Hursh Consulting & Communications: Kevin Hursh on Agriculture

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Hursh on Agriculture

February 28, 2007

Test pea germination after cleaning
The supply of seed for yellow peas has tightened due to rising prices for the crop and germination issues. Most of the 2006 field pea crop was harvested during very hot, dry weather. With low moisture content in the seed, it’s prone to seed coat damage, which drops the germination. Some seed growers, as well as producers who save and clean their own seed, are getting nasty surprises when they have germination tests conducted. Bruce Carriere, of Discovery Seed Labs in Saskatoon, says every time peas are moved there is damage and a drop in germination, even though the damage isn’t always visible. Carriere notes it’s important to test peas after they’ve been cleaned, because the cleaning process can inflict considerable damage. Field pea prices have been rising with over $6 a bushel now available at some locations on the Prairies. New crop pea contracts have been available at $5 a bushel. Analysts had been expecting a slight decline in field pea acreage this year. With the strong prices, many are now calling for an acreage increase. With these two factors at play, pea seed of newer yellow varieties, if you can find a supply, is selling in the $8 to $9 a bushel range. I’m Kevin Hursh.

February 27, 2007

Useful new options in Sask Crop Insurance
The Variable Price Option and the Contract Price Option are welcome additions to Saskatchewan Crop Insurance. Insured prices for each crop are based on a forecast made in December. Prices can change a great deal between December of ’06 and the harvest of ’07. If a producer chooses the Variable Price Option that has been reintroduced, the price will be set based on a forecast made in July. If the July price forecast is higher, insurance coverage goes up, as does the premium. If the July forecast is lower, the opposite happens. The change is capped at between 50 and 150 per cent of the December forecast price. If a producer believes a commodity is likely to have a better price outlook in July and if higher coverage is deemed desirable, that option is now available. There’s also a Contract Price Option for identity preserved canola, canaryseed and mustard. On these crops, it’s common to have a price locked in on some of the production. Crop Insurance will now take that contracted price into account when setting insured prices. These new options make a lot of sense. Crop Insurance should reflect crop prices that are actually available. I’m Kevin Hursh.

February 26, 2007

Brace for a higher Crop Insurance cost per acre
The average premium for Saskatchewan Crop Insurance is going down, but producers should be prepared for a much higher expense than last year. The reason is improved grain prices and a corresponding increase in coverage levels. While farmer premiums vary by crop, risk zone and a producer’s claim history, the average premium is dropping by 3.4 per cent this year. Meanwhile, the value of coverage is increasing from a provincial average of $64 an acre last year to $86 an acre this year. That 34 per cent increase will mean a much higher cost per acre even with the small drop in the premium rate. You just have to look at the insured prices to see what has happened. The only significant crop to show a decrease in its insured price is flax. Other crops are higher, particularly canola. The insured price of canola last year was only $5.06 a bushel. This year it’s $7.71 and even higher than that on identity preserved canola. On canola, producers should brace for a 50 per cent increase in their premium per acre. Producers will find out their specific coverage levels and premiums in early March. Even with an increase in the cost of the insurance, it’s great to have coverage levels that are closer to the cost of production. I’m Kevin Hursh.

February 23, 2007

Feed barley worth more than malting
The Canadian Wheat Board has not done well with malting barley this year. The new Pool Return Outlook for the current crop year was released yesterday and there’s no change from the January projection. The top grade of two-row designated barley is expected to be worth only $3.13 a bushel once average Saskatchewan freight and handling is deducted. It seems that very little malting barley is bought as the top grade. Standard select two-row designated barley has a projected price of $3.02 a bushel. It’s the first year I can remember that feed barley is worth more than malting. Over $3.00 a bushel is being paid for off-board feed barley in many parts of the province. That’s the price picked up on the farm. There’s no dockage deducted. And you get all of your money right away. The CWB made most of its malting barley sales early in the crop year when prices were lower. With prices pooled for the entire year, the CWB malting barley price is a disappointment to say the least. On Monday, the CWB will release its first Pool Return Outlook for wheat, durum and barley for the upcoming crop year. Unless there’s a significant improvement in the malting barley outlook, even more producers are likely to grow higher yielding feed varieties of barley and not even try for malting. I’m Kevin Hursh.

