Blame ethanol The tide of public opinion is turning against ethanol production, as if it is solely responsible for food shortages. No doubt the big increase in American and Brazilian ethanol production has played a role in grain price escalation, but a more important factor is the growing demand for food in India and China. Transportation costs are also adding to food prices. As well, it should be noted that when corn or wheat is processed into ethanol, it’s not a total loss for the food chain. The co-product to ethanol is distillers’ grains that are used as livestock feed. Some estimates suggest that a million tonnes of Canadian wheat may be used for ethanol this year. That would be about four per cent of an average Canadian wheat crop. That million tonnes of wheat will produce about 400,000 tonnes of distillers’ grains. When producers are growing wheat for the ethanol market, they choose varieties that have lower protein and higher yields, so total production will be higher than it would be otherwise. We could stop producing ethanol in this country and world grain markets would hardly notice. Remember the years when we had mountains of feed wheat that no one wanted. All it takes is an early frost or lots of wet harvest weather and we will be in the same situation again. When that happens, there will be an ethanol industry to use some of the wheat that’s unfit for human consumption. I’m Kevin Hursh.
April 29, 2008
Huge increase in phosphate prices Keystone Agricultural Producers, the general farm group in Manitoba has released the results of its spring fuel and fertilizer price survey. Good data isn’t readily available on the year-over-year change in these input costs, so the KAP survey of its members provides useful benchmarks. Here are the numbers for urea, 46-0-0. Back in 1999, urea nitrogen was only $268 a tonne. By the spring of 2005, that had increased to $410 a tonne. In 2006, urea was $531. Last year it was $591 and this year, according to the KAP survey it is $618 a tonne. The price increase over last year is only 4.5 per cent, which is the smallest increase among the various types of fertilizer. Anhydrous ammonia, 82-0-0 is $972 a tonne this spring according to KAP. That’s a 10.5 per cent increase over last spring. Back in 2005, anhydrous was $629 a tonne. As everyone knows, the biggest increase has come on phosphate fertilizer. Over the past year, the price of 12-52-0 has nearly doubled going from $617 a tonne in the spring of ’07 to a whopping $1,211 this spring. Back in 2005, phosphate was only $403, one-third of the current cost. There have also been substantial increases in the prices of potash and sulphur. While the Manitoba numbers may be somewhat different than Saskatchewan’s, the trends will certainly be the same. I’m Kevin Hursh.
April 27, 2008
Winter wheat worries Mark Akins, an agrologist with Ducks Unlimited says he’s had a number of calls recently from producers worried about their winter wheat. In many cases, the crop was just coming out of dormancy when it was hit with last week’s unseasonably cold temperatures. Akins says there’s no way of knowing until the weather warms back up for a while, but he suspects the crop will survive the cold temperatures. However, he notes that the crop will likely be set back and the maturity will be a bit later. Producers had just started assessing the winter survival before the cold weather returned. Overall Akins says he was impressed by how well winter wheat came through the winter even in areas without snow cover. While the blast of freezing temperatures after spring growth had started is worrisome, hopefully it won’t cause any serious problems. There are many new growers of winter wheat this year. Statistics Canada has winter wheat in Saskatchewan pegged at 565,000 acres up 50 per cent from 375,000 acres last year. Acreage is also up in Manitoba and Alberta. I’m Kevin Hursh.
April 25, 2008
Wheat and durum prices are dropping Wheat and durum prices have come down dramatically over the past month. In the latest Pool Return Outlook from the Canadian Wheat Board, milling wheat is down 50 to 70 cents a bushel and durum is down 55 cents a bushel as compared to the March PRO. Prices are also down from what is expected in the current crop year. This year, after deducting average Saskatchewan freight and handling, No. 1 CWRS wheat with 13.5 per cent protein is expected to have a total price of $8.93 a bushel. The wheat price estimate for the new crop year has fallen to $8.25. The difference in crop years for durum is even greater. In this crop year, No. 1 durum with 13 per cent protein has a PRO of $12.87 a bushel. The new crop PRO is now $10.42 a bushel. Cropping conditions have improved in a number of key regions for wheat and durum and more acres will be seeded in North America. Of course, lots of things could change. Predicting prices months in advance of the new crop year is always a guess, but these are the best estimates available. New crop malting barley is down 13 cents a bushel in the new PRO. That puts two-row at $6.32 a bushel, but it’s still well above the $4.92 a bushel expected in the current crop year. I’m Kevin Hursh.
