpeas which are up 2 cents to 24 cents a pound. On a per acre basis, most producers are going to see reduced crop insurance costs, but the main reason will be declining coverage levels. I’m Kevin Hursh.
February 23, 2006
Producers watch for attractive wheat prices The Canadian Wheat Board’s latest Pool Return Outlook for the current crop year has No. 1, 2, 3 and 4 durum down by $4 a tonne. Meanwhile, wheat PROs are $2 to $3 a tonne higher than last month. The industry will be watching with interest on Monday as the first PROs for the new crop year are released. Along with the PROs will come the first opportunity to lock in new crop prices using Fixed Price and Basis Payment contracts. The best possibility for attractive pricing options is on wheat because American wheat futures have been rising. If, after deducting freight and handling, producers can only lock in $4 a bushel on No. 1 spring wheat, I doubt if there will be much interest. However, if the fixed price starts climbing to the $4.50 level, there may be some interest. If you look at the charts and graphs, there have been times in each of the past couple crop years when a Fixed Price contract would have generated a better return than the pooled price. Producers will have the option to select a limited "force majeure" clause if they sign up for the program. Such clauses excuse performance under the contract if certain specified events occur which are beyond the producer's control, such as flooding, drought or other natural disasters. The clause will only apply to production loss, not downgrading. Watch for all the details early next week. I’m Kevin Hursh.
February 22, 2006
Manitoba moves on biodiesel Manitoba is taking some tangible steps towards the development of a biodiesel industry. Funding of $1.5 million has just been confirmed for the Manitoba Biodiesel Production Program, which will be used to assist in the developments of facilities. Eligible projects must be located in Manitoba and have an annual capacity of at least two million litres. The projects must also demonstrate technical feasibility and economic viability through a detailed business plan. A board has been appointed to review applications to recommend which projects receive program funding. Manitoba has also established a 5.5 cents per litre tax advantage for biodiesel compared to regular diesel. Canola oil is the preferred vegetable oil for producing biodiesel. It has the best cold flow properties. Canadian canola oil is being exported to Europe for the production of biodiesel, but very little biodiesel is being produced in Canada. The U.S. is also way ahead of Canada when it comes to this renewable fuel. Biodiesel continues to be studied and discussed in Saskatchewan. We know a small amount of biodiesel mixed with regular diesel has advantages for fuel economy, engine life and the environment. However, it would appear that neighbouring Manitoba is further ahead on an actual plan to develop the industry. I’m Kevin Hursh.
February 21, 2006
More Alberta envy A couple days ago, I told you about the Revenue Insurance Coverage that Alberta has announced as an option within their crop insurance program. As more details become available, it’s clear the program will be a big boost to Alberta farmers. Similar to the old GRIP program, floor prices are set for each of the commodities. Those floor prices include spring wheat at $4.23 a bushel, barley at $2.56, canola at $7.16, field peas at $4.23 a bushel and lentils at 16 cent per pound. Many of the prices are pretty sweet compared to what the marketplace is likely to deliver and the premiums farmers will have to pay for the Revenue Insurance look quite reasonable. Alberta farmers are likely to sign up in droves and coverage levels are likely to influence seeding decisions. It still won’t be easy for Alberta farmers to make money, but at least they have a guaranteed base to start the season. Meanwhile, here in Saskatchewan rural municipalities are fighting tooth and nail just to get some equity on farmland education taxes. This will again be a major issue at the SARM convention, which begins March 6. We shouldn’t be shy about demanding education tax changes considering the advantage Alberta farmers are going to have with their Revenue Insurance Coverage. I’m Kevin Hursh.
February 20, 2006
No durum accepted Delivery prospects for durum continue to be limited. The Canadian Wheat Board has announced acceptance levels for Series B delivery contracts. No durum of any grade was accepted. In the Series A contracts, only 50 per cent of the durum offered by farmers was accepted. There is some good news on the lower grades. There have been a number of Guaranteed Delivery Contracts for No. 4 and No. 5 durum. A fourth Guaranteed Delivery Contract was recently issued. However, producers with No. 1, 2 and 3 durum are looking at a big carryover unless something changes in the upcoming Series C delivery contracts. On wheat, the delivery prospects are considerably better. The Series A acceptance level was either 80 per cent or 100 per cent depending upon the class and the grade. In Series B, there’s a 50 per cent acceptance level on No. 1 and 2 CWRS wheat with 13.4 per cent and lower protein. The acceptance is also 50 per cent on No. 3 CWRS. On No. 1 and 2 with 13.5 per cent and higher protein, the Series B acceptance level is 100 per cent. The acceptance is also 100 per cent on all other grades and classes of wheat. The carryover of wheat is likely to be minor compared to the amount of durum. I’m Kevin Hursh.
