Brazil implements biodiesel mandate When we hear about biofuel production around the world, it’s usually ethanol production in the U.S. and to a lesser degree biodiesel production in Europe. Here’s some news about biofuels from Brazil. This is from a story by Michael Astor of The Associated Press. Starting January 1, Brazil will require all diesel fuel to contain two per cent biodiesel. All filling stations in the country will be required to offer the two per cent blend. An estimated 800 million litres of biodiesel per year will be required to meet the blend. While Brazil is using various vegetable oils to produce biodiesel, the vast majority comes from soybeans. Brazil plans to slowly increase the percentage to five per cent by 2013. Brazil is already a huge producer of ethanol. In fact, Brazil was a major ethanol user long before the U.S. The U.S. has become the largest ethanol producer in the world, but Brazil is a close number two. Other countries produce far less than the Americans and Brazilians, but you may be surprised by which countries are number 3 and number 4. According to a paper done for the Alberta Institute of Agrologists, the third largest ethanol producer in the world is China. Number 4 is India. I’m Kevin Hursh.
December 28, 2007
Hog industry contracts Recently, I talked with a hog producer who’s going out of business. He’s depopulating his barn and negotiating with secured creditors. He’s had to strike deals with the creditors to provide money to feed the hogs and pay the employees while the barn is being emptied. At the end of it all, a creditor will own the barn, but it will be practically worthless. No one wants a hog barn these days. Many unsecured creditors will not be paid. Canadian hog producers have lost a pile of money in the past 20 months, but American producers have been profitable until recently so they haven’t been cutting production. Thus, a quick market turnaround is unlikely. Most analysts believe the Canadian industry is 12 to 18 months away from making any money. For many producers, the losses are simply too large. Either they or their lenders are pulling the pin. Even a number of Hutterite barns are shutting down. Some facilities could reopen when profitability returns, but many will not. Despite the various farm safety nets and some provincial assistance like the new loan program in Saskatchewan, 2008 is going to be known as the year of the big contraction in the Canadian hog industry. I’m Kevin Hursh.
December 27, 2007
Wheat PRO increases by more than $1 per bushel With the Christmas holiday and with the various government announcements on farm safety nets, the December 20 Pool Return Outlook from the Canadian Wheat Board didn’t get as much attention as usual. However, there was a big jump in the price outlook for wheat. The PRO on wheat was up by well over a dollar a bushel as compared to the previous month. No. 1 CWRS wheat with 12.5 per cent protein now has a PRO of $7.30 a bushel after deducting average Saskatchewan freight and handling. The previous high for wheat was back in 1995-96 at $5.68 a bushel. The most recent PRO also saw a price rise for durum. It was up by 25 to 35 cents a bushel. No. 1 durum with 12.5 per cent protein has a price projection of $11.35 a bushel. That eclipses the previous high price of $6.67 back in 95-96. Pool B feed barley in the current crop year has improved to $4.16 a bushel, well over any export feed barley price seen previously. Malting barley PROs were unchanged on December 20. The top grade of two-row has an expected price of $4.86 in Saskatchewan. That’s only a little bit better than the $4.52 available back in 95-96. Malting barley prices are a bit disappointing compared to the prices for many other crops. I’m Kevin Hursh.
December 24, 2007
Saskatchewan announces livestock loan program The cattle and hog loan program announced on Friday by the Saskatchewan government is targeting $30 million to hog producers and $60 million to cattle producers. However, the program is likely to be much more significant for hog producers than for cow-calf operators. Cattle producers can borrow $75 per head for calves, feeders and bred heifers based on August 1 inventory. A producer with a hundred calves back on August 1 will be able to get a loan of $7500. The loans will be termed out for three years starting January 15 of 2009. The hog loans will be much larger for any producer with a sizable operation. For market hogs, the loan is available on animals marketed between October 1 and May 2 of next year. The loan amount is 90 per cent of the difference between $140 per hundred kilograms and the weekly pooled price. For many of the weeks this fall the loan should be more than $30 per hog and the program covers seven months of marketing. For operations selling weanlings, loans of $10 per head are available for the same time period. The loans on market hogs will start to be paid back after May of next year if the market price exceeds $140 per ckg. In May of 2009, the loan will be termed out over three years. Weanling loans will also be termed out at that time. A lot of hog operations are in serious trouble and these low-interest loans are what the industry had on its Christmas wish list. I’m Kevin Hursh.
