Hursh Consulting & Communications: Kevin Hursh on Agriculture

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Hursh on Agriculture

September 28, 2006

Big increases in low quality wheat and durum prices
It would have paid to hold low quality wheat and durum from 2005 for sale in the current crop year. The Canadian Wheat Board has just come out with its September Pool Return Outlooks for both the current crop year and last crop year. Over the past month, the PROs for the current crop year have increased dramatically on the lower grades. No. 4 CWRS wheat is up $16 a tonne since August. Feed wheat is up $20 a tonne. No. 4 durum is up $13 a tonne, with No. 5 up $20 a tonne, just like feed wheat. The Saskatchewan PRO for top grade No. 1 CWRS wheat with 14.5 per cent protein is very similar for both crop years – about $4.30 a bushel. Every other wheat price is expected to be higher in the current crop year and the difference is the greatest on the lower grades. For No. 3 CWRS wheat: last crop year $2.66 a bushel; this crop year $3.44. No. 4 wheat last year: a mere $1.98 a bushel versus a projected price of $2.76 this year. No. 3 durum in the last crop year is expected to total $2.85 a bushel as compared to $3.49 this crop year. On No. 4 durum, the difference is $2.44 versus $3.13. Of course storing crop for a year isn’t easy. There are cash flow and bin space issues, as well as the potential for storage problems. But prices are certainly looking a lot better on the lower grades this year. I’m Kevin Hursh.

September 27, 2006

Straight talk about ag subsidies
On Tuesday, Peter Clark, a noted international trade expect from Canada, made a presentation at a WTO Public Forum in Geneva. Clark makes some great points about why world trade agreements have not created a level playing field for farmers. We’ve heard a lot about Europe and the U.S. classifying their support to farmers as “green”, because it supposedly isn’t trade distorting. Peter Clark makes the point that all types of financial support to agriculture distorts production which in turn distorts trade and world prices. The more cash available to the farmer, whatever the source, the more inclined the farmer will be to produce and the better able he will be to finance his operation. Clark says failure to adequately address trade distorting support was a major failure of the Uruguay Round of the WTO and the same mistake has been made in the now failed Doha Round. Clark is skeptical that the U.S. and EU will agree to meaningful, effective and enforceable reductions in their very generous domestic support programs. Since the last trade deal, he notes agricultural production has increased and prices have plummeted. The U.S. and EU have operated very carefully structured agricultural policies based on heavy subsidies to grains and oilseeds, which in turn subsidize downstream production. It’s nice to hear someone making sense of how world trade rules have failed. I’m Kevin Hursh.

September 26, 2006

Alberta softens age verification threat
Alberta is postponing its target date for mandatory age verification of cattle. April 1, 2007 had been set as the date by which all cattle sold in Alberta had to be age verified. In Saskatchewan, and other provinces, producer groups and governments have opted for a voluntary, market-driven approach to age verification. However, with many cattle from other parts of the country sold to Alberta feedlots, the mandatory age verification date in that province had everyone’s attention. In announcing the suspension of the target date, Alberta agriculture minister Doug Horner noted that significant progress has been made in submitting birth dates. He also said premiums are being paid for age-verified cattle. Alberta has not set a new target date for mandatory age verification, saying industry consultations on the regulatory changes required to establish age verification are being planned for next spring. One wonders whether Alberta is actually serious about mandatory age verification. Perhaps it’s a threat to nudge the industry and get producers using the system. If that’s the case, the plan seems to have had some success. To date, more than 2.5 million birth dates have been submitted to the Canadian Cattle Identification Agency’s website at www.canadaid.ca. I’m Kevin Hursh.