February 19, 2006
Lucky Albertans Alberta is enhancing the Revenue Insurance aspect of its crop insurance program. Revenue Insurance was introduced last year. It’s a program only available in Alberta. For this year, the Revenue Insurance floor prices are being increased by seven per cent. Another change for 2006 is that Alberta producers will receive 70 per cent of the calculated benefit versus 50 per cent last year. The announcement was just made on Friday so all the details are not available. However, many of last year’s floor prices look pretty attractive. For instance, canola was $6.69 a bushel. A seven per cent increase puts it over $7.00 a bushel. Let’s say an Alberta producer has crop insurance yield coverage of 20 bushels an acre for canola. That’s the amount covered by revenue insurance, whether the producer grows more or less than the 20-bushel yield. If the market price in the fall is a dollar a bushel below the floor price, the producer would receive 70 per cent of the price difference on the 20 bushels per acre. In this example, it would be $14 an acre. It appears that Alberta’s Revenue Insurance program has the potential to provide significant support. The floor prices may even influence what Alberta farmers decide to seed this spring. I’m Kevin Hursh.
February 16, 2006
Saskatchewan connections in B.C. agriculture I spent part of yesterday at the Pacific Agriculture Show in Abbotsford, B.C. This trade show had nothing to do with grains and oilseeds. It was about berries, horticulture, greenhouses, forage production and dairy. However, there were a number of Saskatchewan connections. One booth featured a Saskatchewan real estate company promoting Saskatchewan dairy farms that are for sale. B.C.’s production insurance program, the counterpart to our crop insurance, had an employee manning the booth who used to work in Saskatchewan. One of the speakers at the horticulture meeting was Wanda Wolf of Lone Wolf Herb Farm at Phippen, Saskatchewan. Wanda is an industry leader in herb production and marketing. I also ran into a saskatoon berry grower from Saskatchewan who was at the Pacific Ag Show to see if he could get a line on a used berry harvesting machine. The University of Saskatchewan’s College of Agriculture had a presence at the Abbotsford event. Jon Treloar, the marketing and community liaison coordinator for the College was in attendance trying to attract potential students. Agriculture is very different in B.C. and so it was amazing to see so many links to Saskatchewan. I’m Kevin Hursh.
Layoffs at Sask Soil Conservation Association With the country supposedly moving to carbon credit trading and with farmers hoping to get some returns for sequestering carbon in the soil, it seems like a strange time for funding to dry up for the Saskatchewan Soil Conservation Association. The SSCA has been a lead organization in the work on carbon credits. It has been examining carbon trading systems and the mechanics of quantifying sequestration. This was a natural progression following the years the organization has spent helping producers adopt minimum tillage and direct seeding. Unfortunately core funding for the SSCA is ending. The Greenhouse Gas Mitigation Project has not committed to any further funding and neither has Saskatchewan Agriculture. As a result, the Saskatchewan Soil Conservation Association has been forced to give lay-off notices to its five field staff around the province. Unless something changes, the five professional agrologists will be out of a job March 31. The board of the association didn’t think it was fair to wait any longer to give the field staff their notices since there has been no commitment for the continuation of funding. Even short-term bridge funding has not been forthcoming. The problem federally may be with the bureaucracy or it may be due to the change of government. Either way, it’s disappointing to see the association’s infrastructure being dismantled. I’m Kevin Hursh.
February 14, 2006
Wheat is best hope for market turnaround It’s dry in a big portion of the American winter wheat region, particularly Texas and Oklahoma. In addition, the winter wheat crop is looking poor in much of Russia and Ukraine. Some analysts discount the current problems saying world wheat production will still be large. Other observers believe this could be the start of a market turnaround. Wheat futures in the U.S. have been rising, although not in a straight line and it may take some time to know if the rally can be sustained. At the end of February, the Canadian Wheat Board will release its first Pool Return Outlook (PRO) for the upcoming crop year. With this first PRO will come opportunities to use various pricing options to lock-in prices on wheat, durum and barley for the upcoming year. Hopefully, there will be some options that look more attractive than current price levels. If the shortfall of wheat production is serious, the potential exists for a rally that will go beyond just wheat. A rising tide lifts all ships. If wheat begins to look more attractive as a cropping option, it will attract seeded acres from other crops. A market turnaround has to start somewhere and at this point, wheat seems to be the most promising. It’s too bad someone has to suffer a production shortfall to improve the market outlook, but that’s really the best short-term hope for the prairie grain industry that otherwise is facing a grim price picture. I’m Kevin Hursh.
