Hursh Consulting & Communications: Kevin Hursh on Agriculture

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Hursh on Agriculture

September 28, 2007

Durum becomes a top money maker
The projected price for durum wheat is nothing short of amazing. In yesterday’s Pool Return Outlook from the Canadian Wheat, the expected price for durum increased by more than $3 a bushel. Such an increase in just a month is unprecedented. The farm gate price for the top grade of durum in Saskatchewan is expected to be about $10.50 a bushel. Even No. 3 durum is expected to have a price of around 10 bucks. With a price premium of $4 a bushel over spring wheat, durum has gone from being a low-priced dog to being a star performer. In makes one wonder what will happen next year. Most of the durum is grown in the southern grain belt of Saskatchewan where there are better odds of getting it harvested with a good grade. However, some years you can find durum grown all the way to Melfort in the northeast and even north of the Battlefords in the northwest. Will durum acres explode next year? If they do, good prices could be a one year phenomena. As the major exporter in the world, our production levels have a big impact on world price levels. The other theory is that with very expensive seed and the fear of over production, durum acres won’t balloon and good returns will be around for more than a year. Place your bets. I’m Kevin Hursh.

September 27, 2007

Organic dogma
Did you know that Saskatchewan has a Legislative Secretary on Organics? He’s Lon Borgerson, the Regional and Co-operative Development Minister. Borgerson has prepared an extensive and glowing report on organic agriculture that he’s just presented to Premier Lorne Calvert. Saskatchewan has 1,181 certified organic operations plus 184 in transition. Another 1,088 operations claim to produce organically but aren’t certified. In his report Borgerson recommends that Saskatchewan set a goal of having 10 per cent of Saskatchewan farmers in organic production by 2015. He also has recommendations for significant support to organic growers. This includes $10 an acre for farmers in transition to organic production and the province would pay 75 per cent of annual certification fees up to $750. Saskatchewan does have a great opportunity in organic agriculture, and it makes sense for the government to foster the growth. However, as a conventional farmer, I take offense to the inference that my practices are polluting the environment and leaving harmful residues in food. I would not support Borgerson’s recommendations that organic food agriculture be taught in the school system, nor that organic food be procured for public institutions. I’m Kevin Hursh.

September 26, 2007

Innovative mustard pricing
Mustard Capital Inc., the new dry mustard mill at Gravelbourg has come out with some innovative pricing contracts. Pardon the pun, but the mustard market is hot right now, especially for yellow mustard. Yellow mustard has been selling for as high as 40 cents a pound. Mustard Capital Inc. is offering 60-day price averaging with guaranteed delivery. Producers can choose one of four 60-day periods starting at the beginning of December. Alternatively, producers can price average for the balance of the crop year with delivery at MCI’s call. Or they can take a fixed spot price, which is the way business is usually conducted. Price averaging may be attractive in such a volatile market. No one wants to sell their yellow mustard at 35 cents a pound, only to see the price go to 55 cents. Price averaging would allow producers to capture part of any price increase. As with any contract, producers should read and understand all the details, including the storage payments, the timing of payments and how the price averaging is calculated. It’s great to see a new Saskatchewan enterprise like Mustard Capital Inc. also pioneering new payment options for producers. I’m Kevin Hursh.

September 25, 2007

The Early Payment Option
Following my comment yesterday about the long time it takes the federal government to approve an increase in initial payments, I received an e-mail from someone familiar with the federal approval process. There are about 50 steps. It has to go up the ladder in the agriculture department and then the finance department. Then the Treasury Board staff has to review and approve the due diligence done by agriculture and finance. Finally, the request has to go in front of the Treasury Board. Happily, initial payment levels aren’t nearly as important as they once were. Many producers are using the Early Payment Option. Right now on CWRS wheat, you can get 80 per cent of the Pool Return Outlook and it only costs 11 cents a bushel. If you want 90 per cent of the PRO, the discount is 24 cents a bushel. Most producers are probably shying away from the 100 per cent EPO on spring wheat because it carries a discount of 50 cents a bushel. With an EPO, you effectively lock in a floor price, but you’re still part of the pool account if prices go higher. It’s going to be interesting to see what happens with the new Pool Return Outlooks for wheat, durum and barley. They're scheduled for release on Thursday. I’m Kevin Hursh.

