I'll believe it when I see it A $200 million processing plant has been announced for Rosthern, north of Saskatoon. According to the announcement, the plant would be involved in the production of functional foods, high quality nutraceuticals, nutrition bars and value added products based largely on the bran from barley. I hope the plant can proceed and that it offers opportunities for farmers as well as generating the 60 jobs that have been promised. I hope the company can indeed use the waste by-products “in a new green process of ethanol production not involving fermentation,” as promised. However, at this point, you’ll have to mark me down as a skeptic. $200 million is a pile of money. The company behind the announcement is called International Debranning Inc. or IDI. A quick Google search brings up nothing on the company. IDI is said to be privately owned by four Ontario-based entrepreneurs. Instead of those entrepreneurs making the announcement, the big news was released on behalf of IDI by Farm Corp, which is described as a minority shareholder in the plant. Farm Corp, led by Rick Pender has been around for a number of years with plans for ways to raise international grain prices. The organization may be well-intentioned, but it seems to have accomplished little over the years. I’m a big supporter of value-added processing and I hope I’m wrong. However, it will take more than just a news conference to convince me that this major “biorefinery” is coming. I’m Kevin Hursh.
April 27, 2006
Bits of optimism in grain markets A few bright spots are starting to emerge in the grain market. Canola has been on a gradual uptrend for several months. New crop November futures have also been rising. Current cash canola prices are still nothing to write home about, but they’re a lot better than the $5.00 a bushel of earlier this year. Yellow pea prices of $4.00 a bushel are now available. That’s the best price since last harvest and it may spur more pea acres. Red lentil prices have increased to about 15 cents a pound, which is considerably more attractive than the 12 cent bottom in the market. If the Stats Can seeding intentions come true, it appears that acreage will be adjusted downwards dramatically on durum, green lentils, canaryseed and mustard. Eventually that will help to lift the surplus and hopefully lead to better prices. On the other hand, flaxseed and oats appear to be headed for more oversupply problems. A new Pool Return Outlook from the Canadian Wheat Board comes out today. It’ll be interesting to see the new crop price outlooks for wheat, durum and designated barley. Most grains, oilseeds and special crops are still in the bottom range of historical prices. But there does seem to be a more optimistic tone in the market of late. I’m Kevin Hursh.
April 26, 2006
Seeding intentions report is out of date For its seeding intentions report released yesterday, Statistics Canada interviewed more than 17,000 farmers from across Canada. There were 5,630 in Saskatchewan alone. Not everybody is going to provide straight answers. There’s growing distaste for surveys. Still, with that massive sample size, Stats Can has a marvelous snapshot of seeding intentions. Trouble is, the snapshot is old and faded. The survey of producers took place between March 17 and 31. Canola, field peas and red lentils have all seen price increases since that time. So will canola acreage really be down by 15 per cent as the survey suggests? Will field pea acreage actually decline a bit in Saskatchewan as compared to last year? My guess is that there will be more canola and field peas than the survey indicates. Producers will respond to the price signals. The survey still has a lot of useful information, but some of the results are out of date. A great example of that is corn in Ontario. The Stats Can survey pegged Ontario corn acreage as basically stable, but the survey was conducted before the removal of the anti-dumping duty on American corn coming into Canada. Stats Can needs to shorten the time between its actual survey and the release of the results. In this high tech age, that should be relatively easy to accomplish. I’m Kevin Hursh.
April 25, 2006
Rural municipalities consider ethanol development The South Central Renewable Fuels Initiative, announced last Friday, is a great model for rural development in the province. The 51 rural municipalities in SARM Division 2 have been asked to consider becoming investors in two ethanol plants for the region. Participating RMs would contribute up to $1 an acre for five years. Forty-three of the 51 RMs have forwarded an expression of interest. Those RMs will now take the idea to their ratepayers and will make a final decision within the next two months. A participating RM would administer its own contribution to the project. It should be possible to structure it so that individual ratepayers would have a choice on whether or not to become investors. Over a large geographic region and with potentially thousands of ratepayer shareholders, a great deal of seed money could be raised to push the large ethanol projects forward. The RMs would share any new property tax revenues and producers would have a brand new market for grain through a facility they would own. If this works, you can bet that some of the other six SARM districts in the province will consider the template for their own developments. The education tax revolt has demonstrated the power RMs have when they work together. I’m Kevin Hursh.
