Predictions for 2007 Here are some predictions for the major agricultural news stories in the New Year. Expect the whole barley plebiscite to be a messy affair. There will be disagreements over the voter’s list and over the question producers are asked. Since the federal government controls the process, I expect the vote will favour the removal of barley from the Canadian Wheat Board’s central desk. Whether this is actually implemented is another question. It may well depend upon whether and when a federal election is called. That will also affect the Canadian policy on biofuels. Even without an election, the policy will continue to be rolled out at a glacial pace with unanswered questions slowing the development of new facilities. If grain prices remain strong, watch for farm equipment and farm input sales to be the strongest in a long time. Land prices and land rents are likely to increase going into spring. Meanwhile, there will be more news about the lack of profitability in the livestock sector. It hasn’t received a lot of attention, but both the cow-calf sector and hog producers are facing tough times and it doesn’t appear to be a short-term problem. The safest prediction is that there will be agricultural issues in 2007 that no one anticipates. I’m Kevin Hursh.
December 28, 2006
Horsemeat is latest animal rights battleground Bill HR 503, The American Horse Slaughter Prevention Act, could have wide-ranging ramifications. The bill would ban the transport of horses to slaughtering facilities, thus effectively ending the use of horses for that purpose. The bill received strong support from U.S. politicians, but it died when the Senate adjourned before Christmas. The bill will likely be reintroduced in January. About 90,000 horses are slaughtered in the U.S. each year and up to 30,000 American horses move north to be slaughtered in Canada. A large percentage of the general public is repulsed by the idea of horsemeat, but it’s consumed in many European countries and in China. If horses can no longer be “retired” in this way, it’s likely to lead to increased abuse and neglect. For animal rights extremists, a victory on horse slaughter will be a stepping-stone to other issues. If you can successfully argue that horses are not raised to be slaughtered, you could make the same argument for dairy cattle. Horsemeat is just the latest animal rights battleground and at the moment it looks like a battle the extremists will win because unfortunately, American horse associations are divided on the issue. I’m Kevin Hursh.
December 27, 2006
Consumer stupidity A debate is raging in Ontario over the sale of unpasteurized milk. Dairy Farmers of Ontario say legalizing the sale of raw milk would be a mistake. They say it offers no health advantages and there’s a definite risk of contracting diseases that may be present. On the other side of the debate, one Ontario dairy farmer went on a hunger strike to press for the legalization of raw milk sales and several top chefs have joined the crusade. In an attempt to get around the law, shares are being sold in dairy cows so consumers can say they’re not actually buying raw milk. As for public opinion, a recent poll found Ontario consumers equally divided on the issue. It’s amazing that the fear over BSE crippled Canada’s beef industry for several years, but not a single person has ever contracted BSE from Canadian beef. With raw milk, long-standing science shows an unquestionable risk. There’s a long list of serious diseases that can be passed to people through milk and we’ve known for decades that the best prevention is pasteurization. In the U.S. where a number of states allow the sale of raw milk, diseases and deaths from its consumption are regularly reported. Not everything that’s raw and natural is safe. I’m Kevin Hursh.
December 22, 2006
Nitrogen prices spike If you haven’t checked the price of nitrogen fertilizer recently, be prepared for a shock. Over the past three or four weeks, nitrogen prices have increased dramatically. Granular urea, 46-0-0, was running at about $350 a tonne at most locations. Now, you’ll find it at $400 and even $425 a tonne. Fertilizer retailers say they’re on allocation, meaning they have to wait in line to see how much they can get. Whether warranted or not, there is some concern about an adequate supply of nitrogen for the spring. While nitrogen fertilizer prices are related to natural gas prices, fertilizer is a commodity on its own and is subject to supply and demand. There’s an anticipation of significant American soybean acres switching to corn in the spring. Soybeans fix their own nitrogen, while corn uses a lot of nitrogen. With corn prices attractive, it’s likely that U.S. farmers will target higher yields, which also means more fertilizer. Here in Western Canada it’s difficult to know what the crop mix will be, but there’s general agreement that canola acres will be high and canola is a big nitrogen user. A lot of observers believe nitrogen prices will be even higher in the spring. That has probably spurred a yearend buying spree. I’m Kevin Hursh.