April 24, 2008
More storm than moisture The snow and rain over the weekend did not result in a large amount of moisture. The PFRA has posted new accumulated precipitation maps, one of which covers the period from April 15 to 21. The area with significant precipitation is in a band along the Alberta border. There was only a limited amount of precipitation east of a line running from Prince Albert through Saskatoon and down to Swift Current. While Maple Creek received snow, the precipitation quickly peters out as you go east of there. Alberta may have had lots of blowing snow and icy roads, but the Saskatchewan side of the border received more moisture. The greatest amount of moisture, nearly two inches, fell in a small area southwest of the Battlefords. An area from about Leader through Kindersley and up to North Battleford and Meadow Lake received moisture approaching an inch. Other areas on the west side, even though they had quite a bit of snow, had moisture totals of not much more than half an inch. It’s been unseasonably cold and a lot of the weekend snow is still on the ground. There’s been a major seeding delay, but a lot of dry areas in the southern grainbelt don’t have much to show from the storm. I’m Kevin Hursh.
April 23, 2008
A canola crop within the canola crop An increasing percentage of Western Canada’s canola acreage is made up of high stability varieties. The vegetable oil from these varieties is valuable for the reduction of trans fats in food products. Two companies are involved – Dow AgroSciences with its Nexera varieties and Cargill Specialty Canola Oils with varieties under the Victory brand name. Tyler Groeneveld, marketing specialist for Nexera says up to 15 per cent of the Canadian canola crop - over two million acres- will be high stability varieties this year. Within five years, the varieties are expected to account for up to a third of the canola crop. It really is a separate crop from regular canola, since it has to be binned separately and marketed through an identity preserved system. For their trouble, producers are paid a premium. The varieties used to have a significant yield penalty as compared to the top varieties of regular canola. Genetics continue to improve and now there are varieties of high stability canola with very competitive yields. High stability canola has become a major cropping choice and it promises to grow even bigger in the years ahead because the food demand continues to grow. I’m Kevin Hursh.
April 22, 2008
Yes, there will be acreage swings With this year like no other in the grain industry, it isn’t surprising to see some big acreage swings in what producers are planning to seed this spring. Yesterday, Statistics Canada released its seeding intentions report based on interviews with 16,000 farmers across the country. Some crops aren’t showing big changes. Canola, lentils and canaryseed are expected to be virtually unchanged from last year. However, the Canadian acreages of oats and barley are expected to be down 17 and 14 per cent respectively. Spring wheat is up nine per cent, while flaxseed is up nearly 13 per cent. I was surprised that field pea acreage is showing only a 4 per cent increase. I was expected a bigger swing into peas. Mustard is showing a 14 per cent increase, which isn’t as much as you might expect given the excellent contract prices available. Meanwhile, chickpeas are down a massive 59 per cent, an even bigger drop than anyone was predicting. Canadian durum acreage is expected to increase by 22.5 per cent – an increase of more than a million acres. It’ll be interesting to see if the durum acreage increase and the barley acreage drop have any impact on price projections when the new Pool Return Outlook is released on Thursday. I’m Kevin Hursh.
April 21, 2008
Storm pushes seeding back Seeding is going to be delayed for some time, especially on the western side of the province. It isn’t that late in the season and big snowfalls at this time of the year are not uncommon. Therefore, the seeding delay is not worrisome yet. In fact, for many southern areas, the moisture in the weekend storm was very welcome. However, all eyes will now be on weather forecasts and the calendar. The days ahead are looking abnormally cold, which will mean slow melting and drying. There’s also a possibility of another weather disturbance rolling through and pushing the time clock further. Seeding has been starting earlier in recent years. Many farms are getting larger and even with big equipment it’s a stretch to get everything seeded on a timely basis. In many years, early seeded crops are the ones that yield the best, but not everything can go in the ground early. It’s hard to not get anxious about getting into the field and getting something done. Checking weather conditions and forecasts umpteen times a day doesn’t really help anything, but it’s hard to fight the impulse. I’m Kevin Hursh.
April 18, 2008
Storm watch Producers in different parts of the province and sectors of the industry will be viewing the approaching storm from different perspectives. For farmers in a big chunk of southern Saskatchewan and especially southwestern Saskatchewan, having moisture will be a godsend. The dry conditions are the number one concern for both grain and cattle operations. A storm like the one described could even help replenish dams and dugouts. However, a blizzard of heavy snow could also create a lot of problems for cow-calf operators, many of whom are in the midst of calving season. In areas of the province where moisture is already adequate to surplus, another blast of winter is going to delay seeding and will add to flooding concerns. I can’t remember a time when there was so much advance warning of such a major storm. Usually the big ones catch us largely by surprise. It’ll be interesting to see if the forecasters have this one right. If they do, there will be major ramifications, both good and bad, for the entire agriculture industry. I’m Kevin Hursh.