December 21, 2007
AgriInvest details announced The federal government has announced more details on the new AgriInvest program including the $600 million kick-start. The kick-start will be based on 2.63 per cent of a farmers average Allowable Net Sales from previous years. An additional federal deposit may be made at a later date depending on availability of funds. Farmers will not have to make a matching deposit to receive the kick-start money. Most farmers will automatically receive a letter with information on their share of the $600 million and they will have the option to either withdraw the funds or keep the funds on account. Beyond the kick-start, producers will receive a notice indicating how much they can deposit to their account after their 2007 income tax information is filed. Deposits will be based on up to 1.5 per cent of Allowable Net Sales. Governments will match this deposit. There will be a limit on how much money can be held in AgriInvest accounts. The maximum will be 25 per cent of average Allowable Net Sales. Like the old NISA program, farmer deposits will not be tax deductible and will be held in fund 1. Government contributions will be held in fund 2 and will not be taxable until withdrawn. Governments are reviewing whether there will be withdrawal triggers. Governments are working with banks and credit unions to arrange for accounts to be held in financial institutions. I’m Kevin Hursh.
December 20, 2007
Livestock assistance falls short A communiqué was released yesterday afternoon from federal and provincial ministers of agriculture talking about all the wonderful support programs that will be available for cattle and hog producers. While improvements are coming to a number of farm safety net programs, there won’t be a lot of producers jumping for joy. AgriStability is just the old CAIS program with enhanced negative margin coverage and inventory evaluation. Interim payments and targeted advance payments are supposed to get money into the hands of producers more quickly. While that sounds good, governments haven’t even implemented AgriStability yet. That’s also the situation with AgriInvest, the new savings account type program. Long ago, the feds promised a $600 million kick-start for AgriInvest that producers could withdraw immediately. However, since AgriInvest isn’t yet established, there’s no estimate of when this kick-start money will be available. The feds are also promising changes to the Advance Payments Program so that larger loans will be available to hog and cattle producers. Again there’s no time frame for when this will happen. Politicians and bureaucrats may be happy with progress on the new farm safety nets, but hard-pressed livestock producers can be forgiven if they feel under-whelmed. I’m Kevin Hursh.
December 19, 2007
U.S. passes Energy Bill There’s some big news for those who believe in biofuels. Both the U.S. Senate and the Congress have passed the Energy Bill. President Bush has promised to sign the bill into law and that’s expected to happen shortly. In addition to increasing the average fuel economy of new cars, the bill also increases the renewable fuel standard – the amount of renewable fuels that have to be used in motor vehicles. Nine billion gallons of renewable fuels is required in 2008. Under the bill, that will progressively increase to 36 billion gallons by 2022. Much of that is to come from using cellulose –straw, switchgrass and woodchips – as the source for producing ethanol. However, cellulose technology is still a work in progress so the new standards will mean a growing demand for ethanol from corn. At 36 billion gallons a year, renewable fuels will account for 25 per cent of American fuel consumption. The American action is a boost for Canadian biofuel plants and it’s evidence that demand for grain and oilseeds will continue to increase. I’m Kevin Hursh.
December 18, 2007
Ontario supports its livestock sector As the new government in Saskatchewan ponders how to provide support to the livestock sector, there are a couple of templates to follow. Some time ago, Alberta earmarked $165 million that will be paid out by tinkering with CAIS reference margins. Just last Friday the Ontario government announced a $150 million assistance package. Of that amount, $130 million will go to about 13,000 cattle, hog and horticultural producers to help them deal with immediate financial challenges. That’s an average of $10,000 per farmer. Payments will be based on historical records of allowable net sales. For cattle and hog producers, the payment will be 12 per cent of allowable net sales, while the payment for horticulture will be two per cent. The payment cap per individual farmer is $3 million and no application forms are necessary. There is at least one proviso in the Ontario program that probably won’t be popular. To be eligible, producers must have at least half of their total commodity sales from cattle, hogs or horticulture. Federally, the promises to date have centered on making more loans available. There have also been vague suggestions by the feds that they will expedite payments from CAIS and the new AgriInvest. At least Alberta and Ontario are putting up some new money that isn’t just extra debt. I’m Kevin Hursh.
