Hursh Consulting & Communications: Kevin Hursh on Agriculture

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Hursh on Agriculture

August 31, 2007

Long weekend equipment repairs
Beware of equipment breakdowns. It’s the long weekend. Most farm equipment dealerships make provisions for their parts and service departments to have someone available even though Sunday and Monday are holidays, but look out if you need a part out of an equipment warehouse somewhere. It’s my experience that those guys don’t work long weekends. You might be waiting until early next week to get a part if your dealership doesn’t have it in stock. There are so many little things that can go wrong to bring harvest operations grinding to a halt. Tires, bearings, belts, chains, sprockets and pulleys may be interchangeable, but there are so many specialized parts on so many different makes and models of combines, swathers, trucks and tractors that tracking down the right part can be a nightmare. During a long weekend, it can be even worse. Harvest started so early this year in some southern areas of the province that some producers experienced the same issues during the August long weekend. I was looking for a yoke for the PTO on a swather and I found it very frustrating. The other issue about long weekends is that sometimes friends and relatives who are off work come out to lend a helping hand. That’s great, but you have to take the time to make sure they know what they’re doing. Here’s hoping your harvest operations have a safe and trouble free Labour Day weekend. I’m Kevin Hursh

August 30, 2007

Mustard and red lentil prices move up
Some specialty crop prices are starting to move up. CGF Brokerage and Consulting of Saskatoon reports that red lentils have moved up several cents with prices of 23 to 24 cents a pound fob farm depending upon the specific variety. Large green lentil prices are firm with No. 1 product selling for about 20.5 cents delivered, but there hasn’t been much price movement lately. Yellow mustard prices are moving up. Prices have hit 27 cents a pound. It’s CGF’s view that producers should continue holding mustard. Canada’s supply is down and the world needs Canada’s mustard. On the other hand, CGF believes that if producers need cash flow, red lentil prices look pretty good. It’s always a guessing game to know what to market early and what to hold. Most market analysts believe flax has some upside potential. Current prices reflect $9.00 per bushel for October / November delivery. The outlook is not bright on oats. Analysts point to a monster Canadian crop and say the price trend is likely to be down. The oat price is currently around $2.50 a bushel delivered for September / October movement. While the analysts do their best to look at Canadian supply and demand and relate it to the world picture, there are no guarantees when predicting price levels. For producers, good marketing decisions can make a huge difference in the bottom line. I’m Kevin Hursh.

August 29, 2007

Can grain prices stay ahead of input costs?
There’s a lot more money coming into the hands of grain producers these days. The trick is to keep some of it and not have to spend it all on inputs. According to figures just released by Statistics Canada, crop receipts across the country for the first half of 2007 reached a record of $8.4 billion, supported by higher grain and oilseed prices and strong grain deliveries. This was more than 25 per cent above the 2006 January to June time period and it was 15 per cent higher than the record set in 2004. With good grain prices, the fear is that input manufacturers will take this opportunity to pad their profits. One example is glyphosate herbicide. Glyphosate is integral to the minimum tillage seeding system that has revolutionized Prairie agriculture. Beyond the original Roundup moniker, there are all sorts of brands from a number of manufacturers. Farm input retailers say the main suppliers have simultaneously increased their glyphosate prices this fall. It’s hard to get the so-called cheap generics and they aren’t very cheap anymore. Glyphosate has been the one input that has continued to decline in price over the last 20 years. Manufacturers will point to increased North American demand as the reason for the price increase. Farmers will have other theories. I’m Kevin Hursh.

August 28, 2007

Piles of wheat in Colorado
The state of Colorado is experiencing a huge problem with trying to get a big winter wheat harvest to market. The Rocky Mountain News is reporting mammoth piles of wheat on the ground. An estimated ten million bushels is piled on the ground in Colorado alone. Railway cars are running 10 to 15 days late and there’s a shortage of trucks. With the best harvest in years and with very attractive prices, farmers have marketed a big chunk of their wheat crop right off the combine. Grain elevators, many of them farmer co-operatives, have purchased the wheat, but with elevators full there’s no place for it other than the ground. The Governor of Colorado has declared a disaster for wheat farmers and grain elevator operators. He has signed an executive order temporarily allowing trucks with farm license plates to custom truck wheat. The millet and corn harvest is yet to come so the problems are going to be aggravated. The worry is that rain that will cause spoilage losses before the wheat can be moved. In some years, Saskatchewan producers are forced to temporarily store a lot of grain on the ground, but this is typically done on-farm rather than at elevator facilities. There won’t be as much of that this year with a below average harvest in most areas of the province. I’m Kevin Hursh.