September 25, 2006

ALUS comes to Saskatchewan
ALUS. It stands for Alternative Land Use Services. A pilot project is underway in Manitoba in the RM of Blanchard. ALUS is the brainchild of Ian Wishart, a farmer from Portage la Prairie who is also vice-president of Keystone Agricultural Producers. I had an opportunity to talk with Wishart on his farm recently. Basically, under ALUS, producers are paid incentives to adopt environmentally beneficial land use practices. With a little bit of assistance, producers might leave a pothole rather than draining it. Or they might grass a waterway. Or they might not take their first cut of forage until after the nesting time for waterfowl. Ian Wishart argues that these practices are for the public good and should be supported by society as a whole. Conservation groups, in this case Delta Waterfowl from the U.S. are also willing to contribute. An ALUS task force has now been established in Saskatchewan. The task force is seeking expressions of interest from rural municipalities across the province for hosting a pilot project similar to what Manitoba is doing. It’s hoped that a pilot project will be established by next spring. Not all the bureaucrats and not all the conservation groups like the ALUS approach, but Ian Wishart is right. With a little bit of financial support, a lot of farmers will make adjustments that are good for the environment. I’m Kevin Hursh.

September 24, 2006

More winter wheat
There’s growing interest in winter wheat. This was a pretty good year for winter wheat yields and there’s increasing demand from ethanol plants. Harvest of spring-seeded crops has been early, allowing winter wheat to go in the ground. Starting October 1, there will be a refundable check-off of 50 cents per tonne on winter wheat, fall rye and winter triticale in Saskatchewan. In the near future, Manitoba is also expected to set up a check-off. Producer investment in research should bode well for the development of new winter wheat varieties. Acreage estimates from Statistics Canada show Manitoba is the prairie province with the most winter wheat. Manitoba harvested 320,000 acres this year versus 275,000 acres in Saskatchewan. Only 120,000 acres were harvested in Alberta. While there’s some talk about Saskatchewan’s winter wheat acreage reaching a new record, a look at past statistics shows there’s a long way to go. Back in both 1985 and 1986, Saskatchewan’s winter wheat acreage was an amazing 800,000 acres. Various factors caused a crash following that peak. This time around, the growth in winter wheat acreage will hopefully be more sustainable. I’m Kevin Hursh.

September 21, 2006

Chuck Strahl on safety nets
2007 isn’t very far away, but new farm safety net programming has a long way to go. Yesterday, I was granted a 15-minute interview with federal agriculture minister Chuck Strahl. I didn’t bother badgering him about whether CAIS is being changed or replaced. To me, it’s quite clear that the new margin-based program will be very similar to the old CAIS with improved inventory valuation and negative margin coverage. I did ask Chuck Strahl about the new disaster assistance program that’s supposed to be added to safety net programming. Unfortunately, he would provide few details. I got the uneasy feeling that the workings of this disaster program are still up in the air. Hopefully, Strahl isn’t under the naïve impression that everyone will know a disaster when they see it. That’s the problem we have now. When does a flood or a drought become a disaster? When does a trade disruption become a disaster? How low do prices have to fall to constitute a disaster? Hopefully, there will be some answers following the meeting of federal and provincial agriculture ministers in November. Improved production insurance is also being promised. I’m Kevin Hursh.

September 20, 2006

Sask farmers disadvantaged again
It isn’t only Alberta where support for agriculture is greater than here in Saskatchewan. The Ontario government has just announced nearly $100 million to cost share CAIS transitional funding with the federal government. Back in May, the feds announced retroactive changes to CAIS with $900 million allocated to adjust the inventory valuation for 2003, 2004 and 2005. The first payments from this CAIS Inventory Transition Initiative (CITI) are expected in the next couple of weeks. However, it will be well into 2007 before all the payments are made. The $900 million from the feds won’t be enough to fully fund the recalculation so payments will have to be prorated. With Ontario adding $100 million, qualifying producers in that province will get a greater benefit from the CAIS recalculation. Meanwhile in Alberta, $261 million has been allocated to boost the CAIS program. Based on the 2004 claim year, reference margins will be increased by 25 per cent of the fuel and fertilizer costs and there will be a general reference margin increase of 15 per cent. It’s estimated that about 60 per cent of Alberta’s 2004 CAIS program participants will see a payout under this provincial program. Do you ever feel like you’re farming in the wrong province? I’m Kevin Hursh.