September 24, 2007

Initial payment flap
The new agriculture minister Gerry Ritz issued an odd statement on Friday. Ritz is obviously smarting from criticism that the government has been slow to raise initial grain payments. Here’s what Ritz had to say. “By the time the Canadian Wheat Board released its initial prices on August 2, it was already clear that commodity prices were rising and the CWB acknowledged the need to raise initial prices. On August 15, the Canadian Wheat Board officially asked the government for the initial price increases.” And here’s the kicker by Ritz. “It’s unfortunate that it took the CWB nearly two weeks to make the request to begin the process to adjust the initial price.” Ritz concludes the news release by saying he and his department officials are working hard to do the due diligence and deliver the best possible decision as quickly as possible. Ritz chastises the board for a two-week delay in making an official request, but the government hasn’t acted in five weeks. How can it take that long to figure out that grain prices are up dramatically? Beyond that, why doesn’t the government give the CWB the ability to adjust initial payments without going through the government bureaucracy? I’m Kevin Hursh.

September 21, 2007

Fertilizer price disparity
Fertilizer prices this spring were a lot cheaper on the U.S. side of the border. Keystone Agricultural Producers in Manitoba commissioned a study this spring by PricewaterhouseCoopers. The results have just been released. Prices in southern Manitoba were compared to prices at input suppliers just across the border in North Dakota. There was a dramatic difference. Across the range of fertilizers, Manitoba farmers were paying 33 per cent more than their American counterparts. The biggest difference was on anhydrous ammonia where North Dakota farmers were paying an average of $522 a tonne while Manitoba farmers were paying $852. That’s a 63 per cent price difference. The study suggests some possible reasons for the disparity. Pre-purchase of product prior to the major price increase in the spring might have made a difference. Feedback from the survey also revealed that most dealers in North Dakota sourced fertilizer from both the U.S. and Canada, while most dealers in Manitoba sourced only Canadian product. Still, it seems odd that such a huge price difference could exist. This is an area that would seem to warrant further study. I’m Kevin Hursh.

September 20, 2007

Calf price analysis
A year ago at this time, barley prices were just starting to spike and feeder calf prices were just starting to drop. Graphs prepared by Sandy Russell of Saskatchewan Agriculture with the help of data from Canfax show the price trends this year and last year. The current price of 550-pound feeder steers is around $1.12 a pound versus $1.33 last year. Last year prices dropped almost steadily through the fall and closed the year at $1.05 a pound on 550 weight steers. Last year’s barley price in Lethbridge peaked at the end of the year at about $3.50 a bushel. The current barley price in Lethbridge is around $4.00 a bushel. The price of finished steers isn’t much different than a year ago. When you add it all up, it looks like the price of feeder calves could go even lower. The main fall calf run comes in October. The calf run will start with feeders running at a steep discount to the prices of a year ago and unless something unforeseen happens, prices are likely to continue slipping. It isn’t shaping up as a good fall for cow-calf producers. I’m Kevin Hursh.

September 19, 2007

Cash advances for cow-calf producers
Saskatchewan cow-calf operators now have access to interest free cash advances, but in many cases the amounts advanced will be small. Legislative changes came into effect earlier this year that allow cow-calf producers access to the Advance Payments Program. In Saskatchewan, the program is being administered by the Canadian Livestock Advance Association, which has been formed for this purpose by the Canadian Canola Growers Association located in Carman, Manitoba. The Canadian Canola Growers have administered cash advances on non-board grains for many years, so getting into cattle was a natural extension. There’s one important difference regarding the security taken on grain advances versus the security for livestock advances. On grain, either production insurance or CAIS can be used as security until crops have been harvested and then the grain becomes the security. Since production insurance is not available for cattle producers, CAIS and the calves are used as security. Many producers don’t have a very large CAIS reference margin and the Advance Payments Program is based on a percentage of the reference margin. At least the program is a start. Hopefully there can be improvements in subsequent years. I’m Kevin Hursh.

