Does the CWB make us money or cost us money? The never ending battle of numbers continues on the Canadian Wheat Board marketing issue. Informa Economics has come out with a new study that says the board is costing Prairie farmers between $450 and $628 million a year in lost revenue and higher system costs. The study was commissioned by the Alberta government. Funny how these studies, of both sides of the issue, always support the bias of whoever is paying for them. While Informa Economics says the board is costing us a pile of money, the CWB in its end of year news conference said its pooling approach put an extra $560 million in farmers’ pockets in the crop year that just ended. According to the CWB, most American farmers sold early before prices increased on wheat and durum. The CWB’s more measured approach to sales meant more grain to sell later in the crop year at improved prices. The CWB also notes that some farmers used the various pricing options to lock in wheat prices of $15 and even $20 a bushel. So who’s right? Does the CWB make us money or cost us money? I don’t know the answer over the long run, but in the last crop year, the pooling approach probably did make producers money. However, it was largely good luck and not necessarily good management. I’m Kevin Hursh.
July 30, 2008
Food prices in perspective The Harbour Group which operates within RBC Dominion Securities has released a report on rising food prices that puts food costs into perspective. The report details how commodity prices in general have increased the past couple of years. However, food price increases are a lot smaller than the increases for other commodities. The report says food prices are up by 152 per cent this decade, but that pales in comparison to metal prices at 294 per cent and oil at a 1,053 per cent increase. The Harbour Group report also looks at commodity prices after adjusting with the U.S. hourly wage going all the way back to 1947. Wage-adjusted food prices are 80 per cent below 1947 levels. Metal prices are 37 per cent lower than in 1947. Meanwhile, oil prices are 382 per cent above 1947 levels after being adjusted for the wage rate. No doubt rising food prices have been a blow to the extremely poor people of the world. However, when you put food prices into perspective, this basic human need is being provided at a bargain basement price. To encourage more production to feed a hungry world, food prices can’t remain static. I’m Kevin Hursh.
July 29, 2008
WTO talks collapse The make or break World Trade Organization talks collapsed yesterday in Geneva. Reports say the emergency negotiations failed after the United States, China and India disagreed over provisions that would have allowed developing nations to slap emergency tariffs on imports if they suddenly jumped to unmanageable levels. Export oriented Canadian farm organizations are bitterly disappointed by the WTO failure. Just a couple days ago, they were predicting a successful conclusion. The Canadian Agri-Food Trade Alliance claims the collapse will cost Canadian agricultural exporters close to $10 million a day in lost potential sales. Of course, the supply managed industries in Canada – dairy and poultry – are no doubt heaving a sigh of relief. Even though all sorts of Canadian politicians and farm group leaders have been in Geneva the past week and a half, the WTO negotiations have not been on the radar screen of average grain and red meat producers back home. After seven years of the Doha Round going nowhere, people have lost interest. Plus, past world trade deals that were supposed to be great for export-oriented agriculture were a big disappointment. The rules are complicated and poorly enforced and the big players like the United States tend to make up their own rules anyhow. I’m Kevin Hursh.
July 28, 2008
Not everyone will share in Saskatchewan's above average crop Saskatchewan Agriculture is predicting the total harvest of grains, oilseeds and specialty crops in the province will be 25.35 million tonnes. That would be eight per cent above last year and seven per cent above the ten-year average. Here are some of the average yields being predicted: spring wheat – 32.1 bushels per acre, durum – 30.5, flax – 19.3, barley – 52.7, canola – 26.8, field peas – 32 bushels per acre, and lentils – 1256 pounds per acre. I agree with the Saskatchewan Agriculture analysis. Barring a disaster such as early frost, the crop should be a bit above average. However, I feel for those producers who won’t enjoy a good yield this year. In many regions, there are canola fields that are ugly. While some of the field is flowering, the rest hasn’t even bolted yet. There are also areas where cereal crops are stunted due to a lack of moisture. Yields may be less than half of the provincial average. And then there’s the hail damage. Big storms over the past month have wiped out large regions. Sometimes, producers have adequate hail insurance. In many cases, producers will be out a lot of money. So yes, Saskatchewan has the potential for an above average crop overall, but the news isn’t good for everyone. I’m Kevin Hursh.