April 17, 2008
Bad timing for Sask. Crop Insurance review A review of Saskatchewan Crop Insurance was an election promise by the Saskatchewan Party. Promising to do a study isn’t a very big promise, but hopefully the process will result in some positive changes. The study is supposed to engage producers to get their ideas and suggestions, but unfortunately the timing exactly corresponds to the growing season. Focus groups are the beginning of the process and they start next week. Dates and locations for public meetings will be announced in May. Meyers Norris Penny, which is conducting the review for the government, is to submit its report to Agriculture Minister Bob Bjornerud in September. You can’t blame Meyers Norris Penny for the timing. They’ve just been handed the project and to get any changes in place for the 2009 crop year, recommendations are needed by the fall. However, it is reasonable to ask why the provincial government couldn’t have launched the review two or three months ago when producers would have had a lot more time to participate. I’m Kevin Hursh.
April 16, 2008
Feeding frenzy on farm inputs Never have farmers spent so much money to put a crop in the ground. Good equipment at farm auction sales has been selling for premium prices. Drop by any farm equipment dealership or farm supply store and it’s like a feeding frenzy. A lot of products are already in tight supply this spring. The latest crop report from Saskatchewan Agriculture talks about shortages of many crop inputs: Edge, trifluralin, Clean Start and several types of glyphosate herbicide; some types of fertilizer and seed treatments; and Invigour canola seed. Prices continue to escalate on everything. The price is up dramatically on many types of glyphosate. The most startling price is for phosphate fertilizer at $1,200 a tonne. As farmers, we’re being less cautious about our purchases this spring. We just want to buy what we need before it’s sold out or before the price increases. For anyone able to grow a good crop, this should be a profitable year. However, rising expenses are going to take a bite out of the bottom line. I’m Kevin Hursh.
April 15, 2008
Saskatchewan land prices are on the move It’s no secret that farmland values have been rising in Saskatchewan, but now there are some numbers to go along with the anecdotal reports. Farm Credit Canada in its semi-annual Farmland Values Report says Saskatchewan prices increased an average of 7.8 per cent in the last half of 2007. FCC says that magnitude of increase is reminiscent of the increases back in the late 70s. In the first six months of 2007, FCC analysis indicates a 3 per cent rise in provincial farmland values, so the increase for the full year is 10.8 per cent. It’s interesting to note that farmland values are still rising faster in Alberta. Alberta’s 2007 increase is a whopping 16.7 per cent. That means Saskatchewan is still attractive to Alberta farmers who want to move to where land prices are more reasonable. As well, a lot of investors from Alberta and elsewhere believe land prices in Saskatchewan have a lot of upside potential. That outside investment is also helping to push prices up. While the FCC farmland values are interesting, they don’t provide information on the variability from one area of the province to another. Nor do they tell you what’s happening in the land market this spring. For that information, we’ll have to wait until the report that will come out this fall. I’m Kevin Hursh.
April 14, 2008
FarmLink predicts dramatic acreage swings FarmLink Marketing Solutions based out of Winnipeg has come out with seeding estimates for Western Canada. Brenda Tjaden Lepp is the co-founder and chief analyst with FarmLink and I find her firm’s estimates to be more believable than the recent estimates from Saskatchewan Agriculture. FarmLink is calling for a 14 per cent acreage increase in durum, a 29 per cent increase in flax, a 21 per cent increase in lentils and a 27 per cent increase in mustard acres. More moderate increases are predicted in wheat (up 7 per cent), canola (up 3 per cent) and peas (up 7 per cent). The canaryseed acreage is predicted to be the same. The biggest percentage drops are on chickpeas (down 32 per cent), oats (down 15 per cent) and barley (down 6.5 per cent). FarmLink is also calling for a 16 per cent decline in Western Canadian summerfallow. Although many of the trends are the same as the Sask Ag estimates, FarmLink is calling for much more dramatic acreage swings. Given this spring’s unique market situation, I believe there will end up being some big acreage changes. Although the predictions are bold, I think most of FarmLink’s numbers are plausible. I’m Kevin Hursh.
