Unanswered questions on carbon trading for agriculture Last week, Environment Minister John Baird announced an action plan to reduce greenhouse gases and air pollution. The government says it’s committed to reducing Canada’s total emissions of greenhouse gases, relative to 2006 levels, by 20 per cent by the year 2020. The good news for agriculture is that there will be emissions trading – carbon will be bought and sold. However, it’s a long, convoluted document and it isn’t clear how or when agricultural land will benefit by being a carbon sink. Projects that store carbon in agricultural land are given only passing reference as an example of possible types of carbon offset projects. The government is promising a one-time allocation of credits to those firms that took verified action to reduce their greenhouse gas emissions between 1992 and 2006. But, how much might be paid to agricultural land under minimum tillage and how the verification might be done is not discussed. There are a lot of unanswered questions on this new regulatory framework for air emissions. I’m Kevin Hursh.
April 27, 2007
Crops that could be sleepers Based on seeding intentions, there are several crops that in my opinion have the potential for significant price increases over the next year. According to Statistics Canada, Saskatchewan farmers intend to seed 360,000 acres of mustard this spring. That’s a 22 per cent increase over last year. However, the ten-year average for mustard is over 500,000 acres. It would appear that mustard supplies could end up tight. Green lentils are another sleeper. The Saskatchewan acreage of all types of lentils this spring is expected to be 1.27 million. The ten-year average is 1.45 million acres. In the last few years, there has been a major increase in red lentils and that will be the case again this spring. That means the acreage of green lentils is much smaller than normal. Eventually that should translate into higher prices. In my opinion, flaxseed is in the same boat. Predictions call for Saskatchewan acreage to drop by 29 per cent, along with a 34 per cent drop in Manitoba. Across the line, North Dakota is also cutting back on flax. While it may take a while, the reduced 2007 supply of mustard, green lentils and flaxseed should eventually lead to more attractive prices than what we see currently. I’m Kevin Hursh.
April 26, 2007
Farm Stewardship Program swamped with applications If you have an approved Environmental Farm Plan and if you’ve applied in the past couple of months for funding to implement a Best Management Practice, odds are you’re still waiting for approval. The Canada-Saskatchewan Farm Stewardship Program has been swamped with applications. The PFRA office in Regina is administering applications from all three Prairie Provinces. Officials say 130 to 180 new applications are coming in each day. For a straightforward project, such as the purchase of a GPS guidance system, approval may take about 6 weeks. More complex applications such as cross fencing pastures or designing a new manure handling system will take significantly longer. Officials say many applications are incomplete and it chews up time to contact the applicant and get everything straightened out. Many producers are anxious because proceeding without written approval will make them ineligible for any program assistance. If you’ve got an application submitted and you’re wondering about its status, you can call and ask. The number to call is 1-800-667-8567. I’m Kevin Hursh.
April 25, 2007
Seeding intention surprises Saskatchewan is going to see some big acreage swings – much more so than in neighbouring provinces. In the Statistics Canada seeding intentions report released yesterday, Saskatchewan oat acreage is up a whopping 46 per cent. In comparison, oat intentions are up only 15 per cent in Manitoba, while Alberta oat acreage is expected to decline by 8 per cent. In both Manitoba and Alberta, 1.1 million acres of oats are expected. In Saskatchewan, oats are expected on 3 million acres. On barley, Saskatchewan’s intentions are up by 25 per cent as compared to last year. More moderate increases – 13 per cent in Manitoba and 8 per cent in Alberta – are expected. On canola, the Saskatchewan increase again leads the way. Producers in this province are expecting to seed 7.4 million acres, a 15 per cent increase over last year. In Manitoba, the canola increase is about 9 per cent, while Alberta is 7. For me, the biggest surprise in the Stats Can report is on peas. Alberta’s field pea acreage is expected to drop by nearly 5 per cent. Saskatchewan is showing a pea acreage increase of just 3.4 per cent. With such strong prices and based on the producers I’ve talked to, I’m surprised that more acres aren’t going into peas. I’m Kevin Hursh.