July 27, 2008
No easy solution to high fertilizer prices Keystone Agricultural Producers, the umbrella farm group in Manitoba is calling on the Standing Committee of Agriculture and Agri-Food to undertake an immediate investigation into fertilizer prices. Prices have continued to escalate since the spring and some producers are already buying fertilizer for the 2009 crop year because they’re worried the price will get even worse. Paying for high priced fertilizer for 2009 before the 2008 crop is even harvested is not an option for many producers. They just don’t have the cash flow. Keystone Ag Producers is certainly reflecting the views of producers by raising the fertilizer pricing issue. However, a federal investigation isn’t likely to produce many benefits. As Canadians, we don’t pay any less for fuel just because the country is a big oil exporter. The same principle applies in fertilizer. Companies sell for the world price. The Saskatchewan government has had a major investment in a nitrogen manufacturing plant for years, but that hasn’t made nitrogen any cheaper here. Fertilizer companies are making huge profits and producers feel like they’re getting ripped off. Unfortunately, there aren’t many ways to shield producers from the realities of the international marketplace. I’m Kevin Hursh.
July 24, 2008
Comparing old and new crop PROs New Pool Return Outlooks for the current crop year and the upcoming crop year were released yesterday. After average Saskatchewan deductions, here’s how prices are looking for this year versus next crop year. For the new crop year, the wheat PRO is down $11 a tonne, while wheat is down $3 a tonne for the current crop year. On No. 1 spring wheat with 12.5 per cent protein, the price in the current crop year is now expected to be $8.36 a bushel, while the new crop year is predicted at $7.43 a bushel. If the prediction is correct, wheat will be worth almost a dollar a bushel less in the upcoming crop year. The difference is even greater on durum. The milling durum PRO is up $7 to $8 a tonne in the current crop year, but the new crop durum PRO is unchanged from the last estimate. No. 1 durum with 12.5 per cent protein is expected to have a total realized value of $12.27 a bushel in this crop year. For the new crop year, the PRO is down to $9.55 a bushel, a decline of more than $2.50 a bushel. Malting barley shows the opposite trend. The PRO for the top grade of two-row designated barley in the current crop year has improved to $4.99 a bushel. In the new crop year, the expected price is $6.45. Of course, you can have a lot more confidence in the current crop year PROs than the predictions for the upcoming crop year. I’m Kevin Hursh.
July 23, 2008
More posturing over Canadian trade position Agricultural officials and farm group leaders from across Canada are in Geneva for the World Trade Organization’s ministerial meetings. From the news releases flying around, it seems like Canada has moved to Geneva to fight over the Canadian trade position. In recent days there have been WTO-related news releases from the Canadian Wheat Board, the Canadian Agri-Food Trade Alliance, and the Western Canadian Wheat Growers Association. Of course, all the farm groups have long-standing positions so there really isn’t anything new in the news releases. Canadian viewpoints are badly fractured with the export-oriented grains and red meat sector pitted against the protectionism of the supply managed industries – dairy and poultry. In a joint news release, agriculture ministers from the four western provinces seem to suggest that Canada should make some concessions on supply management in the interests of getting a trade deal. That puts them at odds with the counterparts from Ontario and Quebec. We’re hearing very little about the actual negotiations between the member countries of the WTO. There’s a general feeling that this is make or break time for the long-delayed Doha Round of trade talks, but it’s hard to predict what will actually happen. I’m Kevin Hursh.