December 21, 2006
Unanswered questions on biofuel To its credit, the federal government has announced some key components of a biofuels strategy, but there are still a bunch of unanswered questions. The feds have reaffirmed their intention to regulate a five per cent renewable fuel content in gasoline by 2010. They also intend to regulate a two percent renewable content in diesel fuel and heating oil by 2012. Brand new is a four-year, $200 million program designed to encourage farmer participation in the renewable fuel industry. Compared to the amount spent on farm safety nets, $200 million isn’t a lot of money, but it is being welcomed. One of the big questions is exactly how this Capital Formation Assistance Program is going to work. Another question – the feds have tied their biofuel development initiatives to passage of the already announced Clean Air Act. Will this act get enough support to pass the House of Commons? Still missing in the biofuel initiative is a government commitment to match U.S. subsidies. In biodiesel, American support is about a dollar a gallon. Without comparable support in Canada, we’ll be importing our biodiesel from the U.S. Inter-provincial trade barriers also need to be addressed. We need a national approach, not a patchwork of provincial initiatives. Canada is making progress on biofuels, but much more needs to be done. I’m Kevin Hursh.
December 20, 2006
Small farms versus large farms More than half of Canada’s farms operate at a scale that is too small to be economically viable, with another 20 per cent at risk over the long term. This comes from analysis by the Institute of Agri-Food Policy Innovation (IAFPI) based in Ontario. The institute says farms with less than $100,000 in gross annual sales are experiencing losses or extremely low net operating incomes. This category includes 52 per cent of the farms in Canada and 56 per cent of the farms in Saskatchewan. Off-farm income sustains small farms, providing the majority of family income. The analysis also claims that farms with annual gross revenue of less than $250,000, which is 73 per cent of Canadian farms and 84 per cent of Saskatchewan farms, may not be sustainable in the long run unless they operate in high margin niches. In Saskatchewan, the statistics show farms with over $250,000 in sales made up only 16 per cent of the total number, but they generated 55 per cent of agricultural sales and 74 per cent of net operating profits. A key conclusion from the analysis is that one approach to farm policy cannot address the opportunities and challenges facing an industry when it consists of very different types of farming enterprises. One size in farm policy won’t fit all. I’m Kevin Hursh.
December 19, 2006
Can Chuck Strahl and the CWB agree on this? The relationship is obviously strained between the farmer-directors of the Canadian Wheat Board and Agriculture Minister Chuck Strahl. However, one would hope that a proposal from the CWB to take over adjustment, interim and final payments would be welcomed by the federal government. At present, the CWB has to wait for government approval before increasing payments. That means delays. For instance, it took so long to get an interim payment approved that the interim and final payments are being combined for the ’05-’06 crop year. The CWB has built up a contingency fund to manage the risk from these payments and from its Producer Payment Options. The contingency fund is currently capped at $60 million, but the CWB has asked that the limit be raised to $100 million. It has also asked for appropriate compensation for taking over some risk from the government, but it’s hard to know whether that will materialize. If the change is approved, the federal government will only be responsible for the original initial payment at the beginning of each crop year. Increases in initial payments and other payments should be timelier. Overall it would seem to be a good deal for farmers and for the federal government. I’m Kevin Hursh.