April 24, 2007
Support for producer investment in biofuels Details are finally available on the federal government’s program to encourage producer investment in biofuel facilities. Originally announced last December, the program is called the ecoAgriculture Biofuels Capital Initiative or ecoABC for short. It will provide repayable contributions of up to $25 million per project, but there is a pile of details. At least five percent of eligible program costs must come from producer investment. At five percent producer investment, the repayable government contribution is 8 cents per litre of facility capacity. At 20 per cent producer equity, the support increases to 20 cents a litre. However, no ecoABC payment will be made until the facility has commenced producing the biofuel at its certified nameplate capacity. Repayment begins three years after full production is reached and the repayment terms are based on profitability. Applications are on a first-come first serve basis with the exception of the first year of the program. In the first year, which ends in March of 2008, each province is restricted to a maximum of $50 million in support. Biofuel proponents, including many ethanol initiatives in Saskatchewan are going to be scrambling to understand the program and to access the support. More information is available at www.agr.gc.ca/ecoabc. I’m Kevin Hursh.
April 20, 2007
How much is too much for AU? Another surprise in the bidding war for Agricore United. Just when it looked like Saskatchewan Wheat Pool had the winning bid, James Richardson International has come back to the table and matched SaskPool’s offer. The latest JRI offer is all cash. A price of $19.25 per share is being offered for all of the limited voting common shares of Agricore. Holders of Series A convertible preferred shares will receive $24 in cash per share. The transaction is said to have a total enterprise value of $1.8 billion. Will SaskPool again top the JRI offer? You’d think at some point the price has to be too high. Back in November, before the first takeover bid by SaskPool, Agricore shares were trading in the $9 range on the Toronto Stock Exchange. Every new maneuver and bid has pushed the share price higher. It shot up again yesterday closing at over $20 a share. It’s been a sweet six months for Agricore shareholders, but the fundamentals of the grain handling and farm input supply businesses haven’t changed. At some point having the winning bid doesn’t make you a winner. I’m Kevin Hursh.
April 19, 2007
Current year malting barley prices get even worse The Canadian Wheat Board has suspended Pool Return Outlooks as well as Producer Payment Options on barley for the upcoming crop year. The board says the uncertainty of the marketing situation makes it impossible to estimate a pool return. For the current crop year, the CWB has reduced the Pool Return Outlook on malting barley by $8 a tonne and it’s blaming the upcoming removal of the single desk. Those who oppose the single desk are going to say this is all about politics and posturing, but the price drop sounds quite plausible. With barley coming off the board, some customers are going to wait and see what happens in the new crop year. That means fewer sales at improved price levels. As well, reduced farmer deliveries are expected because price prospects are better in the new crop year. This factor would have been in play with or without barley coming off the board. After deducting average Saskatchewan freight and handling, the top grade of two-row designated barley now has a Pool Return Outlook of less than $3 a bushel, below the price many producers are receiving for their feed barley on the domestic market. I’m Kevin Hursh.
April 18, 2007
Regulations block new barley variety Perhaps you’ve heard of low phytate barley. The Crop Development Centre at the University of Saskatchewan has been working on this in its barley breeding program for a number of years. In February of last year, it received regulatory support for registering its first variety of low phytate barley. With this barley, there’s less need to add phosphorus to hog rations and there’s less phosphorus in the manure. It’s a win-win situation. Or at least it was. The Crop Development Centre has been unable to license and release the new variety. The Canadian Food Inspection Agency has ruled that the variety is a “novel feed” and for the past eight months the Crop Development Centre has been unable to convince the CFIA otherwise. According to crop breeders, the issue is much larger than this one variety. They say any new innovation or significant change to any crop may cause it to be caught in a regulatory minefield. An open meeting will be held in Saskatoon on Monday to discuss this specific case and the broader issue of novel plant traits. Crop breeders have long worried about the CFIA’s regulations regarding novel traits. Now the low phytate barley has hit the fan. I’m Kevin Hursh.