December 17, 2007
Record corn use for ethanol and record corn exports As everyone knows, American ethanol production continues to increase. The rate of increase has slowed somewhat because the economics of ethanol production aren’t as favourable as a couple years ago, but new ethanol plants continue to come on stream. For this crop year, the USDA is estimating that a record 3.2 billion bushels of corn will be used to produce ethanol. What’s surprising is that this will also be a record year for American corn exports. The latest USDA estimate has corn exports at 2.45 billion bushels, which would edge out the previous record set back in 1980. In percentage terms, about 24 per cent of the American corn crop is going to ethanol, with about 19 per cent of the corn being exported. Record ethanol production, record corn exports and corn carryover stocks will still end up about the same as the previous year. This has been made possible by the monster U.S. corn crop of over 13 billion bushels, which eclipsed the previous record by more than 10 per cent. A year ago at this time, many analysts were predicting a shortage of corn. Instead, so many acres switched over to corn that soybeans and wheat are in short supply. The battle for acres means all prices are strong. I’m Kevin Hursh.
December 14, 2007
Calendar offends cattle producers
It’s the time of year when many companies and organizations give out calendars. A calendar from one prominent national institution has raised the ire of cattle producers. On one month of 2008, the message on the calendar says, “By eating meatless meals once a week, you can make a positive impact on the environment. That’s because growing grains and vegetables uses a lot less water and energy, than raising animals, like cows for our beef consumption.” The calendar tip goes on to state the falsehood that it takes 2200 litres of water to make a quarter pound burger. The correct Canadian figure is less than 15 litres. “Go meat free once a week,” concludes the calendar. “You’ll find there are many tasty alternatives.” This calendar comes from an organization that deals with thousands of producers across the country. Not surprisingly, Saskatchewan livestock groups have complained about the misleading information. In particular, beef organizations have pointed out that cattle can make use of land unsuitable for growing crops. To its credit, the institution distributing the calendar is recalling it and has apologized. For that reason, I won’t name the distributor. The incident has several lessons. First, it’s amazing the propaganda that opponents to livestock agriculture have been able to pass off as fact. Second, people outside of agriculture often don’t know what to believe. And third, the voices of producers can make a difference. I’m Kevin Hursh.
December 13, 2007
There's no more Sask Ag and Food There’s a new name for Saskatchewan Agriculture and Food. The new government has decided each department will be now be a ministry. Therefore the name will be Saskatchewan Ministry of Agriculture. Back some years ago, Saskatchewan Agriculture and Food was given the unwieldy moniker of Saskatchewan Agriculture, Food and Rural Revitalization. A few years later the rural revitalization part was moved to a different department and the name reverted back. It’s pretty easy to shorten Saskatchewan Agriculture and Food to Sask Ag and Food and the abbreviation of SAF is widely recognized. Now that the official name is Saskatchewan Ministry of Agriculture, I suspect many people will shorten it to the less formal Saskatchewan Agriculture. The wheat sheaf has been removed from the official logo. That doesn’t bother me because most people under the age of 50 have never had much to do with sheaves anyway. However, the name now appears with the Saskatchewan Coat of Arms and I don’t think that has much of a connection with most people. It’s interesting to note that while we’ve gone through numerous name changes, the United States Department of Agriculture or USDA has had the same name for as long as I can remember. I’m Kevin Hursh.