Saving on fertilizer The crop management field day held yesterday by the Indian Head Agricultural Research Foundation had a number of presentations related to crop nutrition. Researchers Guy Lafond and Chris Holzapfel have been working with Greenseeker technology. By measuring the variation in colour across a crop, Greenseeker can be used to determine which areas of a field can benefit from additional nitrogen. This variable rate tool will often result in less fertilizer being applied. The Indian Head Research Farm has long cooperated with Jim Halford, the inventor of the Conserva Pak seeder. This is the 30th year that Jim Halford’s farm has been seeded using zero till. Research has shown that due to the build-up of organic matter on that soil, much less nitrogen and phosphorus fertilizer is needed to successfully grow good crops. Halford believes forage crops in the rotation are important to improving soil health. In addition to forage legumes fixing their own nitrogen, the roots go deep in the soil and are effective in collecting nutrients that annual crops can’t reach. With fertilizer prices at record highs and with the prospects for even higher prices ahead, there’s a lot of interest in finding ways to cut back on fertilizer use. I’m Kevin Hursh.
July 21, 2008
Above average crop now possible Other than the extensive hailstorms, July has been kind to Saskatchewan crops. Going into July, growing season precipitation was below normal over a majority of the grain belt. Now, most areas are average or above average. Saskatchewan Agriculture in its latest crop report says 80 per cent of crop land is now rated as adequate for topsoil moisture. July has also been cool for most days, allowing crops like canola to continue flowering. Some crops that looked pretty scabby at the end of June have now filled in. My guess a few weeks ago was that Saskatchewan was likely headed for slightly less than average production. My guess now is that total production will be above average. Seeded acreage is up and that will contribute to more production and help counterbalance the acres lost to hail. As well, Saskatchewan Agriculture has 65 to 75 per cent of the major crops rated as good to excellent. It’s a big turnaround and it’s a big change from last year. In 2007, weeks of hot weather reduced flowering times and took a big toll on crops. This July, crop conditions have steadily improved. There’s been extensive spraying for wheat midge and a lot of fungicide has been applied in some regions, but those are both signs of crops worthy of further investment. The crop is a long way from being in the bin, but potential has been improving. I’m Kevin Hursh.
July 20, 2008
Producer payment security remains elusive Through Bill C-39, the federal government is proposing to eliminate the mandatory licensing and bonding requirement for grain buyers. The current requirements are administered by the Canadian Grain Commission. There hasn’t always been enough protection to pay producers all they’re owned for their grain when a buyer has gone out of business. As well, the bonding requirement is criticized as being expensive – an expense that is ultimately borne by producers. The Western Barley Growers Association has been promoting a clearinghouse concept as a replacement. A private, independent entity would guarantee the financial, delivery and timing obligations of contracts. Both buyers and sellers would pay a fee for the services of the clearinghouse. The concept does not seem to have gained widespread support. Now, a large number of organizations representing producers, processors and exporters are planning a big study on the whole topic of producer payment security. The groups involved include APAS; Saskatchewan, Alberta and Manitoba Pulse Growers; Canadian Federation of Agriculture; Canadian Special Crops Association; Keystone Agricultural Producers; and Wild Rose Agricultural Producers. It won’t be easy to come up with something that makes everyone happy. As producers we want protection, but we aren’t keen on paying for it. I’m Kevin Hursh.
July 18, 2008
Milk price treadmill An interesting report by the Guelph-based George Morris Centre argues that the Canadian Dairy industry is shooting itself in the foot by asking for an emergency increase in industrial milk prices. The Dairy Farmers of Canada is calling for the increase citing the increased costs faced by producers for feed and energy. The George Morris Centre points out that domestic dairy markets have shown sluggish or negative growth and increasing the price paid by consumers is not a way to increase sales. The Canadian dairy industry has long feared that a World Trade Agreement would lower trade barriers resulting in dairy products being imported into Canada. The George Morris Centre report says an increase in Canadian milk prices would make any adjustment to new WTO rules even more difficult. The report also points out that most provincial milk boards have enacted measures to try and keep a lid on milk quota values. However, milk price increases play a central role in escalating quota values. The report concludes that responding to increasing costs with a milk price increase removes any pretense that there’s a long-term strategy to strengthen the dairy industry. I’m Kevin Hursh.