April 17, 2007
Oats, canola and peas lead acreage increases Based on information from its network of volunteer crop reporters across the province, Saskatchewan Agriculture has compiled information on seeding intentions. Spring wheat acreage is expected to be down 6 per cent, which makes sense when looking at the disappointing returns projected for the crop. Durum has somewhat better price expectations and its seeding intentions are up 4 per cent, but are still well below the ten-year average. Strong contract prices have been available for oats, and an increase of 9 per cent is anticipated in oat acres. Barley acreage in the province has a projected increase of 3 per cent. That would still be a much smaller acreage than the ten-year average. Flax acreage is expected to fall by 6 per cent. However, flax acres in the province will still be above average. A 6 per cent increase is expected in canola. That increase has no doubt been moderated by recent price weakness as well as the high cost of nitrogen. A 5 per cent increase is expected in field pea acres. I wouldn’t be surprised if the actual increase turns out to be larger given that you can lock in new crop yellow peas at $5.75 a bushel. Canaryseed is up only one per cent and mustard is up only two. Both of these crops remain well below average for acreage. A four per cent decrease is expected in lentils. The lentil acreage looks to be just below the ten-year average, but that’s deceptive now that we’re growing a sizable quantity of red lentils. Next Tuesday, the Stats Can seeding intentions report comes out and it’ll be interesting to see whether or not it agrees with Sask Ag’s projections. I’m Kevin Hursh.
April 16, 2007
SaskPool on the brink of Agricore takeover The week ahead should determine the fate of Agricore United. On Friday, Saskatchewan Wheat Pool again upped its takeover offer. Each Agricore limited voting common share would get $20 cash or 2.2076 SaskPool common shares or a combination of cash and shares. Agricore says the offer is superior to the deal it has with James Richardson International. JRI has until this Friday to match or improve upon SaskPool’s offer. If JRI doesn’t counter and if Agricore goes with the Pool offer, Agricore will have to pay a termination fee of $24 million to JRI. With the Pool’s substantially improved offer and with competition issues already addressed with the Competition Bureau, SaskPool appears to be in the driver’s seat. Agricore United, the largest grain handler in the country can trace its roots back to three farmer-owned grain companies - Manitoba Pool Elevators, Alberta Wheat Pool and United Grain Growers. Not many years ago, Saskatchewan Wheat Pool was teetering on the brink of financial collapse SaskPool has risen from the ashes and appears to be on the brink of the biggest grain company takeover in the country’s history. I’m Kevin Hursh.
April 13, 2007
A common enemy The resumption of the CN Rail strike has united the grain industry. There has been a flurry of news releases calling for back to work legislation. The Western Canadian Wheat Growers Association, the Canadian Fertilizer Institute, Canadian Canola Growers Association, Grain Growers of Canada, the Canadian Wheat Board and APAS are among those calling for action and pointing out the harm further grain transportation delays will bring. Rail transportation, particularly on special crops and pulse crops is terrible at the best of times. Labour disruptions on top of that make us look like a third world country. This time it isn’t just grain that’s a worry. The nitrogen fertilizer supply is hand to mouth this spring. Rail disruptions could cause even more shortages. All too often farm organizations concentrate their efforts on areas of disagreement – the CWB monopoly, the World Trade Organization, the structure of farm safety nets. It’s time for a unified voice to government on grain transportation. Not only does the labour disruption need to end, but we also have to make progress on the ongoing systemic problems. Other differences of opinion should be put on a back shelf while this common problem is addressed. I’m Kevin Hursh.