August 27, 2007

Disappointing yields but strong prices
As harvest proceeds, producers in southern Saskatchewan and Alberta are finding out how much the extreme heat in July has hurt yields. The one consolation is that grain prices are in many cases nearly double the levels of a year ago. Saskatchewan Agriculture and Food compiles information on price and how they compare with one year earlier. Feed barley is quoted at over $3 a bushel in central Saskatchewan versus a dollar and a half a year ago. Flax is well over $8 as compared to five and a half. The numbers are similar for canola. Yellow mustard is currently 24 cents a pound versus 13 a year ago. Large green lentils are about 20 cents this fall while last fall they were barely 13.5. Red lentils are 21 cents or better versus a dismal 11 cents at the end of last August. Yellow peas are over $6 a bushel delivered versus $3.50 at this time last year. Canaryseed is a bit over 16 cents, which looks a lot better than last fall’s 10 or 10.5 cents. One year ago, the price of feed grain hadn’t yet spiked so 700 to 800 pound feeder steers were about $1.21 a pound. Currently the price is less than $1.10. Feeder steers in the 500 to 600 pound weight range were $1.30 a pound last August based on cheap feed grain. This year, feed grain isn’t so cheap and light weight feeder steers are averaging about $1.17 a pound. I’m Kevin Hursh.

August 24, 2007

Grain prices zoom up
The price expectation on Canadian Wheat Board grains, particularly durum, is nothing short of amazing. The CWB released its new Pool Return Outlook yesterday and wheat, durum, feed barley and designated barley all saw increases. Unfortunately, the board isn’t publishing average freight and handling charges anymore, but if you use last year’s average Saskatchewan deductions, No. 1 CWRS wheat with 13.5 per cent protein is expected to have a Saskatchewan farm gate price of around $5.40 a bushel. No. 3 CWRS wheat is at about $4.85 a bushel. The CWB just started to issue barley PROs again a couple weeks ago, but the new PRO released yesterday is higher. The Saskatchewan price for feed barley is around $3.30 a bushel, while the top grade of two-row designated barley is around $4.30 a bushel. The biggest increase is on durum. It’s up by more than a dollar a bushel from a month ago. The PRO with average freight and handling deducted for No. 1 durum with 13 per cent protein is in the $7.30 a bushel range, which is just amazing. Even No. 3 durum looks pretty good. It has a PRO of about $6.50 a bushel. Unfortunately, one of the main reasons for such a strong durum price is the heat reduced crop here in Western Canada. Still, anyone with a decent crop is going to do well. I’m Kevin Hursh.

August 23, 2007

Another technology fee for farmers to pay
Remember the uproar a number of years ago regarding Monsanto’s Technology Use Agreement. The $15 an acre fee for using Monsanto’s Roundup Ready canola technology is still a bone of contention for many growers. With that in mind, it’s surprising to see the path being taken by BASF. A letter is going from BASF to producers who have used the company’s Clearfield production system. The letter informs growers that for 2008 BASF will be implementing a new Clearfield Commitment in canola and sunflowers. This will mean a new fee of $3 per acre on Clearfield sunflowers and $30 per bag of Clearfield canola seed. At $30 a bag, the price tag is about $3 an acre at typical seeding rates. Why the new fee? BASF says it’s because Clearfield technology delivers “real value”. It sounds like there may be some price adjustments coming on Odyssey and Odyssey DLX herbicide to soften the blow, but in my opinion a new technology fee is not going to be very popular with growers. The company says there will be no fee for Clearfield wheat or Clearfield lentils in 2008, but you have to wonder what will happen in 2009. I’m Kevin Hursh.

August 22, 2007

New grazing mentorship program
A new cost-shared program has been set up to help producers with grazing management. It’s called the Sustainable Grazing Mentorship Program. Respected producers with extensive grazing management experience act as mentors. A mentor visits a client’s farm or ranch and is available for a total of about 16 hours to provide advice and suggestions. A participating producer pays $100 and the program tops up the rest to pay the mentor’s time and travel expenses. The program is an opportunity for producers to receive individual input and suggestions from a producer peer on how to improve their profits, efficiency, forage productivity as well as land and water resources through improved grazing management. The program started last year in Alberta and is still gearing up in Saskatchewan. Interested producers should contact the Saskatchewan Forage Council at www.saskforage.ca or 306-966-2148. Funds for the project are being provided by Agriculture and Agri-Food Canada's Greencover Canada Program and are being paid through the Canadian Cattlemen's Association. I’m Kevin Hursh.