April 11, 2008
Lashing out at Big Sky Farms It’s amazing to see the ill will being directed towards Big Sky Farms, the province’s largest pork producer. The Saskatchewan government’s major investment in Big Sky makes the company a natural target during this financial crisis that’s devastating the industry. Some are suggesting that the province should pull the pin on Big Sky, take the sow buyout program that’s being offered and exit the industry. While it’s true that North American hog numbers must come down for hog prices to increase, making a big reduction in Saskatchewan won’t help the industry any more than if the reduction happens somewhere else. Maybe there shouldn’t be provincial investment in a hog production company. The Saskatchewan Party government has said that it will look for a good time to exit that investment. However, Big Sky isn’t any more responsible than any other hog operation for the terrible times the industry is facing. If anything, Florian Possberg and the people involved with Big Sky have worked for the betterment of the entire industry. It’s natural to be a bit jealous of Big Sky’s size and the government money involved. It’s also natural to lash out when your back is against the wall, but I would argue that Big Sky has been a net benefit for the other producers in the province. I’m Kevin Hursh.
April 10, 2008
High hopes for the rail service review Our major railways do a wonderful job hauling grain. Just ask them. But don’t ask anyone else or you’ll get an entirely different story. In a recent news release, CN claims it has significantly improved hopper car velocity in recent years resulting in increased loadings at country elevators. Those comments run contrary to any evidence I’ve seen or heard. CN warns that re-regulation of grain transportation would discourage CN investment in the sector and could require a return to taxpayer subsidization of grain movements. That sounds like a veiled threat. Don’t mess with our exorbitant profits or you’ll see grain movement get even worse. Federal Minister of Transport Lawrence Cannon has announced the start of the long-promised rail freight service review, so maybe there will finally be some progress on the issue. The review will focus on service provided to Canadian shippers and customers by CN and CPR within Canada, including to and from ports and border crossings. It is proposed that the review be conducted in two stages that may take 12 to 18 months to complete. It’s unfortunate that the process will take that long, but it’ll be worth it to have definitive proof of railway incompetence and hopefully a road map for improvements. I’m Kevin Hursh.
April 9, 2008
Take the seeding intention numbers with a grain of salt I appreciate seeing the numbers, but I don’t believe them. Saskatchewan Agriculture in its first crop report of the year has come out with a seeding intentions report. It’s based on feedback from the network of volunteer crop reporters across the province. According to the report, field pea acreage in the province is expected to increase by only 4 per cent. I believe the increase will be much larger. Yellow peas have been as high as $11 a bushel and new crop prices of $9 are available. I think peas could be way above the three million acres that are projected. The report calls for a 6 per cent decline in chickpea acreage. I think chickpeas will be down a lot more than that. They’re one of the few crops for which prices haven’t increased much. Why grow such a high risk crop when other crops are very profitable? The projected durum increase of 10 per cent probably underestimates how much durum will be seeded. At a projection of less than 4.5 million acres, durum would have fewer acres than the 10-year average. The canola acreage increase of 4 per cent seems small, but it may be right. I think many farmers in the southern grainbelt will move away from canola into other crops. It’ll be interesting to see how the Sask Ag acreage estimates stack up against the Stats Can seeding intentions report that comes out April 21. I’m Kevin Hursh.
April 8, 2008
Innovative land rental agreements A colleague in Manitoba sent me an interesting e-mail about farmland rents in that province. He says cash rents are creeping up in Manitoba and they’re as high as $100 an acre in the Red River Valley. Little wonder when land there is selling for as high as $4,000 an acre. As my colleague points out, “When the price of canola or wheat now changes more in a day that it used to in a year, and fertilizer has gone exponential, we have to find ways to share risk with the landowner.” To that end, he has helped construct a cash rental agreement that links rental payments to grain prices. In this case, the November Pool Return Outlook on wheat from the Canadian Wheat Board is being used, but you could use the price of canola or another crop at a specific time. In this lease, there’s a base amount per acre paid to the landlord. If wheat is $7.25 a bushel or better net to farmers at the end of November, the cash rent goes up by $5 an acre. If wheat is above $8.25, the cash rent goes up $10 an acre. If the wheat PRO is above $9.25 a bushel, the rent increase is $15 an acre above the base. However, if the tenant collects crop insurance for the crops on the leased land, there are no rental increases no matter what grain prices do. These sorts of innovative lease agreements can make a lot of sense for both parties. I’m Kevin Hursh.
