Hursh Consulting & Communications: Kevin Hursh on Agriculture

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Hursh on Agriculture

May 31, 2006

What sort of flooding support makes sense?
Farmers in the Porcupine Plain area of northeastern Saskatchewan have done a good job of publicizing the flooding difficulties in their region - rutted fields and a nightmare harvest last fall, and now this spring a big percentage of the land will not be seeded. While it’s easy to appreciate the problems, it’s more difficult to know what governments should do about it. When there were serious problems with flooding in southeastern Saskatchewan a number of years ago, the unseeded acreage benefit through Saskatchewan Crop Insurance was increased from $25 an acre to $50. (Producers don’t actually get payments on all the acres. There’s an adjustment for seeding intensity and for insurance intensity and there’s a deductible.) An additional $15 an acre has been added, but many say that still isn’t enough. How high should support be for unseeded acres? Crop Insurance coverage for a seeded crop isn’t very high, so there’s a limit to how high the support can be for acres too wet to seed if you want to maintain any sort of equity. Beyond this year’s flooding, some want support for last fall’s rutted fields and the difficult harvest. How do you measure that? On what would you base this sort of support? The problems don’t follow rural municipal boundaries or township lines. It isn’t easy to design ad hoc support programs to address specific problems. I’m Kevin Hursh.

Grain price outlooks
The price outlook for feed barley looks promising. The outlook for flax does not. The Market Analysis Division of Agriculture and Agri-Food Canada has just released new supply, demand and price estimates for the various grains. On feed barley, the average off-board price, basis Lethbridge is expected to be $20 a tonne higher in the upcoming crop year. That would be an average increase of over 40 cents a bushel. On flax, carryout stocks are expected to rise substantially and the average price in the new crop year is expected to drop by $20 to $40 a tonne. On canola, average prices are expected to rise, but only by $10 to $20 a tonne. Meanwhile, Chicago Board of Trade nearby futures prices for oats are expected to decrease by $15 a tonne. On Wheat Board grains, the Ag Canada analysis sticks to the board’s Pool Return Outlook, but there is an interesting observation on durum. The expected discount for No. 1 durum with 11.5 per cent protein as compared to No. 1 CWRS wheat with 11.5 per cent protein is $18 a tonne. That is the largest discount on record. Usually, durum runs at a premium to spring wheat. Moving ahead, the major market factors to watch are: weather and growing conditions in the major producing countries, import demand from China and India, EU export subsidies, increased demand for biofuel, ocean freight rates and the Canada/U.S. exchange rate. I’m Kevin Hursh.

May 29, 2006

Large unseeded acreage looms
Province-wide, seeding progress is at 80 per cent, which is right on the five-year average. However, the rain in recent days has been more bad news for farmers in water-drenched regions of northeastern east central Saskatchewan, where seeding is running way behind. Last night I talked to a producer in the Margo area who has only been able to seed 400 of his 2200 acres. He even has some flax crop left from last year that he hasn’t been able to deal with. I talked to another producer at Elfros who is less than half done. He’s had an inch and a half of rain in recent days. Some areas around him have had three to four inches. The area was already saturated from last summer’s 16 inches of rain. Some producers are resigned to having a large unseeded acreage this spring. Others are still hoping for dry weather ahead that will allow quick progress. It’s getting late for a lot of crops. Yields and quality are typically reduced from seeding well into June. There is some coverage through Saskatchewan Crop Insurance for unseeded acreage and there was the recent announcement of an additional $15 an acre to help with land that was flooded last year and/or this year. Still, the weather problems are causing a great deal of frustration and disappointment. Many producers are on the verge of having the year washed away. I’m Kevin Hursh.