September 19, 2006

CWB task force to act quickly
It appears to be full speed ahead in getting rid of the Canadian Wheat Board’s export monopoly. Chuck Strahl, the minister responsible for agriculture and the Canadian Wheat Board has announced a task force for implementing marketing choice on wheat and barley. In my opinion, the government does not have a mandate to change the CWB. Any decision like that should come from farmers themselves. However, if the change is going to be made, there are a whole lot of issues that need to be addressed. That’s the role of this new task force. A federal bureaucrat is the task force chair. Many of the other members are well known for their opposition to the CWB monopoly. One position on the eight-member task force has been reserved for a representative to be named by the Canadian Wheat Board. It’s unclear whether the CWB will participate. The task force is to meet affected industry and producer groups as deemed necessary. Then it’s to produce a report with recommendations on technical and transitional issues. All this is to happen in approximately four weeks from the first meeting. By task force and government standards, that’s lightning fast. I’m Kevin Hursh.

September 18, 2006

Sask crop report best in the country
Give credit where credit is due. Those of us in the media business don’t always do that, but credit is certainly due to the weekly crop report put out by Saskatchewan Agriculture and Food. Our crop report is head and shoulders above what comes out of neighbouring provinces. In Manitoba, there is a weekly crop report, but it lacks the detail and the standardization of Saskatchewan’s report. In Alberta, the crop reporting effort is disjointed, with a long time lag. Alberta reports are done every two weeks with half of them coming from Alberta Agriculture and the other half coming from Alberta Financial Services Corporation. An Alberta crop report is supposed to come out today, but based on past formats the information will be more than a week old. They will entirely miss the big rainfall event of the past week. Compare that to Saskatchewan where there’s an up to date rainfall total for almost every rural municipality. Saskatchewan people, even those who don’t farm, are interested in the weather and crop conditions. The weekly crop report and crop reporter Terry Bedard are widely quoted. We shouldn’t take this for granted. This doesn’t happen in Manitoba and Alberta. I’m Kevin Hursh.

September 17, 2006

The big wet
A major amount of precipitation has fallen over a wide area of Western Canada. The big weather system has ended an amazing stretch of hot, dry weather. There is still crop remaining to be harvested in some areas and the wet weather won’t be good for the quality of cereal crops that are still out. Fortunately, a lot of the crop still in the field is flax, canola and canaryseed that shouldn’t take much harm. With the rain, the winter wheat outlook has improved. Germination should be good on the fall crops that have been seeded. More producers will look at applying fertilizer this fall if the weather permits. Anhydrous ammonia application should work a lot better now. With soil moisture improved on forage and pasture land, next year’s production should get off to much better start. The rain and snow from the past week doesn’t guarantee a crop in 2007, but it does limit the odds of a major drought. The big droughts of 1988 and 2002 started with a dry fall the previous year. The dry spell has for now been broken. I’m Kevin Hursh.

September 14, 2006

Gun registry debate rekindled
The shooting rampage in Montreal on Wednesday is going to heat up the debate about gun registration. Both sides in the debate will use the incident to support their point of view. For supporters of gun registration, the tragedy reinforces their belief that gun ownership needs to be more stringently controlled. However, opponents of gun registration can correctly point out that the registration laws have done nothing to stop this sort of incident. The reports I’ve read suggest the gun in question was a restricted weapon, subject to very stringent controls. Restricted weapons and handguns have long been controlled under Canadian law and this is a good thing. However, if stringent controls don’t always work, the loosey-goosey long gun registry certainly isn’t going to do much. Only a fraction of long guns are registered and the registry itself is a mess. There’s limited enforcement. And so what if a gun is registered? How does that stop it from being used improperly? A billion dollars has been spent inconveniencing farmers who keep a rifle for coyote and gopher control and duck hunters who spend money in rural Canada. And the nation has little to show for this billion dollars. Registered firearms can still be used to commit crimes. Unregistered firearms will always be available to the criminal element. I’m Kevin Hursh.