September 18, 2007

Importing herbicides from the U.S.
Producers can import Touchdown, Banvel II or Roundup Weathermax through the new Grower Requested Own Use (GROU) Pesticide Importation Program for use this fall, but they’ll have to act quickly. Step one is to pre-pay container disposal fees. Step two is to go onto the Pest Management Regulatory Agency’s website for an application form and all the details. Unfortunately, the PMRA cannot guarantee that applications received after September 21 will be processed. The products aren’t supposed to be used after a killing frost so the PMRA will cease processing applications where a killing or damaging frost has occurred. The Grower Requested Own Use program will resume in the spring, although the details of the timing are not available. The list of eligible products will expand in the spring. In addition to Touchdown, Banvel II and Roundup Weathermax, the products Reflex and Basagran will be on the list. If any of these products are less expensive in the U.S., Canadian growers will have a clear mechanism for importing the herbicides for their own use. For all the details, go to the PMRA website (www.pmra-arla.gc.ca) and look under the Grower Requested Own Use Program. I’m Kevin Hursh.

September 17, 2007

$10 for canola and $6 for wheat
Most grain prices are showing amazing strength. Well over $9 a bushel is available for canola for fall delivery. If you want to price your canola for next summer, prices of around $10 a bushel are available. The market is providing a significant premium for holding the product. If you want to price next year’s canola crop, over $9 a bushel is available. On spring wheat, the Canadian Wheat Board’s Fixed Price Contract is offering a substantially better price than the last Pool Return Outlook. For No. 1 CWRS wheat with 13.5 per cent protein, the PRO after average Saskatchewan deductions is $5.40 a bushel. Meanwhile, the Fixed Price for wheat as of last Friday was just over $6. The price for yellow peas has been as high as $7 a bushel for November delivery. Large green lentils are finally above 20 cents a pound, canaryseed is approaching 20 cents and yellow mustard is nearing 30 cents a pound. All too often attractive prices have been short lived. Are things different this time? How long should producers wait before pricing? At this point, the market indicators seem strong, but there are never any guarantees. I’m Kevin Hursh.

September 14, 2007

Red ink in the hog industry
Tough times continue for pork producers. In his hog market update, livestock economist Brad Marceniuk of Sask Ag and Food notes that with current prices, producers are losing big. He says there probably won’t be a return to profitability until the second quarter of 2008. Some producers locked in prices that are helping to limit their losses, and well-established operations try to build up a reserve in the good times to carry them through periods like this. Still it’s a rough time for the industry and there will be casualties. Industry sources say that a lot of young pigs from Canada are moving into the U.S. to be fed to slaughter weight. American corn is less expensive that barley right now. Plus the U.S. has a better packing plant situation. Here in Saskatchewan, work is continuing on a new packing plant that would have producer ownership. However, a new plant is far from a certainty and even if it proceeds, it’ll be quite some time before it’s up and running. Pork production is an important segment of agriculture in Saskatchewan, but the industry is concentrated in the hands of just a few hundred producers. For that reason, there hasn’t been a lot of news about the hard times currently facing the pork industry. I’m Kevin Hursh.

September 13, 2007

Food Miles are over rated
Counting Food Miles and adhering to a 100-mile diet have become big trends, particularly in urban Canada. As farmers in Saskatchewan many of us have not heard much about these trends. I used to think a 100-mile diet was the distance to the next fast food restaurant. Of the surface, the local food movement makes sense. Why not support local producers and the local economy? Why not decrease the fossil fuels used to transport food thousands of miles? Isn’t it better to know the producer you’re buying from? Yes, there are merits to supporting local food production and certainly there are many fruits and vegetables imported into Saskatchewan that we should be producing here. However, like most concepts, local food consumption has its issues. Consider a product that’s traveled 100 miles in the back of a pickup truck to be sold at a farmers’ market. Is the transportation actually less than a semi-load coming a thousand miles? And how do we justify a 100-mile diet when Saskatchewan is a huge exporter of food products around the world? We expect consumers in other parts of Canada and in other countries to buy our grains, pulses, oilseeds, beef and pork because our products are high quality and competitively priced. We wouldn’t sell much if consumers everywhere stuck to a completely local diet. I’m Kevin Hursh.