April 23, 2006
Seeding intentions report on April 25 Statistics Canada will release its seeding intentions report tomorrow. My guess is that canola acreage will remain strong despite projections last winter that farmers would shy away from the crop. In recent weeks, canola has shown a bit of price strength and many farmers will view it as having a better potential for profit than most other crops. I also expect field pea acreage to be high. This is another crop where prices have edged upwards in recent weeks. Peas sales have been strong, so at least producers have been able to turn this crop into money. The lentil acreage from Statistics Canada will be difficult to interpret. Everyone expects green lentils will be down and red lentils will be up. However, the Stats Can report is likely to list overall lentil acreage, leaving everyone guessing on the split between reds and greens. That same problem is likely to occur on chickpeas. Kabuli chickpea acreage is going to increase dramatically in response to good prices and good returns in ‘05, but there may also be an increase in desi chickpeas. After several years of poor prices, desi values have improved. New crop contract prices of around 13.5 cents a pound have recently been available. With Stats Can lumping both chickpea types together, the value of the data will be diminished. The seeding intentions report is certainly not the final word on what actually goes in the ground, but on most crops it will provide market analysts with some new numbers to work with. I’m Kevin Hursh.
April 22, 2006
Railway competition needed Amazingly, it’s been ten years since the federal government announced plans to dispose of the federal hopper car fleet. For all those years, the Farmer Rail Car Coalition has been working to obtain control of the 12,000 cars for producers. Although there are 17 farm organizations within the Farmer Rail Car Coalition, not all producers and producer groups believe in their mission. The Coalition could gain a lot of support and momentum if a study by the Canadian Transportation Agency is released. According to the Coalition, the study shows that producers in Western Canada are overpaying the railways by approximately $30 million dollars a year due to excessive maintenance fees on the government owned cars. Naturally, the Farmer Rail Car Coalition is pushing to get the study released. The huge discrepancy in annual maintenance costs is central to the Coalition’s case for transferring ownership of the fleet to farmers. This is part of a much larger issue. The two major railways in this country have been making huge profits while providing lousy service to the grain industry. This isn’t just a farmer rant. Many of the major grain companies say the same thing, at least in private. If the new federal government wants to do something for farmers that has long-term impact, allowing more competition into grain transportation would be a step in the right direction. Forcing Transport Canada to release the hopper car study would show the government is serious about the issue. I’m Kevin Hursh.
April 19, 2006
Successful share offering for ethanol plant North West Terminal at Unity is doing very well with its share offering for building an ethanol plant. About $9.5 million of the $10 million minimum has already been raised. There are about 160 investors that come from all over northwest Saskatchewan. The proposed plant would produce 25 million litres per year while using about 2.5 million bushels of wheat. A major selling point for the shares has been the opportunity for shareholders to supply wheat. For every $10,000 invested by a shareholder, there’s a delivery opportunity of 1500 bushels a year for 5 years at a guaranteed price of $4.50 a bushel. Half the grain would be delivered off the combine, with half delivered through the rest of the year. Interested producers have been able to get financing from lending institutions based on the price guarantee for the feed wheat they can deliver. The North West Terminal approach is also unique in that grain screenings along with sawdust and wood chips will be burned to dry the distillers grains left over after fermentation. The plan also calls for the plant to generate 75 to 85 per cent of its own electricity requirements with the solid fuel furnace. The terminal hopes to have its ethanol plant running by the fall of 2008. North West Terminal has been very successful in the grain handling business. Hopefully that success will also extend to ethanol production. I’m Kevin Hursh.