September 13, 2006

2006 should see improved Sask grain income
Generalizations are always dangerous, but overall this should be a year of improved income for Saskatchewan grain producers. In some parts of the south, it was too dry and producers will not have a good year. In parts of the northeast, producers had so many unseeded and flooded acres, they will not have a good year. There are also producers who got hailed out without adequate hail insurance. Overall, the size of the Saskatchewan crop will slightly below average, but quality will be well above average. And there will be some lucky areas with above average yields and above average quality. I received an e-mail from a producer in southeastern Saskatchewan who just finished combining. His malting barley ran 70 bushels an acre, wheat averaged in the high 40s, canola averaged over 30, flax also averaged 30 and durum yielded 50 bushels an acre. He has a big pile of wheat on the ground because he doesn’t have enough storage space. Everything is good quality. He’s going to have a strong year financially. While most producers are not this fortunate, the price outlook is significantly stronger than it was at this time last year. And on a lot of commodities, market analysts are predicting better prices in the months ahead. That’s going to be a big benefit to the bottom line. The 2005 crop was the biggest ever produced in Saskatchewan, but with improved quality and stronger prices, 2006 is looking like a better year financially for most producers. I’m Kevin Hursh.

September 12, 2006

CAIS recalculation
It’s been many months since federal agriculture minister Chuck Strahl announced $900 million in assistance to be paid through a change in inventory valuation of the CAIS program. Not a dime has flowed to farmers at this point, but federal officials say the first cheques should be out before the end of September. This will be money owing from the recalculation of CAIS for the 2003 program year. Since July, the feds have been promising the first money in September. It sounds like they’ll make that promise, but just barely. The majority of the 2003 payments are likely to come sometime in October. Payments for the 2004 recalculation are scheduled to start flowing in November, while payments for fiscal 2005 are supposed to start in January. Most producers have no idea whether they’ll receive any money, let alone how much. Even if you or your accountant has made the recalculations using opening as well as closing inventories, there’s no guarantee. The total amount of assistance is capped at $900 million, so payments may need to be prorated to fit the funding envelop. Thus the first payments will be only 50 per cent of the calculated amounts. Producers are left to cross their fingers and see what happens. I’m Kevin Hursh.

September 11, 2006

CWB election farce
It’s an election that may not matter much. Nominations are open for Canadian Wheat Board director elections in the odd numbered districts. Most of the past elections have been hotly contested and the main issue has been the future of the CWB’s monopoly on wheat and barley exports. What’s the election going to be about this time? The Conservative government seems determined to remove the central desk. Whether it can do this without going through the House of Commons is open for debate, but certainly the Conservatives act like they are going to find a way to make the change. Most of the current farmer-elected directors support the central desk. That apparently doesn’t matter. The federal government is committed to marketing choice and farmers are going to get choice whether or not a majority wants it. The government action makes a mockery of self-determination for producers. Usually I’d be urging interesting producers to let their name stand for the CWB election whether they support or oppose the central desk. That’s what democracy is all about. This time around, it’s hard to get excited about the whole process. If the government is calling the shots, what’s the point of farmer elections? I’m Kevin Hursh.

September 10, 2006

Dry soil and winter wheat
September 15 is the deadline for seeding winter wheat and still getting Saskatchewan Crop Insurance Coverage for winterkill. Mark Akins, a winter wheat agrologist with Ducks Unlimited has been getting lots of calls from producers who were planning to seed winter wheat, but who are now worried about dry soil conditions. The advice for winter wheat is seed shallow and hope for a shower to get the crop germinated. There’s no use putting the crop in too deep in search of moisture. The people with winter wheat experience say if the crop is half an inch deep, odds are there will be a few tenths of rain to get it germinated. If you seed deep, it will actually take more rain to get full germination. Mark Akins believes waiting for a rain is also a mistake. For one thing it’s getting late, but even more importantly, if there’s just a small rain, by the time you get the seed in the ground, it could be dry again. Some producers are voicing concern that the seed will get enough moisture to germinate, but then the seedling will run out of moisture and die. Akins says he’s never seen that happen. The plant seems to go dormant if it’s running out of moisture. I’m Kevin Hursh.