February 22, 2007

Richardson Agricore Limited?
What a blockbuster deal. If the proposed combination of Agricore United and James Richardson International goes through to create Richardson Agricore Limited, it will be a major shakeup in the grain industry. When you look at the locations of JRI’s Pioneer Grain facilities and where Agricore United is established, there’s considerable overlap. When the new entity works to realize efficiencies, it’ll have to deal with those overlapping operations. Back when Agricore merged with United Grain Growers, the Competition Bureau said the Agricore United export terminal at Vancouver had to be sold. That hasn’t happened yet. JRI also has a major export terminal at Vancouver, so the Competition Bureau will no doubt have more to say about export terminal competition if this new proposal goes ahead. There’s also rampant speculation about this deal spurring other mergers and acquisitions. Most of that speculation involves Saskatchewan Wheat Pool and one or more of the other significant players – Cargill, Paterson Grain, and Parrish & Heimbecker. To compete with such a dominant player in Western Canada, the others in the industry may feel compelled to strike deals of their own. I’m Kevin Hursh.

February 21, 2007

Oddities in barley plebiscite
By now, barley producers should all have their barley plebiscite package. There are a few things quite odd about the process. It’s odd that the producer self-declaration has a number and the same number is on the so-called secret ballot. Even though the ballot goes in an unmarked envelope, the number on the bottom means a producer’s identity could be traced. Personally, I don’t really care and I doubt that most producers do, but it’s a strange way to hold the plebiscite. KPMG, the organization conducting the vote says the 'secrecy' ballot envelopes will not be opened until after the March 13th postmark deadline and the corresponding self-declaration has been processed. Staff responsible for opening the envelopes and tabulating the results will not have access to the declaration or registered voter names, says KPMG. There are all sorts of producer votes conducted by mail in ballot. If a producer association conducted an election in which the ballots had identification numbers, it would be frowned upon. Another oddity is the plebiscite website. For additional information, producers are directed to www.2007barleyvote.ca. The first thing you see on the website is the federal government’s intent to implement marketing choice. So much for a neutral process. I’m Kevin Hursh.

February 20, 2007

Rail transportation problems extend beyond current strike
With the strike at CN Rail, grain movement has gone from poor to abysmal. A total of 17 ships are waiting in Vancouver with another two due this week. At Prince Rupert, there are seven ships waiting and another one due this week. Fourteen of the ships are waiting for Canadian Wheat Board grain. Eight of those ships are being paid demurrage. The bill being shouldered by farmers is about $300,000 a day. The CWB says it was 2,000 cars behind target at the end of January and the strike has eliminated any possibility of catching up. CN is spotting at facilities that can load a hundred cars, so some of the major grains continue to move. However, the system is now so clogged that CP had declared Force Majeure, saying it can’t be responsible for its lack of performance. Incredibly, the situation is even worse for specialty and pulse crops. Members of the Canadian Special Crops Association say there’s virtually nothing moving. It’s considered the most restrictive rationing of capacity in years. Some buyers are reportedly sourcing from India rather than Canada because of more reliable shipping. Hopefully, the strike at CN won’t be allowed to drag on much longer. Unfortunately, our rail transportation system has serious problems that go far beyond the current strike. I’m Kevin Hursh.

February 16, 2007

Ethanol will remain a driver in grain markets
There are some analysts who believe the ethanol-driven increase in grain prices will be short-lived. The numbers say differently. The U.S. has 110 ethanol plants with a capacity of over 5 billion gallons. Another 73 plants are under construction and eight are expanding. The USDA says American ethanol production should more than double in the next couple years. In 2006, over two billion bushels of U.S. corn were used for ethanol. For 2007, that could rise by another billion bushels or more. The trend yield is high at over 150 bushels an acre, but it will still take another 6.5 million acres of corn to meet the increased demand for 2007. The corn acres are expected to come mainly at the expense of soybeans. Over time, corn yields will probably continue increasing and some land could come out of the Conservation Reserve Program. Plus, there’s a major push to produce ethanol from cellulose rather than grain. But those factors won’t come into play any time soon. Ethanol production from grain is booming and that should remain a driver in grain markets for the foreseeable future. I’m Kevin Hursh.