July 16, 2008
Crop Insurance variable prices announced soon More Saskatchewan farmers picked the Variable Price Option under Saskatchewan Crop Insurance this year. Nearly 2,500 contract holders picked the Variable Price Option on at least some of their crops. This is nearly double the number from the previous year, but it’s only about 10 per cent of the total contract holders. Under the Variable Price Option, the insured price is based on a July estimate, rather than the estimate made last December. The variable price can increase or decrease a maximum of 50 per cent as compared to the base price. Variable prices won’t be announced until the end of July, but some crops should see a dramatic increase. The base price for flax is only $11.56 a bushel, while new crop flax contracts are being signed at $20 a bushel. The crop insurance price for canola is $9.19, far below what most analysts are now expecting for the upcoming crop year. Crop Insurance has red lentils pegged at 23 cents a pound. Some expect the actual price to be twice that number. Producers who have chosen the Variable Price Option are likely to see a big increase in their coverage levels when the prices are announced. Along with that will be a corresponding increase in premiums. I’m Kevin Hursh.
July 15, 2008
Beware the big white combine It’s been a hail of a week. Seldom do you see so many serious storms in such a short period of time. Every day there seems to be more areas hit and some producers have been hit more than once. It isn’t much comfort for producers who have lost some or all of their crop, but overall crop conditions have seen a dramatic improvement due to extensive rains that have accompanied this weather pattern. For the thousands of producers who have hail claims, the waiting and wondering is just beginning. How soon will a hail adjuster arrive and what will the damage assessment be? On many crops, particularly if they were later seeded and if the hail damage wasn’t extreme, the loss determination won’t be easy. Young plants can often recover, at least partially. With grain prices attractive and with the high cost of inputs, producers have purchased hail insurance at higher coverage levels than ever before. Thus the cost and the potential payouts are higher than ever. It’s early for so much hail. There’s lots of time for many more storms. I’m Kevin Hursh.
Best crops are in the northeast Crop conditions have improved dramatically over the past week due to widespread rains. The downside is that hail damage has been extensive. As well, producers in many areas are battling wheat midge. Combing through the statistics in this week’s crop report from Saskatchewan Agriculture, it’s interesting to note that the best crops in the province are in the north eastern grain belt. Despite having below normal growing season precipitation, the northeast has the largest percentages of crop rated in the good to excellent category. For instance, 68 per cent of the spring wheat is rated as good to excellent and 73 per cent of the canola is rated as good to excellent. Seeding was early in the northeast and that region also has the most advanced crops. Less than 30 per cent of spring cereals, oilseeds and pulse crops are rated as behind normal development. East central Saskatchewan stands out for having crops that are late. More than 60 per cent of the spring cereals and oilseeds and more than 50 per cent of the pulse crops in the east central region are behind normal development. That is also the wettest region. Ninety per cent of the crop land in east central is rated as having adequate topsoil moisture. Only one per cent is rated as short and nine per cent is rated as surplus. I’m Kevin Hursh.
July 13, 2008
AgriStability dictatorship At last week’s federal/provincial meeting of agriculture ministers in Quebec City there was a commitment to continue working on improvements to farm safety net programs. One area that that still needs a lot of improvement is the old CAIS program that’s now called AgriStability. Accounting firms can tell horror stories about costly miscalculations by the administration. Without continuous scrutiny by themselves or a good accountant, farmers can be out large amounts of money. Some accountants are afraid to publicly criticize the administration for fear of retaliation. This isn’t just a problem with the federal administration. It also exists in Alberta where the province is doing its own administration of AgriStability. In the Canadian tax system, there’s access to tax litigation which helps with interpretations of the various sections. With AgriStability, no one can look at the various appeals and subsequent rulings to help understand what is allowed and what isn’t. For instance there are various rules that often prevent splitting a farm operation even when the farm has distinct operations. We’re supposed to live in a democracy, but some of the stories about AgriStability sound more like what happens under a dictatorship. If the agriculture ministers truly want to improve farm safety nets, there’s a natural place to start. I’m Kevin Hursh.