May 28, 2006

Proposal to bring back NISA
The Canadian Federation of Agriculture has an interesting proposal for the development of new farm safety nets. The CFA is exploring the possibility that a program incorporating the strengths of the former Net Income Stabilization Account or NISA program should be used. When farmers had NISA accounts they always knew how much money there was to help them. The CFA has a number of suggestions it says would make NISA more workable. CFA president Bob Friesen argues that an improved NISA could be more successful than a completely new and untried stabilization program. He says a new NISA could cover the top 30 per cent of producer margins. Covering the bottom 70 per cent of margins would be a disaster relief program handled by an improved version of the CAIS program. Friesen says these programs wouldn’t solve the farm income crisis, but he says they could provide better support for the industry, while long-term solutions are developed. It’s an interesting proposal, especially the part of bringing back NISA, which was a popular program with a lot of producers. I’m Kevin Hursh.

May 25, 2006

Wheat prices still disappointing
There’s been a lot of talk in the mainstream media about rising wheat prices, but the reality for farmers isn’t as rosy as the reports. In its Pool Return Outlook for May, the Canadian Wheat Board has raised the expected new crop price by $10 a tonne for most grades and classes of wheat. Durum, on the other hand, was a dollar a tonne lower with feed and malting barley unchanged from the previous month. New crop durum and barley price projections are ten to twenty cents a bushel lower than the prices expected in the current crop year. The $10 a tonne increase on wheat is 27 cents a bushel. While that’s certainly a move in the right direction, it still isn’t a great price. On No. 1 CWRS wheat with 13.5 per cent protein, the expected price after deducting average Saskatchewan freight and handling is only about $4.13 a bushel. On No. 1 wheat with 12.5 per cent protein, the PRO is $3.92 a bushel. Those prices are less than 20 cents a bushel above the prices expected in the current crop year. American wheat futures may be booming, but after you take into account the high value of the Canadian dollar and the fact that wheat prices outside of the U.S. are not nearly as high, the Canadian price projection isn’t that exciting. From time to time, the Fixed Price Contract on wheat has been quite attractive. That seems to be the best option for locking in a profitable price level on some production. I’m Kevin Hursh.

May 24, 2006

Farmer morale at low ebb
The survey results released yesterday by the Canadian Wheat Board provide many interesting insights into the opinions of farmers. Beyond the debate over dual marketing and the future of the CWB, there were survey questions on how farmers see the agriculture industry. 80 per cent of the 1300 producers surveyed said they were more pessimistic than last year. 70 per cent said they would lose money on their operation this year. Six per cent said due to their financial situation, they wouldn’t make it past this year. An amazing 52 per cent said they would be out of farming in the next couple of years if income stays the same. Only 35 per cent described themselves as being in no real danger, while a mere 5 per cent said they were doing just fine. The CWB says those are the most negative responses since it began asking the question in surveys back in 1998. The survey was conducted between March 15 and April 2. It would be interesting to know whether the improving wheat and canola prices of recent weeks have moderated some of the pessimism. I’m Kevin Hursh.

May 23, 2006

Wayne Easter's criticisms ring hollow
Wayne Easter was popular with many farmers and farm groups across the country when he served as Parliamentary Secretary to the Agriculture Minister. His report on how to empower farmers in the marketplace is still widely quoted. However, as the Liberal critic for agriculture, it’s hard to take Easter seriously. He fires out news releases complaining about the new Conservative government and how they’re not sending farmers a bunch of money this spring. The Conservatives are making retroactive changes to the CAIS program at a cost of $950 million and just yesterday a $50 million program was announced for farmers hit by flooding this year and last. Despite Easter’s assertions, it’s difficult to imagine that kind of extra commitment from the Liberals. Easter has also complained about the Enhanced Spring Credit Advance Program. The interest free cash advance is going from $50,000 to $100,000. He says encouraging more borrowing will only force more farmers to sink deeper in debt. Easter is out of sync with what farm group leaders have been saying. They’ve praised the cash advance changes. To be an effective agriculture critic, Wayne Easter needs to be less strident and more analytical. I’m Kevin Hursh.