April 18, 2006
Westside Irrigation Project A meeting this afternoon could set the stage for the future development of irrigation in Saskatchewan. Five rural municipalities contributed $40,000 and the National Water Supply Expansion Program contributed $340,000 so that a study could be conducted into the expansion of irrigation into a large area to the north and west of Outlook. The Westside Irrigation Project as it’s called was envisioned as part of the original Lake Diefenbaker Project back in the 60s, but the development stalled. The new study takes a fresh look at the feasibility. The findings are that 370,000 acres in the region southwest of Saskatoon would be suitable for irrigation from the project. This is greater than the total acreage currently under intensive irrigation in the province. The water for the new project is available, and according to the study the cost would be within the normal range for this sort of development. Of course, to make the large private and public investment worthwhile, the irrigation would have to support value added processing. There are also the benefits of a safe water supply, increased recreation and tourism, and enhancement of the environment. The results from the study will be released at a public meeting in the community of Conquest this afternoon. I’m Kevin Hursh.
April 17, 2006
Ethanol development policy When you listen to Lionel Labelle of the Saskatchewan Ethanol Development Council, it’s easy to get excited about the potential for ethanol to be a major driver of the rural economy in this province. With new ethanol plants at Lloydminster and Weyburn, Saskatchewan is leading the nation in ethanol development. Labelle believes it will be Western Canada that captures the biofuels industry. After all, central Canada is a net importer of corn. After extensive study, Labelle has lots of advice regarding the government policies needed to capture the opportunity. He says rather than a 5 per cent renewable fuel standard, Canada should go for 10 per cent by the year 2015. Rather than breeding wheat crops for protein, Labelle says there should be crop development aimed at maximizing the starch needed for fermentation. Fifty per cent of American ethanol plants have producer ownership due to government incentives. Labelle says that approach should be used on this side of the border so that producers share more of the benefits. Ethanol has become very profitable. The payback on a new ethanol plant is currently estimated at just 5 years. That’s not surprising when you see the price of gasoline at the pumps. I’m Kevin Hursh.
April 16, 2006
BSE in B.C. The Canadian public has become accustomed to the discovery of an occasional case of BSE in the cattle herd. There’s no doubt the supply of beef is safe and there’s no doubt the incidence of BSE is extremely low. Still the latest case in a British Columbia dairy cow is an unwelcome discovery. It’s the 5th case in Canada. That’s five out of the 100,000 high-risk animals that have been tested since 2003. This latest case breaks the Alberta connection that characterized previous discoveries. This cow was raised near Chilliwack in B.C.’s Fraser Valley suggesting a different feed source. The most disconcerting aspect is the age of the cow – only 6 years. The cow was born three years after the ruminant-to-ruminant feed ban came into effect. George Luterbach with the Canadian Food Inspection Agency is quoted as saying recent cases are probably the result of residual contamination within the feed system. However, three years is a long time and it makes one wonder how many more cases of BSE will be discovered. Cows born before 1997 are a dwindling number, but unfortunately we continue to find cases in younger animals. I’m Kevin Hursh.
April 12, 2006
Wheat market worth watching again U.S. winter wheat futures prices were starting to look interesting back in early March. Dry conditions in Texas, Oklahoma and elsewhere were escalating concerns about the crop and prices were reacting accordingly. The Canadian Wheat Board’s Fixed Price Contract is based off American futures. On March 10, producers here were able to lock in a new crop price for No. 1 CWRS wheat, 13.5 per cent protein of $4.27 a bushel. That was the price with average Saskatchewan freight and handling deducted. After March 10, American futures prices and the CWB’s Fixed Price dropped in response to rain and snow in the southern U.S. However, in the past week or so, prices have been rallying again. Winter wheat crop ratings remain poor in Texas and Oklahoma and they aren’t great in Kansas either. Meanwhile, too much moisture is a concern in the Red River Valley. In recent days, the CWB’s Fixed Price Contract has climbed above $4.20 a bushel. It’s almost back to the peak reached on March 10. A price of $4.20 bushel is nothing to brag about, but it’s considerably better than the Pool Return Outlook of only $3.83. Many producers are watching the wheat market again. I’m Kevin Hursh.