February 15, 2007

Consolidation coming among cow-calf producers
Beef cow numbers have been increasing in Saskatchewan. In fact, we’re closing in on Alberta as the province with the largest number of beef cows. However, with reduced returns for cow-calf producers, with grain prices strong, and with off-farm jobs plentiful, you have to wonder what the future holds for the beef industry. One example of the rising costs of production is the increase in grazing rates at PFRA Community Pastures. This year, the cost to graze a cow-calf pair will be just over $104. By 2010, the cost for a cow-calf pair will be $152. Saskatchewan is a great place to raise cattle, but will producers with smaller herds stick with the industry? Someone who is 60 years old with 50 or 80 head of cattle may decide that the returns aren’t worth the effort. Someone who is 25 or 30 years old may decide that winter employment will net more money than trying to build a herd. The hog industry has seen a massive consolidation. There is only a fraction of the number of hog producers there used to be, but those in the business have much larger operations. The consolidation in the beef industry won’t be as dramatic, but the trend is likely to be the same. I’m Kevin Hursh.

February 14, 2007

Factors driving rural Canada's economy
The Agriculture Division of Statistics Canada has released an interesting study on factors driving rural Canada’s economy. The study notes that in agriculture the price of labour has risen faster than the price of machinery. That means an ongoing incentive to adopt labour-saving technology, which means fewer people in rural areas. The study notes some long-term price trends. The cost of transporting goods is falling. Some of this is due to more efficient transloading of shipments. Thus rural Canada has become more cost competitive in manufacturing. The cost of transporting information is also falling. Just look at what has happened to long distance phone charges and the increased use of the Internet. This means rural entrepreneurs can take advantage of new information technologies to sell their goods and services. The Statistics Canada study says Aboriginal people will remain a driving force for parts of rural Canada. That’s particularly true in Saskatchewan. Projections show that by 2017 Aboriginal people will account for 21 per cent of the total population and 37 per cent of all the children in the province. The study also notes that rural areas are often competitive in attracting key demographic groups, such as young families and early retirees, as well as international immigrants. The full report (Study: Factors driving rural Canada’s economy) is available at www.statcan.ca. I’m Kevin Hursh.

February 13, 2007

The biofuels budget
There are conflicting stories on whether or not the federal budget will include the necessary government support to make ethanol and biodiesel viable. Based on its sources, the Saskatchewan Canola Development Commission believes the federal commitment will fall far short. They say the necessary 10 cents a litre on ethanol and 20 cents a litre on biodiesel wasn’t in the early draft of the federal budget. Thus, the SCDC has been urging produces and other interested individuals to visit www.saskcanola.com where they find a letter than can be emailed to the Prime Minister and Finance Minister. While observers such as SCDC are worried, other well-connected sources say the federal budget will contain what the biofuels industry is seeking. No one seems to have an explanation for the conflicting information. However, there’s general agreement that without comparable support to what the Americans receive, a Canadian industry won’t be competitive. This aspect of the upcoming federal budget is going to be watched very carefully. I’m Kevin Hursh.

February 12, 2007

BSE spin doctoring
The latest case of BSE discovered last week in an Alberta bull created barely a ripple in the mainstream media. However, this 9th Canadian case did not go unnoticed south of the border. The protectionist farm group known as R-CALF jumped on the new case, using it as ammunition for why the U.S. border should not be open to Canada. In announcing the new case, the Canadian Food Inspection Agency said “the age of the animal falls well within the age range of previous cases detected in Canada…” In other words, the animal was born after the 1997 feed ban, but wasn’t as young as some of the cattle that have tested positive. R-CALF notes in its press release that, “Canada has had four known cases of BSE born after the 1997 implementation of its original feed ban, three of which were known to have been born years later.” The CFIA says that under Canada’s enhanced feed ban, which comes into effect on July 12 of this year, BSE should be eliminated in the national herd within about 10 years. R-CALF points out that the enhanced ban is not yet implemented. With Specified Risk Material being removed from all beef, any public safety risk is minute, but R-CALF claims that Canadian cattle and beef flowing into the U.S. will further complicate American efforts to restore beef export markets. It’s easy to see why the R-CALF spin resonates with a lot of American cattle producers. I’m Kevin Hursh.