August 21, 2007

Fixed Price Contract on wheat may be attractive
The Fixed Price Contract levels for Canada Western Red Spring Wheat are worth watching. The Canadian Wheat Board says the Fixed Price on CWRS wheat hit a record high on August 15. This isn’t quite as impressive as it sounds because Fixed Price Contracts have only been around for a few years. However, $6.91 a bushel at port position for No. 1 wheat with 13.5 per cent protein works out to around $5.30 a bushel after deducting average Saskatchewan freight and handling. That’s well above the most recent Pool Return Outlook, which is about $4.85 a bushel. With a Fixed Price Contract, producers get all of the money near the time of delivery, but they don’t participate in any adjustment or final payments. Since August 15, fixed prices have declined in response to commodity market pressure from the U.S. sub-prime mortgage crisis. The fixed price in effect for most of today is about $5.05 a bushel after average freight and handling. That’s still above the PRO, but it isn’t as attractive as the price a week ago. You can monitor the daily changes in Fixed Price Contracts at www.cwb.ca. I’m Kevin Hursh.

August 20, 2007

Variable price option shows its worth
The variable price option available this year through Saskatchewan Crop Insurance allowed better price coverage for most grains. With the variable price option, a price estimate is made in July and that becomes your insured price. The variable price can go up or down by as much as 50 per cent from the base price set in the spring. Nearly all the crops increased. Durum had the biggest move. Rather than an insured price of $3.89 a bushel, the insured price is $5.61 a bushel under the variable price option, an increase of 44 per cent. Flax has also seen a big improvement. The variable price is $8.38 a bushel as compared to only $5.89 in the spring. The only crops to go down are canaryseed and caraway and they only dropped by one cent per pound. The variable price option doesn’t change your bushel per acre insurance, but it does give you a value for crops that should more accurately reflect the market. In a year like this when prices have continued to increase, the variable price has dramatically improved coverage levels per acre for producers choosing this option. Of course, along with higher coverage comes a higher premium. I’m Kevin Hursh.

August 17, 2007

Weather data is not knowledge
The new weather network being launched by WeatherBug, the Canadian Wheat Board, James Richardson International and other partners has received a lot of attention, but may be raising unrealistic expectations. There are benefits to having accurate weather information from a location near your farm and from locations across the Prairies. However, producers already have a pretty good handle on their temperature and rainfall. It’s the prime topic of conversation. Accurate wind speed and humidity will be useful, but will it really save any trips out to the field to see if crop is fit to combine? And will you be any better able to predict your yields? Insect and crop disease modeling should be more accurate with more detailed weather information, but who will develop the projections? There’s also a danger of confusing local weather information with local weather forecasts. We all wish we had more accurate and detailed forecasts, but there’s little talk of forecasts being generated from this new network. With the information available through the Internet, you may be able to know if it’s raining ten miles away and that has some value, but it doesn’t really tell you whether you’re going to get rain. Call me a bit of a cynic when it comes to this new weather network. I’m Kevin Hursh.

August 16, 2007

Mustard processing in Saskatchewan
A dry milling facility for mustard is expected to open in Gravelbourg in the next couple weeks. Mustard Capital Inc, or MCI will use yellow, brown and oriental mustard. With dry milling, the seed is fractioned into bran, flour and oil. In Phase 1, the plant should process about 5,000 tonnes per year. There are plans for further expansion which would bring production to over 20,000 tonnes, but the scale up of production will be dependent on market development. Mustard seed ends up in many foods including mayonnaise, ketchup and barbeque sauces. It’s often used in the meat industry as a binder for wieners and other processed meats. Emerging non-food markets include bio-pesticides and biodiesel. MCI was primarily financed by local investors. The long-term plan calls for an investment of $8 to $10 million. About 90 per cent of Canada’s mustard production comes from Saskatchewan. This accounts for nearly half of world production. Finally Saskatchewan is going to have a significant mustard processing operation rather than just exporting raw seed. The only other mill in Canada is located at Hamilton, Ontario. I’m Kevin Hursh.