February 13, 2006
Cattle prices slip Cattle prices took a bit of a tumble last week. Beef economist Sandy Russell of Saskatchewan Agriculture reports that prices softened on all feeder cattle classes, with steers dropping the most. While a lot of the heifer weight ranges were down $2 to $3 a hundredweight from the previous week, some weight classes of steers were down as much as $6 a hundredweight. Some feeder classes also dropped in previous weeks, but last week was the first across-the-board decrease. The main reason is the softening of fed cattle prices. Fed steers in Saskatchewan were about $4 lower last week, with heifers down nearly as much. Fed cattle exports to the U.S. are brisk as feedlots look for the best prices, but fed cattle prices overall have been slipping for the past several weeks. Sandy Russell says there’s a reduced beef slaughter both here and in the U.S. It’s a slow time of year for beef sales. As well, pork and poultry are providing strong competition. Cattle prices are well above the levels seen during the height of the BSE crisis, but the current price trend is down. What happens in the U.S. marketplace and what happens with the value of the Canadian dollar will be key factors in the weeks ahead. I’m Kevin Hursh.
February 12, 2006
Ethanol / Feedlot template It didn’t make much news and at $110,000 it isn’t a lot of money, but a new ethanol study in Saskatchewan is a step in the right direction. The Saskatchewan government and the Saskatchewan Ethanol Development Council have announced the creation on an integrated ethanol / cattle feedlot development template. Meyers Norris Penny and VCM Engineering are doing the work. As Pound-Maker at Lanigan has proven, there’s a natural fit with ethanol and feedlots. If you can use the byproduct of ethanol, the distiller’s grains, right in an adjoining feedlot, drying costs can be avoided. That can make mid-sized integrated ethanol plants competitive with the big stand-alone facilities. Saskatchewan Agriculture and Food, Natural Resources Canada, Western Economic Diversification and ten community groups in the province are sharing the cost of the template project. Ethanol production technology has improved dramatically in recent years and that has to be factored into the equation as well. There’s a place for big stand-alone plants that dry and ship distiller’s grains to other users, but there’s a lot more economic punch for a community to have an ethanol plant integrated with a feedlot. It’s good to see that approach taken seriously again. I’m Kevin Hursh.
February 10, 2006
Replacement for Ag Policy Framework? There’s a lot of soul searching in agriculture these days. Farm income is dismal, but there are widely varying views on what needs to be done to confront the issues. The George Morris Centre, based in Guelph, Ontario is undertaking a project, the intent of which is to “develop a comprehensive public policy for the commercial agri-food sector.” Researchers at the centre have produced a paper to frame the discussion. Their analysis is quite critical of the report done by former parliamentary ag secretary Wayne Easter. While noting that the Easter report has some good ideas, they say it “continues to treat farmers as victims who can only achieve prosperity through government action.” The George Morris Centre has a much more right wing philosophy than Wayne Easter. Many will not like their support for trade liberalization or their view that industry concentration is not necessarily bad. The centre is taking pledges from investors so that it can facilitate the development of a commercial agri-food policy for the country. They see it as a comprehensive replacement for the federal government’s Ag Policy Framework. It’ll be interesting to see what the George Morris Centre comes up with and whether the federal government pays it any heed. I’m Kevin Hursh.
February 8, 2006
Farmland rental rates How much is land renting for? To my knowledge, there are no official statistics on this, but Saskatchewan Agriculture had a professional survey done on this question in 2005. More than 1,600 tenants with agreements on cultivated land provided information. The number of cash rental agreements was somewhat larger than the number of crop share agreements. On both the cash and crop share agreements, the landlord paid the property taxes 95 per cent of the time. On crop share arrangements, the most common split was one-third to the landlord. The next most common split was one-quarter of the crop to the landlord. Twenty-eight per cent of the tenants with crop share arrangements indicated there was some sharing of crop input costs. As you would expect, the cash rental rate varied widely – all the way from $5 an acre to $60. The province-wide average was $23.88 an acre. The crop district around Weyburn had the lowest average cash rent at just under $19 an acre. The highest cash rent was in the Melfort, Tisdale, Nipawin crop district at an average of just over $33 an acre. Of course, these results are all from last year. My guess would be that rental rates will trend downwards for 2006. I’m Kevin Hursh.
February 7, 2006
Sobering farm income projections To understand the challenges ahead, newly minted Agriculture Minister Chuck Strahl needs to look no further than the new farm income forecasts released by his own department. The numbers are sobering, even for an industry that has become accustomed to dropping returns. For 2006, realized net farm income for the whole country is forecast at only $875 million, a drop of 54 per cent from last year and a drop of 62 per cent from the previous five-year average. The main reason is an increase in operating expenses. As well, farm support payments are expected to drop back from the record levels recorded in 2005. The picture varies from province to province, depending upon the type of agriculture. Three provinces are forecast to have a negative realized net farm income – P.E.I., Manitoba and Saskatchewan. Saskatchewan is the largest negative at minus $203 million. Program payments are projected to total over one billion dollars in Saskatchewan this year and yet it won’t be enough to bring producers up to breakeven. Chuck Strahl will be besieged by farm groups providing advice. Often that advice will be contradictory. However, if he can find ways to improve farm incomes, he’ll have a lot of supporters. I’m Kevin Hursh.