April 12, 2007
Less than 20 per cent of calves retained in Sask It’s calving season for many producers. More calves are being finished in Saskatchewan feedlots, but our feedlot industry is still small compared to the number of calves we export. Beef economist Sandy Russell of Saskatchewan Agriculture says Saskatchewan has nearly 1.5 million beef cows – more cows than people. We have about 30 per cent of all the beef cows in Canada. Those 1.5 million cows will produce about 1.36 million calves this year. Yearly exports of weaned calves are at over 900,000, with most of those going to Alberta. We also export over 200,000 backgrounded calves, meaning we put some gain on them before shipping them to feedlots in other provinces and the U.S. Last year, about 250,000 Saskatchewan calves were fed to slaughter weight in the province. That’s less than 20 per cent of the calves we produce. The vast majority of our calves continue to leave the province and the grain to feed them follows. The good news is that the number being finished here is quite a bit higher than in the years prior to BSE. I’m Kevin Hursh.
April 11, 2007
Late start to seeding The cold weather of recent weeks is making this a slow spring. In northern areas of the grainbelt there’s still a lot of snow to melt. Soils are saturated from last fall so producers in many areas are worried about where all the snowmelt will go. They’re also worried about getting on the land to seed in a timely fashion. Some producers are projecting a significant number of unseeded acres again this spring. Many are already making plans for crops that require fewer days to maturity. In the southern grainbelt, most of the snow is long gone, but there was more winter weather yesterday. There isn’t an abundance of moisture in some parts of the south, but that doesn’t mean that seeding is imminent. In the southwestern corner of Saskatchewan, it’s common for the first seeding outfits to be rolling by April 15 or 20th. That won’t happen this year. There are warmer temperatures in the forecast, but it will take some sustained heat to put outfits in the field. While the mainstream news is filled with dire warnings of global warming, the icy grip of winter has been slow to leave. If the province gets another shot of snow and/or cold weather over the next few weeks, it could mean a very late start to seeding. I’m Kevin Hursh.
April 10, 2007
Up to $100,000 interest free The Advance Payments Program is becoming available to crop producers across the country. The Spring Credit Advance Program and the previous Advanced Payments Program have been merged into the new APP. The Canadian Wheat Board is administering the Advance Payments Program for wheat, durum and barley. The Canadian Canola Growers Association is administering the program for most other crops including canola, flax, mustard, oats and pulse crops. The limit on cash advances has been increased to $400,000. The interest free amount has doubled from $50,000 to $100,000. Either crop insurance or the CAIS program can be used as security to get an advance ahead of harvest. A Priority Agreement must be completed by every financial institution with which the applicant deals, as well as every financial institution and secured party that has a lien on the grain or has registered an assignment against the applicant’s crop insurance payments. All the necessary forms should soon be available at country elevators. More information is available on the Canadian Wheat Board website at www.cwb.ca and the Canadian Canola Growers Association website at www.ccga.ca. I’m Kevin Hursh.
April 9, 2007
Sold...to Australia The sale of farm equipment is certainly an international business. Here are a couple of examples. Morris Industries has announced the release of its new Contour Drill. Each opener moves independently to follow the contour of the land. Morris also has a new double shoot opener designed to place fertilizer and seed in a paired row configuration. When you log on to the Morris website to have a look at the new drill and opener, the international nature of the company’s business becomes obvious. The website offers a choice of English or Russian, a testament to how much business the company does overseas. Another example of international connections can be seen at farm auction sales. It has become common for Internet bidding at many auctions. People not in attendance can view digital photos and bid on items they’ve never laid eyes upon. At an auction sale near Milden over the weekend, the auctioneer was making a point of saying where the new home was going to be for each major piece of equipment. While most of the places were within Saskatchewan, one stood out. An older rock picker was sold and the new home is Australia. The purchase price seemed reasonable, but there’s no doubt a sizable price tag to send the implement to a rocky field down under. I’m Kevin Hursh.