From flooding to seeding Seeding is just around the corner in some southern areas of Saskatchewan, but it’s a long way off in the northeast grainbelt. Last night I happened to be in Arborfield, north of Tisdale. Arborfield is on a flood watch. Last summer, the community flooded a couple of time due to heavy rainfall events. Despite the construction of a dike, the town is in danger again. There’s a lot of water running in the northeast and there’s still quite a bit of snow to melt. When the land finally dries up, many fields are going to require extra fieldwork before seeding to deal with the deep ruts left from last fall’s harvest operations. Of course, the ruts are going to hold water longer than the rest of the field. What the area doesn’t need is any more snow or rain right now. The situation is far different in many southern areas. While soil moisture isn’t critically short, many southern regions would welcome additional precipitation before seeding. Without precip, significant seeding activity could start as early as next week. After all, the sloughs are quickly disappearing and weeds are starting to grow. It’s one of those years when seeding dates could vary widely from one region to another. I’m Kevin Hursh.
April 11, 2006
COOL becomes new beef battleground Prices for fed and feeder cattle have been slipping and the price outlook is less than positive. Meanwhile, the movement of Canadian cattle into the U.S. market has been steadily increasing. Given the circumstances, it was only a matter of time until the Americans took notice. According to U.S. protectionist farm group, R-CALF, it’s Canada’s fault that cattle prices are dropping. R-CALF notes that fed cattle prices in the U.S. have fallen from $96.50 in December to $86 a hundredweight last month. That’s a drop of $125 per head. R-CALF says imports will likely capture a record share of the 2006 beef market in the U.S., putting significant downward pressure on prices. Since they seem to have lost their battle to keep the border closed, the new battleground is COOL – Country-of-Origin Labeling. The latest R-CALF news release says, “Unless Congress takes immediate action to implement Country-of-Origin Labeling so consumers have the right to choose either U.S. beef or foreign beef, producers will not be able to compete against these soaring imports.” If cattle prices continue slipping, expect the whining from south of the border to intensify. I’m Kevin Hursh.
April 9, 2006
Farmers deserve honesty and clarity from politicians Politicians of all stripes are doing a fine job of playing politics as farmers across the country turn up the heat for more ad hoc assistance. When the new federal agriculture minister met with all his provincial counterparts on March 20 in B.C., the ministers never let on that they even discussed additional assistance. Now Saskatchewan’s agriculture minister is flying to Ottawa with farm group leaders to press Chuck Strahl for more money. This is a way for the province to look like it’s doing something after there was nothing for agriculture in last week’s provincial budget. Meanwhile Strahl is backtracking from statements he made at the Ag Ministers meeting. At that time, he agreed with provincial ministers that CAIS should be transformed rather than replaced. It appears that Stephen Harper has reminded Strahl that the Conservative election promise was for a CAIS replacement. Strahl’s language regarding CAIS has changed and now some of the provincial ag ministers are upset with their federal counterpart. Meanwhile Stephen Harper makes it sound like his government will be the savior of family farms, but he’s only talking about an additional $500 million a year allocated to agriculture – a figure the Liberals regularly exceeded in ad hoc payments. Farmers would prefer honesty and clarity from the politicians. I’m Kevin Hursh.
April 7, 2006
Meadow Lake optimism Last night, I attended a meeting at Meadow Lake, in the northwestern corner of the Saskatchewan grainbelt. There used to be eight grain elevators in Meadow Lake. Now there are none. Grain is trucked out of the region to North Battleford, Lloydminster or even points in Alberta. However, the occasion of the meeting was positive. Cavalier Agrow, a crop input supply company has expanded its operations to Meadow Lake. Producers at the meeting were refreshingly optimistic about the future of agriculture. An older gentleman told me he had reviewed the prospectus for the ethanol plant being proposed by North West Terminal at Unity. Despite his advanced years, he was considering an investment. A couple of producers from nearby Goodsoil identified themselves as investors in Natural Valley Farms, the beef processing facility at Wolseley. Even though Wolseley is a long way from Goodsoil, these producers believe in farmer investment in value added ventures. There’s an ongoing switch from grain to cattle around Meadow Lake, but there’s also a sense that the grain industry will always have a role in the ag economy of the region despite its geographic isolation. A positive attitude is a valuable asset. I’m Kevin Hursh.