May 22, 2006

30 degree days in May
The temperature topped 30 degrees in many areas of Saskatchewan yesterday. In some locations, the temperature was close to the record. In other locations, the hottest ever recorded for May 22 is 35 or even 36 degrees. However, there’s certainly no doubt that it’s been hot for this time of year. Normal temperatures are a high of about 20 and a low of about 5. Sometimes the May long weekend is darn cold. There have been years with temperatures only a few degrees above freezing and even a skiff of snow. Record low temperatures for this time of year are in the minus 6 to minus 8 range for most locations. Yesterday was one of many warm days this spring. Temperatures have approached 30 degrees on a number of occasions. Sometimes we go through the entire summer with only a handful of 30-degree days. With the warm weather, forage and pasture growth has been rapid and so has the growth of early seeded crops. Weeds that haven’t been controlled are also booming. The whole growing season seems to be couple of weeks ahead of normal. Warmer than normal temperatures mean the loss of more moisture than normal. Fortunately, most areas have not been short of moisture this spring. I’m Kevin Hursh.

May 18, 2006

Wheat at $4.49 per bushel
A lot of grain, oilseed and specialty crop prices are still low, but markets have come a long way since January when everything was absolutely ugly. Cash canola prices that were around $5 a bushel are now in the $6 range. The new crop November futures price for canola has topped the $300 a tonne mark. That’s a rise of $35 a tonne over the past four or five months. Fixed Price Contract levels for wheat sold through the Canadian Wheat Board have bounced around, but they’re currently quite attractive. The Pool Return Outlook for No. 1 CWRS wheat with 13.5 per cent protein is only $3.86 a bushel once average Saskatchewan freight and handling has been deducted. However, yesterday through the Fixed Price Contract, a new crop price of $4.49 a bushel could be locked in. A lot of producers will be considering that pricing option. The improvement in grain markets is even more remarkable considering the continued rise in the Canadian dollar. Many market analysts believe we may see stronger prices ahead for commodities such as barley and lentils. There’s a lot more optimism in the grain industry than there was just a few short months ago. I’m Kevin Hursh.

May 17, 2006

Better weather information
Here is something that should be considered in Saskatchewan. A Manitoba Weather Program was recently announced which gives producers Internet access to data from 26 weather stations. The stations have been set up around Manitoba to fill some of the gaps in current coverage. Each station measures temperature, relative humidity and rainfall. Most units will also be equipped with wind monitoring sensors and some will also record soil temperature and solar radiation. The stations are collecting and transmitting weather information from April through October with the information available on the Manitoba Agriculture, Food and Rural Initiatives (MAFRI) website (http://web2.gov.mb.ca/agriculture/weather/index.php). The information is actually more complete than what Environment Canada provides for its weather stations. In addition to the current conditions, there’s a summary of the weather from the previous day. There’s also a calculation of heat units and growing degree days. In Saskatchewan, there are a large number of weather recording stations being used by Crop Insurance. It would be great if information from those locations could be available to producers on a real time basis like what’s happening in neighboring Manitoba. I’m Kevin Hursh.

May 16, 2006

Cosmetic pesticide ban rejected
Jack Layton and the NDP are hoping to protect us all from pesticides. Layton introduced a motion in the House of Commons to ban the use of pesticides for cosmetic purposes around homes and on any private or public land used for recreation or entertainment.
“We’ve known for some time the serious, long-term, and harmful effects that exposure to these chemicals and carcinogens have on people,” says Layton in a news release.
The sad part is that many people suffer under these misconceptions. Despite the industry being heavily regulated and despite countless millions in testing to ensure that products are not harmful given the minute level of exposure, zealots like Jack Layton are not satisfied. They can always find some obscure, discredited study to support their point of view. And they conveniently ignore all the other chemicals people use in the course of normal living. If pesticides for home and garden use are banned, how long would it be before pesticides are no longer acceptable to grow crops? Fortunately, Members of Parliament defeated Jack Layton’s motion by a vote of 207 to 87. Why don’t you find some real issues to tackle, Mr. Layton? I’m Kevin Hursh.