April 5, 2007
Compliance-based carbon market may be coming A carbon offset market is being established in Alberta. In fact, it’s been put on a fast track and is supposed to have a regulatory framework by July 1. Many of Alberta’s carbon emitters will either have to put $15 per tonne of carbon into a fund or they’ll have to buy carbon credits from people like farmers who can cut carbon emissions through practices such as minimum tillage, composting and biomass combustion. Benefits of the Alberta program will only be available to Alberta producers, but many observers believe the Alberta initiative will be a forerunner for a carbon offset program that’s eventually delivered nationally. A Regina-based company called C-Green Aggregators is currently offering a program for producers for 2006 to 2010 whereby carbon credits are sold through the Chicago Climate Exchange. Officials in Alberta point out that the Chicago Climate Exchange is a voluntary-based trading system, where the rules aren’t as rigorous. The Alberta system will be set by regulation, have higher standards and will probably demand a higher price for carbon. Should producers take what C-Green is offering or will there be a better deal for farmers through some federally regulated compliance-based system? It’s difficult to know how the future will unfold. I’m Kevin Hursh.
April 4, 2007
Let barley go Despite the federal government’s atrocious handling of the issue, barley should be removed from the single desk selling authority of the Canadian Wheat Board. There should have been two questions on the ballot so that producers could choose the single desk or the open market for barley. Instead, the feds muddied the issue by using three questions. In addition there were problems with the voter’s list and a low return rate for ballots. Despite all the shortcomings of the plebiscite, it’s clear the CWB does not enjoy enough producer support to continue with monopoly marketing powers. Any way you look at it, 40 to 60 per cent of producers want marketing choice. The CWB monopoly infringes on the freedom of producers. In order for this to be acceptable, the approval rating should be well over 60 per cent. It’s sad when a marketing tool developed for producers and governed by producers no longer has overwhelming support. Support for single-desk barley marketing isn’t strong enough for it to continue, but the jury is still out on wheat and durum. Hopefully any future plebiscites won’t be a circus like the barley vote. I’m Kevin Hursh
April 3, 2007
Feed grain prices limit feeder cattle price gains Fed cattle prices have reached lofty levels. Slaughter steers in Saskatchewan are currently as high as a dollar a pound live weight. Slaughter heifers are in the 98 cent a pound range. Sandy Russell, beef economist with Saskatchewan Agriculture and Food says the last time fed prices were this high was May 20, 2003, just before BSE hit. In other words, we’re seeing the best slaughter steer and heifer prices in nearly four years. The increasing price of fed cattle has pulled feeder prices higher, but the high cost of feed grain has limited the gains. Feeder steers in the 500 to 600 pound weight range are currently $1.14 to $1.33 a pound. Feeder prices have been improving after the slide they suffered last fall. However, Sandy Russell says lightweight feeders are 15 to 18 cents a pound below the prices of a year ago. Improved feed grain prices continue to take a toll on the returns of cow-calf producers and that shows no sign of changing any time soon. I’m Kevin Hursh.
April 2, 2007
American oat, flax and lentil acreage expected to drop The USDA Prospective Plantings report on Friday got a lot of attention for the big increase in U.S. corn – up 12 million acres from last year- and the big decrease in U.S. soybeans – down about 5 million acres. It’s interesting to note U.S. planting intentions on a number of other crops of direct importance to Western Canada. While our oat acreage will increase this year, American oat acreage is expected to drop by 3 per cent, which at 4 million acres would be the lowest on record. U.S. barley acreage is expected to increase by 7 per cent, but this will still be the second lowest on record. The U.S. has become a significant producer of flaxseed, particularly in North Dakota. This year, U.S. flax acres are expected to drop by 52 per cent going from 813,000 acres down to 390,000. American canola is expected to rise by 12 per cent to nearly 1.2 million acres. Their durum is going up by 6 per cent. The U.S. has been a growing competitor in pulse crop markets, but acreages will be down this year. The chickpea projection is down 8 per cent, field peas are down 3 per cent and lentils are falling by 21 per cent. The first comprehensive estimate of Canada’s seeded acreage will come in the Statistics Canada report scheduled for April 24. I’m Kevin Hursh.
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Kevin Hursh's daily agricultural report is heard Monday through Friday on Swift Current (CKSW), Shaunavon (CJSN), Moose Jaw (CHAB), Estevan (CJSL), Weyburn (CFSL), Rosetown/Kindersley (1330/1210), Lloydminster (CKSA) and Melfort (CJVR).