December 12, 2007
Cheques for carbon credits Farmers who signed up their carbon credits with C-Green Aggregators are now receiving their second payments. This is for carbon sequestered from 2003 to 2006. The program rewards producers who have practiced minimum tillage and direct seeding. C-Green has been selling the aggregated carbon credits through the Chicago Climate Exchange. A total of $11.2 million is going out to Saskatchewan producers in this cheque run. Previously $9.3 million was paid. C-Green says 14 per cent of the total amount is being withheld as they try to determine whether GST has to be paid on the carbon credits. A total of over five million acres were enrolled. Producers in the black soil zone received more per acre than producers in the brown soil zone because more carbon is deemed to collect under minimum tillage in wetter areas. C-Green is already working on the documentation for the next carbon-pooling period. Alberta is coming out with its own program and the feds are also talking about a compliance-based carbon credit system. As well, there have also been a few fly-by-night schemes trying to entice producers. It’s difficult to know how the future will unfold and whether signing up with C-Green will provide the best return. However, at this point, C-Green is the one carbon aggregator that has actually paid a significant amount of money to a large number of producers. I’m Kevin Hursh.
December 11, 2007
Crop price projections for 2008 When doing crop planning for 2008, what grain prices should you pencil in? Here are projections from Greg Kostal of Kostal Ag Consulting of Winnipeg. On spring wheat, Kostal believes it’s reasonable to assume prices will be at least as good as this year – around $6.50 a bushel on top quality CWRS. On durum, Kostal believes prices could be as good as $8 a bushel in the new crop year. However, if too much durum is produced around the world, durum prices might not be any better than spring wheat. His malting barley price expectation is $5 a bushel, while feed barley might be in the $3.50 range. Kostal believes there’s no rush to sell old crop canola. He thinks the price will likely have another leg up. For new crop, prices of over $10 per bushel can be locked in and that price may continue to improve. New crop yellow pea prices of over $7 a bushel can be locked in right now and Kostal believes the new crop market should be able to hold that $7 price. For both green and red lentils, Kostal is penciling in 20 cents a pound for next year. For yellow mustard, Greg Kostal is anticipating new crop contracts of around 35 cents a pound for yellow, with lower prices for brown and oriental mustard. Of course, no one knows for sure what may transpire, but it’s nice to hear a market analyst who will go out on a limb and make some forecasts. I’m Kevin Hursh.
December 10, 2007
Changes coming to barley marketing It appears that, one way or another, there will be more barley marketing freedom in the new crop year. The court has ruled that federal legislation is required to for the government to create an open market for barley. The federal government is appealing that ruling and the appeal will be heard on February 21. Regardless of what happens with the legal wrangling, changes are coming. At a producer meeting on Friday sponsored by CGF Brokerage and Consulting of Saskatoon, Al Morris of the Winnipeg company Integrated Malt Barley Management said contracting programs are coming for malting barley. Morris fully expects companies to be contracting directly with producers for malting barley at attractive prices. Canadian Wheat Board rep Blair McCann spoke to the same meeting and he confirmed that an announcement will likely be made in the next week or so concerning changes in barley sales. I would expect the Canadian Wheat Board to retain some involvement in barley marketing, but it appears that we’ll be moving to something that more closely resembles cash sales. We shouldn’t have to wait too long to find out the details. I’m Kevin Hursh.
December 7, 2007
Durum market analysis The Market Analysis Division of Agriculture and Agri-Food Canada has come out with a bulletin on the market situation and outlook for durum. The European Union is the largest producer and the largest consumer of durum in the world. The four North African countries of Algeria, Morocco, Tunisia and Libya constitute the world’s largest import market. Canada is the largest durum exporter. This crop year, we’re expected to capture 55 per cent of the world durum market. The other major exporters are Europe and the United States. The three major exporters have record low carry out stocks and that means record high prices. Here in Canada, the expected premium for durum over spring wheat is nearly $5 a bushel. For 2008-09, the Ag Canada analysis says world production is expected to increase by 13 per cent as producers react to the record returns. However, due to lower carry-in stocks, the world supply of durum is forecast to increase by only 4 per cent. Ag Canada says prices are expected to fall sharply due to increased production by the three major exporters, but the report doesn’t provide a guesstimate of just how far prices will slip. The analysis does note the price drops will be constrained by low carry-in stocks and strong demand. I’m Kevin Hursh.