August 15, 2007

Gerry Ritz takes over as agriculture minister
We have a new agriculture minister, but don’t expect any immediate ag policy changes. Gerry Ritz, the MP for Battlefords-Lloydminster is the new minister of agriculture and minister of the Canadian Wheat Board. As a former farmer from near Rosetown, Ritz should have an inherent understanding of many of the issues affecting Saskatchewan producers. Expect to see the Conservative government continue its attempts to end the Canadian Wheat Board’s monopoly. So far their approach has sucked, but it seems to be stage-managed by the Prime Minister’s Office more than the agriculture minister’s and that probably won’t change. As for all the business risk management programs being developed, that’s now largely a matter for the bureaucracy both federally and provincially. Ritz has the advantage of taking over the portfolio at a time when the grain industry is doing relatively well, but the hog sector is reeling and cow-calf producers are being squeezed. If anything, Gerry Ritz seems less diplomatic than his predecessor Chuck Strahl. Since he has an agricultural background, comes from an agricultural province and has served as the Chair of the Standing Committee on Agriculture, Ritz won’t have the long honeymoon that Strahl enjoyed. I’m Kevin Hursh.

August 14, 2007

Know when to hold 'em, when to fold 'em
The latest crop report from Saskatchewan Agriculture and Food shows 40 per cent of the provincial field pea crop and 33 per cent of the lentils are combined. As harvest proceeds, the guessing game over marketing starts. Peas and lentils are the first out of the gate. Some producers contracted new crop peas at $5 a bushel. At the time that seemed like a great price. Now, even though there should be harvest pressure, the price is over $6. How much upside potential is there on peas? Will we see the $7 a bushel that peas hit earlier this year? Producers need cash flow, but they don’t want to miss out on any market rally. At around 21 cents a pound, red lentils are the price leader among the various classes and types of lentils. That’s a good price historically for reds. It’s more than double the red lentil price at this time last year. Green lentil prices have continued to edge upwards, but there has been no price explosion. In 2005, there was money to be made by selling a lot of commodities right off the combine. Prices just continued to deteriorate as the year went along. Last year, for a lot of commodities, the longer you held, the better the price. The price complex feels solid this time around, but most of us need to sell something to pay some bills. I’m Kevin Hursh.

August 13, 2007

Buying fertilizer early usually pays
In most years, the price of fertilizer, especially nitrogen, is higher in the spring than in the previous summer and fall. CGF Brokerage and Consulting of Saskatoon in its latest newsletter takes a look at the summer to spring price comparison for both urea and phosphate fertilizer for the past eight years. On urea, there was just one year when the price declined heading into spring. That was the spring of 2006 and the previous fall energy prices had gone crazy due to the damage from Hurricane Katrina. This spring, the price rise on urea was massive. Producers who bought early saved a lot of money. On phosphate fertilizer, the numbers in the report show higher prices every spring of the past eight, although sometimes the price difference was relatively small. While no one ever knows for sure, the CGF analysis suggests the current farm gate price for urea of around $475 a tonne is probably lower than what the price will be next spring. Cash flow, storage issues and income tax considerations also figure into fertilizer purchasing decisions, but there may be money to be made by selling some higher priced grain this fall and buying some fertilizer early. I’m Kevin Hursh.

August 10, 2007

Do you have aster yellows in your canola?
A disease called aster yellows is much more common in canola this year. I’ve been swathing canola the past several days and the stunted and malformed canola plants are easy to identify. They usually stick above the rest of the canola like sore thumbs. You might think it’s some sort of weed or you might think it’s a sign of herbicide damage or a nutrient deficiency. The plants won’t produce seed and the pods and leaves are really odd looking. The good news is that there isn’t usually enough of these aster yellows plants to affect the yield. Besides that, there really isn’t anything you can do to prevent the disease. The experts say aster yellows is caused by a phytoplasma, a plant pathogenic micro-organism. The phytoplasma inhabits the phloem, the nutrient-carrying vessels of infected plants and is carried from plant to plant by sap-sucking leafhoppers. Aster yellows affects many other plants in addition to canola including coriander, caraway, Echinacea and carrots. Most infections are carried north from the United States by migrating leafhoppers. The phytoplasma survives in living plant tissue and is not soil- or seed-borne. So as your swathing your canola crop, it you see an occasional plant that looks like some sort of weird mutation, it’s probably aster yellows and isn’t really anything to worry about. I’m Kevin Hursh.