April 7, 2008
Problems at APAS By all accounts, the Agricultural Producers Association of Saskatchewan is being consumed by internal strife. APAS held a special general meeting last week, but many of those in attendance say little was accomplished. Although touted as the umbrella farm group for the province, the organization seems to be spending most of its time fighting battles between board members and between the board and the staff. It’s been a revolving door for APAS staff ever since the organization was created back in 2000. Start-up difficulties and growing pains are to be expected with any organization, but APAS is showing signs of being dysfunctional. Unfortunately, there are a lot of farmers who, for one reason or another, want to see APAS fail and that certainly doesn’t help. Other provinces, most notably Manitoba, Ontario and Quebec have strong umbrella farm groups and producers reap the benefit of speaking with one voice on a number of important issues. Reports indicate that just over 100 of the 296 rural municipalities in the province are now members of APAS. If APAS doesn’t get its act together soon, membership will continue to decline and the organization will be in danger of losing any remaining credibility. Here’s hoping they can turn things around and start focusing on farm policy issues. I’m Kevin Hursh.
April 4, 2008
Feedback on the cap issue I’ve had some interesting feedback on yesterday’s topic regarding caps on farm support programs. The farm community is obviously divided on this issue. Some believe that large farm operations are entitled to the same income support as smaller operations. They argue that there are no caps on the taxes paid by big farms, so why should farm program payments be capped. As well, big farms often employ a lot of people and provide an economic anchor for local communities. The Saskatchewan Cattle Feeders Association issued a news release yesterday supporting the efforts of Sask Pork in getting caps removed from programs such as AgriStability. On the other side of the equation, there are many people who believe that with limited government resources for agriculture it’s reasonable to have maximums on support levels. They believe it is good policy to channel proportionately more support to small and medium sized operations. Here are some interesting statistics. In the 2006 Census of Agriculture, only 2.6 per cent of Canadian farms reported gross farm income of more than a million dollars. However, those farms accounted for more than 40 per cent of total farm receipts in the nation. I’m Kevin Hursh.
April 3, 2008
Discrimination against large farms Should there be caps on farm support programs? The pork industry across the country has been pushing the federal government to remove program caps, but the feds are not responding. Stomp Pork Farms, the second largest hog producer in Saskatchewan has filed for bankruptcy protection. According to Sask Pork, Stomp would be managing the current industry crisis except for the payment limits on programs like AgriStability. The percentage of farm operations affected by program caps is small. However, in some sectors such as hogs and cattle feedlots, a big proportion of total production is coming from very large operations. Sask Pork says 60 per cent of Saskatchewan’s hog industry has minimal support. Governments can limit support to large farms without serious political consequences. Most farm organizations and most politicians are unlikely to fight for big operations even though there are no caps on the taxes those operations have to pay. It’s also interesting that AgriStability has a payment cap, but there are no limits to the crop insurance coverage an individual grain farm can obtain. I’m Kevin Hursh.
April 2, 2008
Farmer strike in Argentina For more than twenty days, farmers in Argentina have been on strike. Led by the main farm organizations, producers in that country have been refusing to sell their grain and they’ve been blocking food movement into the cities. Some 300 road blockades have been manned by farmers. The discontent is caused by a presidential decree that has increased export taxes on soybeans from 35 per cent to as much as 45 per cent. There are also new duties on other farm exports. President Cristina Fernandez de Kirchner has offered some recent concessions to relatively small farmers, but farm groups say the measures are insufficient. In Argentina, many rural landowners are much wealthier than people living in the cities. The issue is dividing the population along income and class lines. Yesterday, published reports indicated that tens of thousands of pro-government demonstrators marched through Buenos Aires to show support for their country’s leadership in their battle with farmers. What’s happening in Argentina is a bit reminiscent of the farmland education tax revolt that occurred in Saskatchewan a few years ago. Happily, that unfair tax is being addressed. I’m Kevin Hursh.
April 1, 2008
American seeding report hits markets hard Yesterday’s USDA Prospective Plantings report has caused big moves in the futures markets. Based on a massive survey of American farmers in the first two weeks of March, American soybean acreage is expected to jump by 18 per cent to 74.8 million acres. That’s a much larger swing away from corn than analysts were expecting. As a result, soybean futures have dropped like a rock. Soybeans on the Chicago Board of Trade were close to $16 a bushel at the beginning of March. As March came to close, the price was around $11 a bushel. Canadian canola followed the same trend. A month ago, May futures were over $750 a tonne. After a month of wild gyrations, the price at the end of March was in the $550 a tonne range – a $4.50 a bushel drop in the futures price. The Prospective Plantings report also indicates an increase in wheat acreage, and there have been significant losses in the Minneapolis spring wheat futures. That will drop the Fixed Price Contracts available through the Canadian Wheat Board. The USDA is forecasting an 8 per cent drop in corn acreage. While that’s a decrease of 7.6 million acres down to 86 million, the corn acreage would still be the second largest since 1949. Corn initially rallied on the news, but then fell back. These are wild times in the markets. 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).