December 18, 2006
Quality and protein premiums narrow Increases to the initial payments of wheat, durum and barley have been announced. The increases are effective December 21. For grain already delivered, adjustment payments will be mailed on January 12 or received by direct deposit on January 9. The increases are the most substantial on lower grades and protein contents. On CWRS wheat, the increase is only 10 cents a bushel on the No. 1 grade with 15 per cent protein. At 14 per cent protein the increase is 29 cents; while at 13 per cent protein, the adjustment is 41 cents. On No. 2 CWRS wheat with 13 per cent protein, the initial payment is up by 55 cents a bushel. The biggest increase is on a No. 3 with no protein premium where the initial payment is up by 73 cents. The initial payment difference between a No. 3 with no protein and a No. 1 with 13.5 per cent protein is only 51 cents a bushel. The same trend exists on durum. No. 1 durum with 13 per cent protein is seeing an initial payment increase of 40 cents, while No. 3 durum with 13 per cent protein is increasing by 71 cents. The difference in initial payments between the two has narrowed to just 36 cent a bushel. On feed barley, the initial payment has increased by $1.32 a bushel, while the top grade of designated barley is up by 59 cents. It’s a year when the value of crops for livestock feed is rivaling the value of crops for human consumption. I’m Kevin Hursh.
December 15, 2006
Agricore United makes investments Agricore United isn’t acting like a company concerned about the hostile takeover bid by Saskatchewan Wheat Pool. Agricore is investing $4 million U.S. in a dairy mineral manufacturing plant in Texas. The company is also investing $5.2 million in a new specialty oat processing plant at its existing seed cleaning plant at Camrose, Alberta. The new oat plant will replace a smaller plant in Edmonton. Agricore United is also making moves in the farm input business, purchasing two independent retailers in West Central Saskatchewan – Green Acres based at Major and Kerrobert Agro Services of Kerrobert. Some analysts say a merger of Agricore United and Saskatchewan Wheat Pool would be a good thing. They point at the efficiencies that could be gained and how the new company would be better able to compete with the international giants in the grain industry. While there may be some truth in that, producers would be left with fewer options for grain deliveries and sales and fewer options for their fertilizer, chemical and seed purchases. As the Agricore United purchase of Green Acres and Kerrobert Agro Services demonstrates, there is already a diminishing number of players in the industry. I’m Kevin Hursh.
December 14, 2006
Certification of packing plants for humane animal treatment The Farm Animal Council of Saskatchewan held its annual convention yesterday in Saskatoon. FACS is a member-based organization that represents the livestock industry in advancing responsible animal care and handling practices. One of the speakers yesterday was Erika Voogd of Chicago. She’s an independent consultant who does audits and trains auditors for McDonalds Restaurants. I didn’t know this but McDonalds and many other quick service restaurants conduct audits of how animals are handled at packing plants. Standards have been established for plants to become “Certified Humane”. In beef plants, there must be a low percentage use of electric prods to move animals. The percentage of animals slipping and falling is recorded and improvements often need to be made to floors so they aren’t so slippery. The vocalization of the animals, indicating their level of distress is noted. The plant is also audited for its stun efficiency to make sure animals don’t suffer. Erika Voogd says in 2004 several Canadian beef plants did not pass the audit, but in subsequent years, all improved dramatically. Voogd had a long list of plant improvements that she’s seen such truck ramp guides to avoid jamming of animals and anti-slip bars on floors. Quick service restaurants often get a bad wrap, but their audit system of packing plants has improved animal welfare. I’m Kevin Hursh.
December 13, 2006
Hold yellow mustard and sell yellow peas Yellow peas prices are at $5.00 a bushel in some areas of Saskatchewan. However, producers shouldn’t expect them to go much higher. That’s the view of market analyst Greg Kostal of Kostal Ag Consulting. With freight costs and the value of the Canadian dollar, Kostal says buyers are paying record high prices for peas and so there would seem to be little room for further increases. For new crop yellow peas, Greg Kostal is penciling in a price of $4.50 a bushel. He says green peas could have a price premium of a dollar a bushel over yellow peas next year. On lentils, Kostal believes reds will take one more move higher to around the 15 cent per pound range by spring. He believes large green lentils will gradually claw their way to the 15 to 17 cent range for a Number 2. After two years of acreage contractions, canaryseed prices have finally improved. Kostal is expecting new crop canaryseed in the 18 to 20 cents a pound range. He doubts it’ll go above 20 cents, unless there’s a yield shortfall. Yellow mustard prices have also been rising and Kostal says it’s likely headed towards 25 cents a pound. If Greg Kostal is correct, there should be money to be made by storing lentils, mustard and maybe canaryseed for a while longer, but producers might want to sell their yellow peas. I’m Kevin Hursh.