May 15, 2006

Seeding progress by crop district
While 25 per cent of the provincial crop has been seeded, progress varies dramatically. Here is seeding progress by crop district according to the latest crop report from Saskatchewan Agriculture. The southwest is most advanced. The crop district around Leader is 77 per cent done. Shaunavon and east is 68. Maple Creek is 66 and the crop district that runs from Swift Current and north is pegged at 55 per cent seeded. The south central region is also quite well advanced. Around Chaplin – 51 per cent. South of Assiniboia – 36. Weyburn and Radville – about 45 per cent. The crop district that includes Moose Jaw and Regina has about 32 per cent of seeding done. The crop district around Estevan in the southeast corner is 18. The crop district west of Moosomin is 21. Around Kindersley is 19 per cent. Unity is 26, east of Lloydminster is 19. North and east of the Battlefords is 12, Saskatoon and south is 11. The crop district that includes Watrous is 13 per cent seeded. Other areas are single digits. Yorkton / Melville, Foam Lake / Canora and north of Humboldt are all pegged at 7 per cent. The northeast corner including Tisdale and Porcupine Plain is 5 per cent, while the crop district north of Prince Albert only has 3 per cent of the seeding done. With good weather this week, seeding should move ahead rapidly. I’m Kevin Hursh.

May 14, 2006

Lentil predictions
The Market Analysis Division of Agriculture and Agri-Food Canada has come out with a report on lentils that has some insightful analysis. Canada has long been the largest exporter of lentils in the world. With last year’s record production, Canada has become the largest lentil producer in the world. However, that’s not expected to last because Canadian production is expected to drop dramatically this year as producers cut acreage in response to poor returns. While about 70 per cent of world lentil production is the red type, Canadian production has been mainly the green types. That’s changing. The proportion of red lentils will increase dramatically this year. With the projected drop in acres and a return to more normal yields, green lentil production is expected to drop by more than 60 per cent. Red lentil acreage is projected to increase, but with normal yields, red lentils production is expected to decline, but only slightly. Here are Ag Canada’s price projections. No. 1 large green lentils are projected to be an average of 13 cents a pound, up a cent over the current crop year. Small green lentils are pegged at 12.5 cents a pound. The prediction for red lentils is 13.5 cents a pound. I’m Kevin Hursh.

May 11, 2006

Mountains of durum and canola
This week’s report from Statistics Canada on stocks of Canadian grain as of March 31 has some revealing numbers. The report confirms the oversupply of durum. Stocks of durum are at an all-time high of 5.2 million tonnes. That’s up 24 per cent from a year ago. The ten-year average for durum at this time of year is only 3.4 million tonnes. Canola stocks are also a new record – 5.1 million tonnes. This shatters the previous record for canola of 3.9 million tonnes set back in 2000. The good news in canola is that usage is much higher than normal due to demand for biodiesel. Lentil stocks are huge – 785,000 tonnes – a 66 per cent increase from a year ago. Canaryseed stocks remain burdensome at 271,000 tonnes. That’s considerably more than a year’s normal usage. There was some good news in the report. Although still very high, mustard stocks are down a bit from last year. At 6.5 million tonnes, barley stocks are also down a bit. And field pea stocks have dwindled. Despite a big crop, pea stocks are down to 1.5 million tonnes as compared to last year at 1.8 million. Exceptionally good export movement is credited with the decrease. I’m Kevin Hursh.

A hot, dry growing season?
The Environment Canada long range forecast for May, June and July is calling for below normal precipitation and above normal temperatures over most of the country. On precipitation, the extreme southeast corner of Saskatchewan is predicted to be about normal, but the rest of the province is below. On temperature, all but the West Coast of Canada is predicted to be above normal. The combination of hot and dry wouldn’t bode well for agriculture in the May to July time frame. However, in many central and northern regions of the Saskatchewan grainbelt, too much water is currently the main problem and the beginning of May certainly hasn’t been dry. Despite all of its computer modeling, Environment Canada admits that its seasonal forecasts aren’t much better than chance. We know this, but we still pay attention to the information. Of course, the same is true of the fellow from Tompkins who predicts the weather by examining pig spleens. We pay attention even though accuracy is improbable. And even if the forecasts miss by a mile as they often do, we don’t seem to lose our appetite for hearing these projections. I’m Kevin Hursh.