December 6, 2007
Information on malting barley Here are a couple of interesting pieces of information on malting barley. The number of grades of malting barley is going to shrink from three to one as of August 1. The Canadian Grain Commission will implement the change based on the recommendation of the Western Standards Committee. While the price for the top grade of malting barley is the one you hear quoted, most malting barley has not been making the top grade. It’s probably a good thing that there will be just one grade of malting barley starting in the new crop year. A barley sample will either make the malting specs or it won’t. Still with malting barley, the Canadian Malting Barley Technical Centre is advising producers not to store malting barley in large bags. Big plastic bags are growing in popularity as a way to store cereal grains. I know some producers who are renting land that doesn’t have any grain storage and the portable bagging system is a good alternative for them. Unfortunately, the technical centre says that because of the lack of air circulation and the possibility of moisture migration inside the bag, malting barley will go out of condition very rapidly. Producers are being cautioned that storage in large plastic bags will likely result in the rejection of the barley for malting. I’m Kevin Hursh.
December 5, 2007
Dropping dollar helps cattle prices Cattle prices showed significant improvement in November. At the beginning of November, the Canadian dollar hit $1.10. That cut the price of both fed cattle and feeders. As the dollar slipped back to par, cattle prices improved. For the week of November 5 to 9, Saskatchewan Agriculture reported a fed steer price of just slightly over $70 per cwt. Last week, the fed steer price ranged from $81 to $86, a dramatic improvement in just a few weeks. In early November, 500 to 600 pound steer calves were averaging about $98 per cwt. Last week in Saskatchewan, they averaged $1.05. Although feeder cattle prices have been rising in recent weeks, analysts say prices, depending upon the weight range, are still $6 to $17 per cwt below prices of a year ago. It’s interesting to note that cull cow prices have not changed much despite the opening of the American border to older animals on November 19. In the first week of November, D1 and D2 cows ranged from $23 to $37. In the last week of November, the price range is quoted at $20 to $38 per cwt. I’m Kevin Hursh.
December 4, 2007
Time for more irrigation development? The stars may be aligning to see some significant new irrigation development in Saskatchewan. The Saskatchewan Irrigation Projects Association has been advocating more public investment in irrigation development for years, but little has happened. At this year’s SIPA meeting underway in Moose Jaw, there’s renewed optimism that the time is now right. There are about 100,000 acres irrigated from various projects with Lake Diefenbaker as the source of the water. Recent studies show expansion within the existing irrigation areas and the development of two new projects could bring an additional 450,000 acres on-line. The new projects would be Westside, west and north of Outlook, and Qu’Appelle South in the Tugaske to Marquis area. There’s ample water available from Lake Diefenbaker for these potential new acres. Alberta irrigates more area with a lot less water supply. Up until now, the political will for more irrigation has been lacking. Development carries a very large price tag. However, there’s a new government in Saskatchewan and the equalization fight between Saskatchewan and Ottawa is evolving. Both governments are running surpluses. And climate change has emerged as a critical issue. The studies show the increase in agricultural production and related spin-offs could pay for the public investment in irrigation, but selling the idea to the public will require a thorough explanation of all the benefits from water development – benefits that range from tourism to ecology. I’m Kevin Hursh.
December 3, 2007
Beware the Chinese and American economies While biofuels are often credited with the strength in grain prices, there are many other factors at play. One of these is the increase in Chinese imports, particularly imports of oilseeds. The Chinese give soybeans preferential treatment over canola, but their buying still affects the entire oilseed complex. While the Chinese economy is hot, it isn’t all good news. Market analyst Errol Anderson of Pro Market Communications in Calgary says there’s runaway inflation in China. He expects the government will eventually institute price limits and he says the Chinese economy will eventually go into recession. The U.S. economy is another worry. The U.S. national debt is now over $9 trillion. To put that in perspective, it’s more than $30,000 for each citizen. The debt is growing by about $1.5 billion a day and much of that is money borrowed from the Chinese. The Americans have a weak dollar, but the staggering debt doesn’t seem to be something they talk about much. How long before the American economy implodes? Canadian grain, beef and hogs are reliant on trade. There are storm clouds on the horizon. 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).