August 8, 2007

COOL will violate NAFTA and WTO
A number of years ago when the Americans first proposed Country of Origin Labeling for beef and pork we heard a lot about this potential trade barrier. A lot has happened since then including trade restrictions on beef due to BSE. Hopefully the last BSE trade restriction on beef and cattle over 30 months of age will soon be lifted. Now though, it looks like Country of Origin Labeling will actually be implemented in September of 2008. The extra labeling and record keeping requirements under COOL will make it more expensive for American meat packers and retailers to use cattle and hogs that weren’t born and raised in the U.S. The Canadian Cattlemen’s Association and the Canadian Pork Council have teamed up to urge the federal government to challenge the American COOL provisions under the NAFTA and WTO trade agreements. Under international trade rules, cattle and hogs originating from Canada and processed into beef and pork in the U.S. should be labeled as a product of the U.S. Unfortunately, the Americans often design domestic policies that ignore international trade laws. Hopefully the U.S. can be convinced to change its COOL provisions before the law is passed and enacted. More likely, the Americans will ignore the trade rules and Canada will have to go through a long and arduous international trade challenge. I’m Kevin Hursh.

August 7, 2007

CWB needs to deliver
The Canadian Wheat Board has one last chance to impress. When the court granted a stay of execution on barley marketing, the CWB promised that farmers would be given more marketing flexibility and options. It wouldn’t be business as usual. Here’s hoping that promise is more than just rhetoric. In the days following the court decision, barley prices in Western Canada dropped like a rock. International barley prices are strong right now and producers know it. Some had signed contracts with buyers in anticipation of an open market on August 1. The board has developed some successful pricing tools such as Early Payment Options and Fixed Price Contracts, but those took years to be established. The CWB needs to act quickly and decisively to show it has a plan to deliver the strong barley prices producers expect in this current crop year. Whether it was part of a master plan or just by accident, the federal Conservatives have given farmers a glimpse of attractive open market barley prices. The Canadian Wheat Board must now deliver some good values on barley. Otherwise its farmer support base will sink even lower. Ultimately that would also affect the CWB’s control over wheat and durum marketing. I’m Kevin Hursh.

August 3, 2007

Hot fall predicted
If the seasonal forecast issued by Environment Canada is correct, the above normal temperatures in July are going to continue over the next three months. On August 1, Environment Canada issued seasonal temperature and precipitation forecasts for August, September and October. The precipitation forecast shows areas of near normal, below normal and above normal precipitation for different parts of the prairies. For the Saskatchewan grain belt, the three-month forecast is for precipitation that’s normal to below normal. Seasonal precipitation forecasts are not significantly better than chance for most areas so it’s difficult to take the precip forecast very seriously. By comparison, the long-term temperature forecast has a much better track record and the forecast for the next three months looks unequivocal. Almost all of Canada is painted red on the Environment Canada map, indicating above normal temperatures. If the forecast is right, harvest should be done early. I’m Kevin Hursh.

August 2, 2007

Canola pests
A number of pests are eating away at canola crops in various parts of the province. The Canola Council says lygus bugs have been reported in northwestern Saskatchewan and some counts are near or exceeding economic thresholds. Some canola fields in central Saskatchewan are being sprayed to control diamond back moth larvae. It’s important to spray the actively feeding larvae and not the cocoons. Both diamond back moth larvae and bertha armyworms have been found in some fields. For bertha armyworms, timing of control is critical. Spraying should occur when the larvae are in the middle to upper part of the plant and feeding on the pods. With harvest approaching, the Canola Council advises that it’s important to allow for the required pre-harvest interval on any products being considered. You don’t want excess residues appearing in the harvested seed. The crop becomes less attractive for most insects after it has been swathed and begins to dry down. If you’re only a few days away from swathing, this may make more economic sense than a spray operation. The Canola Council has information on all the various pests and their economic thresholds as well as information on the proper timing for swathing at www.canola-council.org. I’m Kevin Hursh.

August 1, 2007

Blame the feds for the barley mess
Open market supporters are ripping mad. Last night a federal court judge struck down a cabinet order that would have ended the Canadian Wheat Board’s single desk control over barley. As a result, this is not the Barley Freedom Day open market supporters have been dreaming about. There is an irreconcilable difference of opinion among farmers on single desk marketing. That isn’t going to change. If open market supporters are looking for somewhere to vent their frustration, they shouldn’t attack the Canadian Wheat Board or farmers who support the board system. The blame for the mixed up market signals rests with the federal Conservatives. How could the feds get it wrong? All along, CWB supporters have said that removing the barley monopoly requires legislation. Surely the feds must have known they weren’t on solid legal ground when they attempted to enact change by an order in council. The feds can also be blamed for a barley plebiscite question that wasn’t straightforward. They tried to manipulate the process. The Conservatives have a minority government and probably can’t get changes to the Canadian Wheat Board Act through Parliament. However, the honest approach, after a clear plebiscite question, is to introduce legislation and let the chips fall where they may. I’m Kevin Hursh.

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