December 12, 2006
Grain price predictions It’s great to hear a market analyst boil his predictions down to actual price forecasts. Here are the predictions from Greg Kostal of Kostal Ag Consulting out of Winnipeg. He spoke last Friday at a meeting in Saskatoon. On feed barley, Kostal believes there could be another $20 a tonne upside towards spring. For next crop year, he’s penciling in $2.75 a bushel for feed barley and $3.50 for malt. On wheat, Kostal says supply can be replenished quickly. He’s expecting $4.50 to $4.75 a bushel for new crop wheat. On oats, Kostal believes the old crop should stay above $2.50 and may hit $3.00. New crop should stay about $2.00 a bushel. His prediction on canola is the market may correct downwards by up to $20 a tonne, but it should have a leg higher than it is now. He suggests budgeting new crop canola at $8 a bushel. On flax, Kostal believes the price will likely increase to $7.00 a bushel by spring to drive acres. He says in 12 to 18 months, the price could be $8 to $8.50. In the days ahead, we’ll look at what Greg Kostal is predicting for peas, lentils, mustard and canaryseed. I’m Kevin Hursh.
December 11, 2006
60 per cent of votes cast for single desk supporters There were two upsets in the Canadian Wheat Board election. Two incumbents were defeated – one a single desk supporter and the other a market choice supporter. In District 1 in the Peace River region of Alberta and B.C., Art Macklin, a staunch single desk supporter was defeated. Taking his place will be Henry Vos from Fairview, Alberta. According to the information Vos posted on the election website, he’s in favour of marketing choice, but he doesn’t sound very strident in his views. The other surprise is District 7 in northeast Saskatchewan where single desk advocate Kyle Korneychuk of Pelly toppled incumbent Dwayne Anderson of Rose Valley, a market choice supporter. So the CWB’s Board of Directors has gained one market choice supporter and lost another. The other three incumbents, Larry Hill, Allen Oberg and Bill Nicholson, all single desk supporters were easily reelected. Across the five districts, 51.5 per cent of eligible voters cast a ballot. Just over 60 per cent of the votes were cast for single desk supporters. Among the ten farmer-elected directors, there are again two that favour an end to the CWB monopoly, while eight support the single desk. I’m Kevin Hursh.
December 8, 2006
CWB election results on Sunday Almost forgotten in the whole Canadian Wheat Board debate has been the directors’ election that’s underway in half of the CWB districts. The voter’s list was cut down just as the election was getting underway. While that was unfortunate timing, it’s hard to argue against the change. People who haven’t been doing business with the CWB didn’t get a vote unless they went through a simple process to be reinstated. With the reduced voter’s list, participation in the election is about 50 per cent, which is a strong turnout. Of the five incumbents running, four are supporters of the single desk and one is a market choice advocate. If another market choice advocate is elected, it’s going to change the dynamics of the governing body. It would mean a total of three market choice supporters among the ten elected directors. When combined with the five government appointed directors, the market choice forces could carry the day. If this election doesn’t result in any more market choice advocates or if the current market choice incumbent is defeated, a majority of the 15 directors will still be single desk supporters. Results from the mail-in preferential ballot are supposed to be announced this Sunday. I’m Kevin Hursh.