September 7, 2006

Yorkton scores two canola crushing plants
Getting a new canola crushing plant in Western Canada is a big deal. Getting two plants officially announced in the same day for the same location is nothing short of amazing. Yesterday, JRI International announced it had chosen Yorkton for its new canola crushing plant. Shortly thereafter, Louis Dreyfus confirmed industry speculation and said it was also going to build a plant in Yorkton. A total of $190 million worth of investment. New crush capacity of about 1.69 million tonnes a year. To put it in perspective, that’s well over a hundred B-trains of canola being trucked to Yorkton every day. Meanwhile, the big Cargill canola crushing plant at Clavet, just east of Saskatoon is undergoing a major expansion. This is unprecedented growth in such a short period of time. It speaks volumes about the increasing demand for canola oil. While vegetable oil use continues to increase, the big new demand is coming from biodiesel. If anyone has doubts regarding the upcoming impact of biofuels on agriculture, look no further than this major increase in canola crushing. I’m Kevin Hursh.

September 6, 2006

Horse meat
It’s not often that I find myself agreeing with R-CALF, the protectionist group of U.S. cattle producers. However, an interesting situation has developed in the U.S. and many people will applaud the position R-CALF is taking. The U.S. House of Representatives is soon scheduled to vote on a bill called “The American Horse Slaughter Protection Act.” If passed, the bill would go to the U.S. Senate for consideration. If passed there, it would mean an immediate and permanent ban on anything to do with horses being slaughtered for human consumption or other purposes. R-CALF points out that there are three horse slaughtering plants in the United States, which ship the resulting products overseas where diners consider the meat a cultural delicacy. To their credit, R-CALF opposes the legislation that would ban horse slaughter. They say producers need options to economically market unwanted horses. Canada also has a horse slaughter industry with meat being marketed in Europe. The industry keeps a low profile for fear of public backlash. Even though many people have a special affinity for horses, there’s no reason why horses shouldn’t be utilized in the same ways as cattle, sheep and hogs. I’m Kevin Hursh.

September 5, 2006

Every year is different
What a difference a year makes. Last year at this time, farmers were struggling with a late harvest. The crop was large, but quality was taking a beating. Hurricanes in the southern U.S. had cut refinery capacity and energy prices were escalating. Most crop prices were low and on the way down. There was too much rain in many areas creating major harvest difficulties. This year, harvest progress is way ahead of normal. The crop overall in Saskatchewan is about average in size, but quality should be well above average due to the good harvest weather. Hurricanes haven’t disrupted refineries as feared and energy prices are actually on the way down. Nitrogen fertilizer prices have declined from last fall’s record highs when urea was worth as much as $500 a tonne. Crop prices aren’t great, but most analysts are saying we should see some improvements in the months ahead. The biggest downside this fall is soil moisture. Once harvest is complete, producers will be wishing for lots of rain. I’m Kevin Hursh.

September 4, 2006

Combining capacity
There’s been a lot of good harvest weather and harvest is amazingly well advanced for early September. That is going to bode well for crop quality and it will also mean much lower expenditures for grain drying. If this kind of fall could be predicted, a producer could save a lot of money on harvesting equipment. When you can stretch harvesting out over more weeks without losing quality, you can get by with less combining capacity. Trouble is, there are also harvests that are late with lots of rain and cool temperatures. A lack of combining capacity can cost you dearly from lost quality. It also increases the likelihood that crop will be left out over winter. Some producers try to adjust from one year to another by leasing an extra combine when it’s needed or hiring custom combiners for some land or some crops. Unfortunately, it can be difficult to gear up harvesting capacity in a year when many others are scrambling to do the same. So far this fall, harvest has been a relative breeze, but you never know when the weather will change and you never know what next year will bring. I’m Kevin Hursh.

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