April 6, 2006
Good and bad news in cattle trade At long last, Judge Richard Cebull of the U.S. District Court in Billings, Montana has closed the door to the U.S. trade protectionist group known as R-CALF. Cebull made life miserable for the Canadian cattle industry by keeping the border closed much longer than it should have been. Even though the border opened last July to animals under 30 months of age, a request before Cebull for a permanent injunction could have disrupted trade once again. That threat has now been removed. However, on animals over 30 months of age and on beef from animals over 30 months the border remains closed and industry analysts do not expect that to change any time soon. The over thirty month rule from the USDA is not expected to come until after the U.S. completes the investigation into its latest case of BSE. Analysts no longer expect to see the rule in 2006. They point to 2007 as a more likely time frame. When the rule finally comes, it’s expected to deal with older animals heading to slaughter plants as well as beef from those animals. It is not expected to include breeding animals. Trade in breeding stock will take even longer. So while the chance of a border disruption on younger animals is now diminished, there’s still a lot of work to do before full trade is restored. I’m Kevin Hursh.
April 4, 2006
Only 19 per cent of Sask calves finished in Sask Beef economist Sandy Russell of Saskatchewan Agriculture has compiled statistics showing just how deficient the province is in cattle feeding. About 1.4 million calves are being produced in the province each year. Last year, we exported 45 per cent of our calves to Alberta feedlots. Ten per cent were exported to the U.S. with about 7 per cent going to Ontario. A further 300,000 animals, about 21 per cent of the calf crop were exported out of the province as backgrounders or yearlings. Only 19 per cent of Saskatchewan’s calves were fed to slaughter weight in Saskatchewan feedlots. So we produce 1.4 million calves and we only feed out 262,000. Along with sending most of our calves to Alberta, we also send a big chunk of our feed barley and all the economic activity. Here’s another interesting statistic. Sixty-three per cent of the feeder cattle that left the country last year came from Saskatchewan. Feeding cattle can be a tough business, but we have competitive advantages that we should be exploiting. I’m Kevin Hursh.
April 3, 2006
Resilience in the farm economy Farmland values are holding up better than a lot of people expected. Farm Credit Canada’s Farmland Values Report for the last half of 2005 shows farmland in Saskatchewan increased by a very modest 0.5 per cent. The increase in the first half of the year was 0.8 per cent. The total increase for 2005 is therefore 1.3 per cent. While that may not be keeping up with the rate of inflation, at least the numbers are still positive. Lenders tend to get nervous when farm equity is eroding. The FCC report has a couple of interesting comments about Saskatchewan. It notes that producers are competing for land to enlarge their operations and spread fixed costs over more acres. It also notes that with Saskatchewan farmland the cheapest in the country, there is some organized buying by groups interested in holding land with the anticipation of long-term gains. It’s also interesting that despite the tough economic situation, notices of farm foreclosure are down in Saskatchewan. The fiscal year ended on March 31 and the number of notices of intent to foreclose on farmers numbered 340 for the year. That compares to the previous year at 427. The farm economy is showing a lot of resilience. I’m Kevin Hursh.
April 2, 2006
The cost of CAIS CAIS deposits have now been dropped and a CAIS fee is in place for 2006. The fee will be $4.50 for every thousand dollars of reference margin protected. Producers who have previously participated in CAIS will receive a letter with more detailed information on the fee. Federal and provincial agriculture ministers have talked about the changes for a long time. They’ve kept extending deadlines, delaying the big CAIS deposits required by producers. It’s now official that producers who participated in 2003, 2004 or 2005 CAIS do not have to make a deposit or pay a fee for those program years. Some producers did make deposits into CAIS accounts. Any money in accounts will be automatically paid back. While a fee of 0.45 per cent is better than a 22 per cent deposit, why is a fee needed? The program has operated for three years without one. With the farm income crunch worse than ever, a producer with a reference margin of $200,000 will have to pay a fee of $900, plus a $55 administrative charge. On top of that, most producers pay professional fees to have their CAIS applications completed. When they were getting rid of the deposit, the agriculture ministers should have also axed the plan for a fee. 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).