May 9, 2006

CAIS inventory valuation change will be retroactive
The changes announced to the CAIS program are going to be retroactive. Agriculture Minister Chuck Strahl is confirming the retroactive approach in interviews he’s giving. That’s also the information coming from the federal bureaucracy. This will be a big deal for some producers. The main change is inventory valuation. CAIS hasn’t been taking into account the declining value of inventory and that’s exactly what the grains and oilseeds industry has seen in recent years. This also happened in the beef industry during BSE. The CAIS administration is going to re-run the numbers for applications going back to the beginning of the program in fiscal 2003. This shouldn’t require any further information or forms from producers. CAIS has the inventory numbers from past application forms. It’s just a matter of re-calculating using inventory valuation that changes from the beginning of the year to the end. Some producers who received a CAIS payment in the past should get a top-up. Some producers who didn’t qualify for CAIS may now qualify with the different inventory valuation. There should be some sizable dollars involved. I’m Kevin Hursh.

Seeding progress varies widely
Statistically, seeding progress in Saskatchewan looks to be about par for this time of year, but the stats are a bit misleading. Saskatchewan Agriculture pegs overall seeding progress in the province at nine per cent, down just slightly from the five-year average of 11 per cent. However, there are a number of regions where seeding progress is very limited and will fall behind even more. The provincial number for progress is skewed by the southwest, which has 27 per cent of the seed in the ground. The next highest is the southeast at 8 per cent. In the rest of the province, progress is quite limited. The biggest concerns are in northeastern and east central regions. In the northeast, 54 per cent of the crop reporters rate topsoil moisture as surplus. Only one per cent of the crop has been seeded. In east central Saskatchewan, 56 per cent of reporters rate topsoil moisture as surplus. Sask Ag notes that sloughs are numerous, there are lots of washouts in fields and some roads are still flooded. Only two per cent of the crop has been planted. Wet weather is hitting many regions again this week. That will further hamper field access. This is only May 9 and there’s still ample time. However, continued wet weather could result in worrisome delays. I’m Kevin Hursh.

May 7, 2006

CAIS common sense
Common sense. It isn’t as common as it should be. But the federal government is showing some common sense by not collecting CAIS overpayments for the time being. On Friday, federal agriculture minister Chuck Strahl announced that the collection of CAIS overpayments is being deferred until changes to the program are sorted out. It’s quite conceivable that promised adjustments to inventory valuation and negative margin coverage will change how much some producers trigger from the program. No use dragging overpayments out of producers only to turn around and pay them money a short time later. As part of the deferral, interest will not be charged on overpayments until January of 2007. The policy change on will affect a relatively small number of producers. Overpayments have been running at about six per cent of the total. However, easing up on collection is both logical and compassionate. Those elements have often been lacking regarding the CAIS income stabilization program. Hopefully, this newly acquired sensitivity will extend to the development of CAIS changes for 2006 and to whatever program or programs replace CAIS for subsequent years. I’m Kevin Hursh.

May 4, 2006

CAIS payments and costs
The CAIS income stabilization program is the subject of a great deal of discussion and debate. I’ve often been asked about how much money CAIS has paid, how big the overpayments have been and how much it costs to administer the program. I put those questions to the communications folks at CAIS and got the following information back. For 2003, CAIS has paid a total of nearly $1.5 billion across the country. For 2004, the total is about $1.2 billion. In both years, Saskatchewan received more than any other province - $473 million and $375 million. How big were the overpayments where producers have to pay the money back? In the provinces where the federal government delivers CAIS, overpayments have been about 6.3 per cent of funds paid. And what about CAIS administration costs? The folks at CAIS say administration costs are approximately $90 million annually to deliver the program across Canada. What do all these numbers indicate? Well, they do dispel a couple of myths. Despite claims to the contrary, CAIS payments have been substantial. And while administration costs are high at $90 million a year, they are only 6 to 7 per cent of the amount being paid to producers. There are lots of problems with the CAIS program, but there are also many unsubstantiated stories being told. I’m Kevin Hursh.