February 9, 2007

Budget for insect pests
As producers prepare crop budgets for the upcoming growing season, it may be wise to pencil in some insecticide applications. Grasshoppers should not be a problem. The forecast map has rarely shown such a low potential for grasshopper damage. However, the same cannot be said for other pests. The wheat midge forecast map is scary. There are areas identified as high risk throughout the moist dark brown and black soil zones. Saskatchewan Agriculture says the 2007 wheat midge map is reminiscent of forecast maps from the late 1990s when the insect pest had a marked effect on wheat production in the province. We’ll probably have record canola acreage this year and a couple of canola pests could also be problematic. There was a lot of spraying for bertha armyworms last year. The only area where there weren’t many bertha armyworms was the southwest. However, that region has a problem that has worked its way in from Alberta – the cabbage seedpod weevil. Besides wheat midge, bertha armyworms and cabbage seedpod weevil, other problems like diamond back moth larvae are always a potential problem. It could be a big year for spray planes and insecticide sales. I’m Kevin Hursh.

February 8, 2007

Manitoba's approach to fighting education taxes
A year ago at this time, a rural tax revolt was underway in Saskatchewan. Many rural municipalities were withholding the education portion of property taxes. Eventually the protest made a difference. On March 3, the provincial government announced an additional $53 million in education property tax relief on agricultural land. It was called sustainable, ongoing funding. The tax revolt ended. While welcome, the extra money doesn’t solve the problem. School Boards are likely to continue raising mill rates to make up for financial shortfalls. It’s interesting to see what’s happening in Manitoba. As a result of lobbying by farm groups, Manitoba is now rebating 60 per cent of the education taxes that farmers pay on their land. While that’s a lot better deal than we’re getting in Saskatchewan, the Manitoba lobby effort is now taking a different tact. Keystone Agricultural Producers, the umbrella farm group in the province, has teamed up with non-agricultural groups to push for the complete removal of education taxes on property. They have a website explaining why the taxation is unfair and outdated. The website is www.letspayfair.com. It’s an approach we should consider here in Saskatchewan. I’m Kevin Hursh.

February 7, 2007

Iogen receives a boost for cellulose ethanol
Many observers believe that in the years ahead ethanol will be produced from cellulose rather than from grain. Others point out that cellulose technology for producing ethanol has been a few years away for the past decade. Iogen, based in Ottawa, claims to be the world leader in technology to produce cellulose ethanol. A number of years ago, Birch Hills was touted as one of the potential locations for an Iogen plant. Straw would be purchased from farmers as a feedstock for the facility. Iogen hasn’t been in the news much recently. Meanwhile, scores of corn and wheat based ethanol plants have been commissioned. Yesterday, the federal government announced a $7.7 million repayable investment in a $25.8 million project by Iogen to update its cellulose-to-ethanol demonstration plant in Ottawa. Iogen president Brian Foody says government support will help the company continue advancing its technology as it moves to commercialization. Back in 1999, Iogen received a repayable government investment to design and complete the demonstration-scale plant. The plant opened in 2003. If cellulose is the future of ethanol production as some people claim, it sure isn’t happening quickly. I’m Kevin Hursh.

February 6, 2007

Rosy farm income projections for Saskatchewan
The new farm income forecasts issued by Agriculture Canada paint a picture we aren’t used to. Saskatchewan’s Realized Net Farm Income should be up substantially for 2006 and if the forecast is correct, we’ll see another big rise in 2007. While Saskatchewan’s farm income picture is improving, many other provinces are seeing their numbers go the other way. Livestock returns are not great, especially on hogs and that’s hurting provinces such as Ontario, Quebec and Manitoba. Here in Saskatchewan where grain is king, the increase in prices means our overall stats look very good. In 2005, Realized Net Income on Saskatchewan farms was only $196 million. For 2006, the number is expected to come in at $646 million. Although it’s just a forecast, Ag Canada is predicting Saskatchewan’s 2007 Realized Net Income at $839 million. That would be far better than any other province. The next highest projection is Alberta at $310 million. Ontario has the poorest projection at minus $200 million. If Saskatchewan actually hits $839 million this year, that would be the highest Realized Net Farm Income in nearly 20 years. How times have changed. I’m Kevin Hursh.