September 12, 2007

Dealing with flax straw

The Saskatchewan Flax Development Commission is working with Ag Canada on a plan for the management of flax straw. No one likes burning, but flax straw is wiry and difficult to deal with in subsequent field operations. For producers lucky enough to have a market for their flax straw, stripper headers work well because it leaves most of the straw standing and it can be later cut and baled. Most producers don’t have access to markets for their straw, so if they don’t want to burn it, they have to do a good job of chopping it with the combine. SaskFlax has an article on its website outlining some of the major factors for effective chopping:
-Rotary combines are generally better for chopping straw than conventional machines.
-Certain choppers and spreaders are much more effective than others.
-The preharvest use of glyphosate will help flax straw dry out and break down.
Of course, the more moisture still in the plant when you combine, the tougher it will be to break up the stalks. SaskFlax notes that some producers utilize a forage chopper without the silage wagon to pick up windrowed straw and then blow the residue onto the field. To see the full article, go to www.saskflax.com. I’m Kevin Hursh.

September 11, 2007

Who speaks for Saskathewan farmers?
The various farm groups in Saskatchewan have become largely invisible. Maybe they’re doing policy work and lobbying behind the scenes, but they sure aren’t in the news much. APAS, the Agricultural Producers Association of Saskatchewan, purports to be the umbrella farm group for the province. APAS has had some leadership issues and throughout its history has been plagued by staffing problems. APAS did have a meeting with the new federal agriculture minister Gerry Ritz and they issued a news release about that meeting. For some reason, they haven’t even bothered to post the release on their redeveloped website. The Saskatchewan Association of Rural Municipalities has been around forever, but their farm policy work isn’t making many headlines either. SARM has issued a few news releases in recent months, but the releases are usually just reactions to government policies. The Saskatchewan Stock Growers Association has had all sorts of internal issues this year. The only news release they’ve had in 2007 was the announcement of an interim office manager to sort out their problems. The farm group generating the most news releases has been the Western Canadian Wheat Growers Association. Most of those releases are about ending the Canadian Wheat Board’s monopoly. Meanwhile, the National Farmers Union has issued a number of releases from the other side of the Wheat Board debate. It’s interesting to note that APAS and SARM are afraid to say anything about the Wheat Board for fear of alienating a bunch of their supporters. There isn’t much leadership coming from Saskatchewan farm groups these days. I’m Kevin Hursh.

September 9, 2007

Harvest rains
Precipitation maps are telling an interesting story. In the one-month time period from August 7 to September 6, precipitation levels have been very different in the southern grainbelt as compared to the central and northern grainbelt. In the south, including Swift Current, Moose Jaw, Regina and everything south of there, rainfall amounts in the past month have been below 40 mm, with many areas receiving less than 20 mm. That’s why harvest is quite advanced across the south. North of there, most areas have had 50 to 60 mm, with huge rainfall totals in an area around Saskatoon. Prince Albert and Meadow Lake have also been very wet over the past month. In many central and northern grainbelt areas, harvest progress has been a struggle. Crops were generally less mature to start with and then lots of rain in August has further aggravated the situation. It’s also instructive to look at total growing season precipitation. This is the precip from April 1 to the end of August. Growing season precipitation has been well below normal for southwestern Saskatchewan and all of southern Alberta. This is the region most in need of fall rains to recharge subsoil moisture levels. I’m Kevin Hursh.