February 6, 2006
New ag minister announces increased grain payment There’s good news and bad news with the surprising appointment of Chuck Strahl as the minister of agriculture and the minister responsible for the Canadian Wheat Board. The good news is that Chuck Strahl is high profile and highly regarded. The bad news is that he faces a steep learning curve. He does not have an agriculture background. The 48 year old father of four represents the Fraser Valley of B.C. where dairy and poultry operations are the main agriculture. His knowledge of the grain and cattle industries is likely limited. Perhaps he can make up for his lack of an agriculture background with effort. There will certainly be no shortage of farm groups offering him advice. Strahl’s first official act as agriculture minister was to announce that the initial payments under the $755 million grains and oilseeds program will start flowing within the next two weeks. The payments have actually been delayed. They were supposed to start coming out last week, but the decision was made to increase the level of this first installment. The average of net eligible grain sales between 2000 and 2004 will still be used to calculate the payment. However, rather than paying 5.81 per cent of the average net eligible grain sales, the first installment has been increased to 7.47 per cent. Virtually all of the funds will be delivered in the first payment. Whether Strahl actually had a hand in the decision is debatable, but getting as much money as possible out before spring will be appreciated. I’m Kevin Hursh.
February 5, 2006
Australian Wheat Board in trouble It hasn’t made much news here, but on the other side of the world, the Australian Wheat Board is facing serious allegations. An inquiry headed by a former judge has heard that the country’s monopoly wheat exporter paid the regime of Saddam Hussein millions of dollars in kickbacks. The Australian Wheat Board is alleged to have paid more than $200 million in bogus transport fees to a Jordanian trucking firm that was partly owned by Saddam’s government. The money was allegedly diverted to the Iraqi dictator in violation of UN sanctions. This has become a political issue in Australia with the opposition demanding assurances that Australian money didn’t end up funding Palestinian suicide bombers and the militant group Hamas. The United States is watching closely and the revelations are causing some ripples among American politicians as well. The inquiry is still proceeding with more witnesses testifying, but observers believe the monopoly export powers of the AWB are likely to be dismantled. That will suit the United States just fine. They’ve been trying to reduce the powers of state trading enterprises. With the bribery scandal, the AWB seems to be self-destructing. I’m Kevin Hursh.
February 2, 2006
Producers disillusioned with malting barley Producers are registering a lot of complaints about malting barley this year. There’s seems to be no logic or consistency to the deductions from the grain cheques. Even malting barley that goes directly by truck to a domestic malting facility may still have terminal elevation and cleaning charges deducted. It would seem that some companies are charging for services that never occur, but it’s tough to get to the bottom of how it all works and what is allowed and what isn’t. There are also stories of producers having their barley co-mingled upon delivery and then having it rejected because the germination is too low. That shouldn’t be happening. Unfortunately, there is no standardized dispute settlement mechanism in place. It isn’t specified in the contracts. Another complaint is grading. It seems that malting barley is most often put into the lowest grade. On a commodity like wheat, producers typically shop around to get the best grades. Once barley is selected for malting, there’s usually very little discussion about the actual grade. The premium for malting barley over feed is no longer large and many producers are becoming disillusioned with malting barley. I’m Kevin Hursh.
February 1, 2006
Huge grain stocks The grain stocks report released yesterday by Statistics Canada is a shocker. We’ve got grain comin’ out our ying-yang in this country. Leading the pack are durum and canola. Durum stocks at the end of December were an estimated 6.4 million tonnes, eclipsing the previous record of 5.3 million set back in 2000. Total canola stocks are estimated at 7.5 million tonnes, an increase of 2.2 million tonnes from a year ago. The previous stock record was in 1999 at 5.5 million. We’re 2 million tonnes over the record on canola. Another amazing number is on lentils, where stocks are above one million tonnes. Stocks of oats and barley are down a little bit as compared to last year, but both are still well above the ten-year average. Although not records, there are hefty amounts of wheat, flax and peas. Stocks of mustard and canaryseed are burdensome for the second year in a row. The huge stockpiles, most of them on farm, are going to figure into the spring seeding plans of producers. It’s hard to go all out to produce another big crop with so many bins still full and with prices so depressed. I’m Kevin Hursh.
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Kevin Hursh's daily agricultural report is heard Monday through Friday on Swift Current (CKSW), Shaunavon (CJSN), Moose Jaw (CHAB), Estevan (CJSL), Weyburn (CFSL), Rosetown/Kindersley (1330/1210), Lloydminster (CKSA) and Melfort (CJVR).