February 5, 2007

New crop peas at $5 a bushel
More new crop prices are now available for growers to consider. Yellow pea contracts are available for fall delivery at prices of $5.00 a bushel. Current prices are higher than that - $5.50 or more per bushel. However, a contract price of $5 for peas is rare. In some parts of Saskatchewan, new crop feed barley contracts have been offered at $3.00 a bushel picked up on the farm. New crop kabuli chickpea prices have also surfaced. The 9 mm size is being quoted at around 30 cents a pound, with the 8 mm size at around 27 cents. Some other new crop prices have been around for a while. No. 1 large green lentils are at 16 cents a pound with No. 2 at 14 cents. No. 1 small green lentils are at 14 cents. CGF Brokerage and Consulting is quoting No. 1 yellow mustard at 22.5, oriental at 16.5 and brown mustard at 18.5 cents a pound for new crop. Canaryseed contracts are available at 16.5 cents per pound. Some contracts have an Act of God clause and others do not, so that’s something to be aware of. Some analysts are advising producers to not be in a hurry to lock in prices, since markets have upside potential. Others say that locking in some crop at a profitable price is never a bad strategy. I’m Kevin Hursh.

February 2, 2007

A Saskatchewan research giant
VIDO, the Vaccine and Infectious Disease Organization in Saskatoon, has a lot of interesting work underway. Dr. Philip Griebel of VIDO highlighted some of the projects at the recent Saskatchewan Cattle Feeders meeting. VIDO’s E. coli vaccine has received quite a bit of press. The vaccination greatly reduces the number of dangerous bacteria shed in cattle waste. A Canadian company called Bioniche will be commercializing the vaccine. VIDO is working on needle free vaccine delivery technology. The fluid moves directly through the skin eliminating pain and the effects of a needle on meat quality. Dr. Griebel says they hope to have in on the market in the next 12 to 24 months. VIDO is starting a research project on Johne’s Disease which can be a problem in dairy cattle. Some believe there’s a link between Johne’s and Crohn’s Disease in humans which makes control even more important. Initially, VIDO thought BSE could be eliminated in Canada without any medical intervention, but now the organization is working on a BSE vaccine, which may also have an application for Chronic Wasting Disease in elk and cattle. VIDO is woking to reduce the frequency of vaccines required and is also working on oral vaccines that could be administered through the feed. Construction will start this spring on InterVac, an $120 million international vaccine facility next to the VIDO building on the U of S campus. I’m Kevin Hursh.

February 1, 2007

Too bad we can't ask the pigs
Maple Leaf Foods has announced that it will phase out the use of sow gestation stalls at all company owned hog operations within the next ten years. Maple Leaf, the biggest hog producer in the country, acknowledges that there is no conclusive evidence that group pens are better than gestation stalls from the standpoint of herd health or production. However, a growing number of consumers believe group housing is more humane. On top of this, U.S. based Smithfield Foods made a similar announcement last week and Maple Leaf thinks the integrated North American industry should move in unison. Even when spread over ten years, the change to group housing of pregnant sows comes with a significant price tag. When an industry leader decides to make this kind of change, you have to think the rest of the industry will be forced to follow suit. How long will it be before Maple Leaf’s processing plants refuse to buy from producers using gestation stalls? For its part the Canadian Pork Council says it remains committed to taking a leadership role in examining sow-housing alternatives. “Efforts to move to new systems should be supported,” says the Pork Council, “but only if the new approaches lead to improved animal welfare.” Yes, decisions should be based on science, but this situation shows that consumer opinion can trump research. I’m Kevin Hursh.

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