September 7, 2007

Australia inches towards GM crops
The Market Analysis Division of Agriculture and Agri-Food Canada has released a report on agriculture in Australia. The main canola producing states in Australia have legislation that prevents commercial planting of genetically modified canola. According to this report by Agriculture Canada, there is no clear evidence that Australia is extracting significant premiums with its non-GM canola and as a result GM commodities may soon be approved for production “down under”. For their part, Aussie farmers are expected to explore the financial and environmental benefits of herbicide tolerant canola should the opportunity arise. That would potentially place Australia in direct competition with Canada in important export markets such as Japan and Mexico. It’s interesting to note that Australia has launched field trials for drought tolerant GM wheat. The government body in charge of genetic modification made the decision after extension consultations with the public and other government departments and agencies. The trials could result in new GM wheat varieties that will be ready for commercial release in five to seven years. I’m Kevin Hursh.

September 6, 2007

Grain burning stove made in Saskatchewan
Grain burning stoves have received a lot of attention in recent years. Cutting heating costs while using a locally available fuel source is appealing. Prairie Fire Grain Energy Inc. of Bruno, Saskatchewan is one of the companies in the marketplace. Prairie Fire is ready to officially launch its new Saskatchewan made grain burning stove. They’ve teamed up with Mifab Manufacturing of North Battleford to produce what they believe is the first grain burning stove to be made in the province. The stove has been tested and certified to burn wheat and complies with safety standards. According to Delmer and Janet Hering, the couple behind Prairie Fire, their new stove will heat in excess of 2,000 square feet using an average of one bushel of grain per day. Over the past year, most grains have seen a dramatic increase in value. The idea of burning good grain isn’t as appealing. Prairie Fire is working with the University of Saskatchewan in a research project that will quantify the combustion energy of various samples of grain while studying the emissions. The company has also been invited to participate in a study of the use of fusarium infected grain as a source of fuel. Using biomass not suitable for human consumption or the feed market would have a lot of advantages. More information is available at www.grainburningstoves.ca. I’m Kevin Hursh.

September 5, 2007

Producers weigh kochia control decisions
The harvest of crops such as field peas occurred very early in many parts of southern Saskatchewan. As a result, kochia weeds that were clipped during harvest have had lots of time for additional growth. Many producers across the south are wrestling with whether control measures are warranted. Clark Brenzil, the provincial weed control specialist with Saskatchewan Agriculture says that with many crops cut in early August, substantial weed seed production is a distinct possibility. This is more often a problem in Montana. Down there, there has been some research into what herbicides to use and what timing is the best. Seed reduction was the greatest when kochia regrowth was 6 to 14 inches tall. This was an ample amount of new green tissues suitable as a target for herbicides, but the plants had not yet produced a large number of viable seeds. It’s interesting to note that kochia plants in the study at Havre, Montana were able to produce 5,700 seeds per plant by September 21 following a mid August harvest. In addition to producing seed, high density kochia patches could cause coverage issues for herbicides next year. For these reasons, some producers are going to the extra trouble and expense of spraying fields this fall. Unfortunately, it takes a substantial rate to get control. I’m Kevin Hursh.

September 4, 2007

Sweet program for Ontario grain producers
Ontario has just rolled out a three-year Risk Management Program for its 25,000 grain and oilseed producers. The program will provide support to Ontario producers when prices fall below a support price. Support prices are being established for each commodity based on the cost of production. For this year, there will be a single support level available for each crop. For 2008 and 2009, there will be four support levels available for each commodity, with the estimated cost of production being the highest level. To take part, producers have to enroll for all three years and they have to be in production insurance as well as the CAIS program. There will be producer premiums, but premiums have been waived for this first year. Ontario is paying 40 per cent of the program cost and is lobbying the federal government to pick up its traditional 60 per cent share of the funding. So far the feds have refused. It’s difficult to see how the feds could cost share this type of program in one province and not make the same funding available across the country. While grain prices are currently strong, there’s no guarantee that will continue and there’s no guarantee that prices can stay ahead of the cost of production. It’ll be interesting to see more details on the Ontario Risk Management Program and we shouldn’t have to wait long. The first payments to producers are expected in December. I’m Kevin Hursh.

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