December 7, 2006
Biofuel ramifications While grain producers applaud the growing use of biofuels, livestock producers have a very different view. In the United States, ethanol production is already using 20 per cent of the corn crop and new ethanol plants are coming of stream all the time. Here in Western Canada, ethanol production is just starting to ramp up, but the livestock industry is worried about the ramifications. Speaking yesterday in Calgary, the chairman of Alberta Pork noted that the growing number of proposed ethanol plants in North America stands to have huge implications on the cost and availability of feed grains. The same concerns exist in the cattle feeding industry. While the increase in grain prices in recent months has been caused largely by the demand for biofuels, some observers believe it’s just a temporary blip. They argue that the world has a great deal of production capacity and the supply will soon increase to match the demand. Other observers believe biofuels have added a new and growing demand component for grain worldwide and that the future of grain prices will not resemble the past. Since observers can’t agree on the grain price outlook, it’s difficult to predict how the livestock industry will be affected. For what it’s worth, I subscribe to the view that biofuels are moving agriculture worldwide into a new paradigm. I’m Kevin Hursh.
December 6, 2006
Renewable fuels policy could see further delays What has happened to the long promised renewable fuels policy from the federal government? The policy was widely expected in October or November. Recently, the expectation has been an announcement at the upcoming renewable fuels conference in Banff. Speaking last night at an irrigation conference in Moose Jaw, Judie Dyck, executive director of the Saskatchewan Canola Growers Association and co-chair of the Biodiesel Development Task Force expressed doubt that the policy would be announced before Christmas. She noted that leaving the announcement until the New Year could mean even more delays. February is budget month and there’s no telling how long the minority government will last before another election is called. For the biofuel industry to flourish it’s critical to have a nation-wide renewable fuels mandate. It’s also important that the government announce incentives to encourage producer ownership of biofuel production. Unlike the Wheat Board issue where producers are divided, there’s widespread agreement within agricultural circles on how policies should be constructed. A lot of biofuel development is on hold waiting for the rules to become clear. I’m Kevin Hursh.
December 5, 2006
U.S. remains way behind in cattle identification The protectionist U.S. farm group known as R-CALF issued a news release last Friday expressing approval that the United States Department of Agriculture has backed away from the original plan of making electronic cattle identification a mandatory program. According to R-CALF, several of its leaders have worked for many months with various USDA officials to prevent implementation of a mandatory system. R- CALF says this is a hot topic among cattle producers and it will be great to have cattle ID voluntary so each producer can decide whether to participate. Some observers says that with all the bickering south of the border over mandatory versus voluntary, state control versus federal control and whether the system should be government run or private, it will be years and maybe even a decade before the Americans have a system in place. While it’s never universally popular to have a mandatory program, voluntary cattle ID is like voluntary license plates on cars. While the Canadian system isn’t perfect, it should give us a big advantage in international markets in the years to come, particularly if the Americans can’t get their act together. I’m Kevin Hursh.
December 3, 2006
Strahl should expect backlash Chuck Strahl has gone too far this time. Threatening to fire Canadian Wheat Board President and CEO Adrian Measner is not going to sit well with a majority of producers. Strahl’s gag order on the CWB has been largely ignored anyway, so that wasn’t such a big deal. Strahl’s appointment of three directors to the Board of the CWB was wrong, considering the appointments were only for the purpose of loading the board with market choice supporters. However, the appointed directors are not high profile among producers. Firing Measner, a 30-year highly regarded veteran of the board is vindictive and mean-spirited. What’s the point of farmer-elected directors? What’s the point of the promised vote on barley? Strahl is obviously determined the tear down the board no matter what producers say. The Ag Minister is obviously taking his marching directions from MPs like David Anderson, the Alberta government and groups like the Wheat Growers and Barley Growers. While farm opinion is split on whether the CWB should have single desk marketing power, there’s a strong majority who believe the decision should rest with producers and not with the government. Strahl and the Conservatives should expect some backlash and the next federal election might not be far away. I’m Kevin Hursh.
Archives
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).