May 3, 2006

Budget reaction
There has been a flurry of news releases with various organizations commenting on the agricultural provisions in the federal budget. The reviews are mixed. The Western Canadian Wheat Growers Association welcomes the support for farmers in the budget, while looking forward to the development of a farm support program that better meets the needs of grains and oilseed producers. Agricore United issued a news release also welcoming the federal announcement on agriculture. Agricore is particularly interested in the development of a biofuels strategy saying ethanol and biodiesel represent unique opportunities for expansion of Canadian agriculture. It’s interesting to see SARM and APAS come out with opposing views on the budget. SARM calls the $1.5 billion funding package some much-needed good news for Canadian farmers. SARM president David Marit says his organization is committed to working with the federal government to build a long-term strategy to re-establish profitability and sustainability in the ag sector. Meanwhile, APAS is expressing severe disappointment. APAS president Ken McBride says a much larger amount is required by farmers. APAS had been calling for payments of $75 an acre – a request that was not realistic. I’m Kevin Hursh.

May 2, 2006

More money for agriculture, but no cheques in the mail
The federal government is providing $1.5 billion more for agriculture in the current fiscal year. An extra $500 million each year is a Conservative election promise. For this one year, an extra billion is being allocated. Many when they heard this no doubt envisioned another program with cheques in the mail to farmers across the country. That does not seem to be what the government is planning. Instead there’s a list of initiatives. Although the feds want to replace the CAIS program, for this year they will provide funding to shift the inventory evaluation method to make the program more responsive. They also want to put in place deeper loss coverage, cost-shared with the provinces. This probably refers to the coverage of negative margins. Beyond CAIS, the government is promising a Cover Crop Protection Program to help farmers deal with the damage caused by flooding of fields. Longer-term measures mentioned in the budget include the enhancement of cash advance programming and funding in support of a biofuels strategy. There’s also a promise to put measures in place to help low-income farm families. Obviously, there’s a lot of work required on details, but the new government has presented some good ideas. However, producers who were hoping for a quick cheque in the mail are going to be disappointed. I’m Kevin Hursh.

May 1, 2006

Farmers at the trough
There was an interesting column in the Saturday edition of the Washington Post. It was entitled Farmers at the trough, disaster aid for farmers who have suffered no disaster. According to the Washington Post report, farm subsidies in the U.S. have risen from $8 billion in 1997 to a projected $22 billion this year. In 2004, U.S. net farm income hit a record $83 billion. Last year’s net farm income was $72 billion and this year’s is projected to be $56 billion, but that’s still above the ten-year average. At issue currently is a Senate proposal to add $4 billion in disaster payments to farmers. Proponents of the spending point to droughts in Iowa, floods in North Dakota and wildfires in Texas. Opponents say that’s what government subsidized crop insurance is supposed to cover. The newspaper column asks, “Should farming be America’s only risk-free enterprise?” It should be noted that American farm subsidies are aimed at the major crops. Livestock producers receive relatively little in government aid, but they benefit from the cheap and abundant supply of feed grains. As the American government continues to rack up huge fiscal deficits, you have to think the farm subsidy debate will intensify, particularly when most of the money is going to very large grain operations. I’m Kevin Hursh.

Pea crazy
The weekly crop report from Saskatchewan Agriculture and Food comes out late this afternoon and it will show significant seeding progress in some parts of the province and no activity whatsoever in many other areas. In the part of southwestern Saskatchewan where my farm is located, seeding is in full swing. I don’t know whether this trend holds in other areas, but I’m amazed at how many field peas have gone into the ground. Durum has always been the primary crop in this area, northwest of Swift Current. But with durum prices low and with limited delivery opportunities, producers have been switching to a variety of crops, with yellow peas the most popular choice. This spring, it isn’t unusual for larger producers to have a thousand or more acres of peas. It’s also my observation that more canola than ever is being seeded in the south. Meanwhile, producers in many central and northern grain belt areas haven’t turned a wheel. Water from the snow melt is still receding. While these regions are hoping for more drying weather, in the southwest, rain would be welcome. The soil surface is drying out and moisture will be needed to ensure even germination. The weekly SAF crop report is going to show a wide variation of conditions facing producers as we head into May. I’m Kevin Hursh.

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