July 11, 2008
Wide variance in wheat prices It pays to shop around for the best prices. FarmLink Marketing Solutions, a market analysis firm based in Manitoba says spot cash bids for off-board wheat have hit $7.50 a bushel in Saskatchewan. The Canadian Wheat Board’s Pool Return Outlook for the current crop year on CPS red wheat is about $7.45 a bushel after deducting average Saskatchewan freight and handling, so on mid-grade wheat it appears the off-board price is a bit better than what the export price will be. FarmLink says the current PRO for winter wheat and Soft White Spring puts them at par or at a slight discount to domestic bids depending upon the specific region of the Prairies that a producer is selling into. However, there’s a large variance in domestic bids. FarmLink says its internal price database shows many bids for feed what currently exist across Saskatchewan in the range of only $4.80 to $6.80 a bushel, which is well below the top bids of $7.50. As with most crops, there are companies in any given time frame willing to pay a substantial premium. I’m Kevin Hursh.
July 10, 2008
Growing Alberta influence on national agriculture policy Agriculture ministers from across the country are meeting in Quebec City. It’s widely expected that the five-year Growing Forward framework agreement will finally be signed at the conclusion of the meeting on Friday. Alberta Agriculture Minister George Groeneveld interviewed for Alberta Agriculture’s Call of the Land radio broadcast said sign-off was likely to happen at the meeting. However, Groeneveld says Alberta has ideas for how to change the AgriStability program and he’s hoping a pilot project will be implemented. The Alberta Agriculture Minister also notes that his province’s recently announced Livestock and Meat Strategy is being watched very closely by other provinces. He wants the strategy to become national saying the livestock industry is at a crossroads and must transition to a different approach. Alberta seems to have a growing influence in national agriculture policy. Part of this is probably the philosophical harmony between the Alberta government and the Harper government in Ottawa. Another reason is that Alberta isn’t shy about bold new approaches and allocating the money to make it happen. I’m Kevin Hursh.
July 8, 2008
Vulnerable time for Saskatchewan crops It’s make or break time for Saskatchewan crops. If the hot, dry weather at the end of June and beginning of July had continued, many areas would have seen severe crop stress. With the change to cooler temperatures and showers in this second week of July, crops have been given a reprieve. It’s early to be making estimates on the size of this year’s crop. One of the first official estimates will be from Saskatchewan Agriculture around the beginning of August. However, some generalities now seem plausible. It won’t be a record crop. That potential has been lost. On the other hand, baring really adverse weather, it isn’t going to be a disaster such as the droughts of 1988 and 2002. Average to slightly below average is the most likely production scenario at this point. As crops get into the heading and flowering stage, the need for moisture increases. If we see a repeat of 2007 and the weather turns hot and dry for the next two or three weeks, crops are going to take a beating. If, on the other hand, the next few weeks have some significant amounts of moisture and temperatures don’t become extreme, the province could pull off a crop that’s about average. The investment in growing a crop has never been greater. Little wonder that producers are anxious over the weather patterns in the weeks ahead. I’m Kevin Hursh.
Wheat drops from $10 to $7 Spring wheat prices have not been doing very well. At the end of April and again at the end of May, the Pool Return Outlook for wheat dropped. At the end of June, the PRO saw a small increase, but since that time wheat futures have been slipping. In fact, yesterday the December spring wheat futures on the Minneapolis Grain Exchange dropped by more than 50 cents a bushel. The Fixed Price Contract offered through the Canadian Wheat Board mirrors the Minneapolis price. Yesterday, after deducting average Saskatchewan freight and handling, the Fixed Price based on a No. 1 with 13.5 per cent protein was just a bit above $7 a bushel. That’s well below the June PRO which was pegged at $7.90 a bushel. Of course, unless world prices improve, you can expect the PRO to soften when the July number comes out. Hindsight is always 20/20, but the Fixed Prices that were briefly available back in February and March now look very attractive. There were a few days when over $10 a bushel was available. I’m Kevin Hursh.
July 7, 2008
How did you do in the thundershower lottery? Thundershower activity can certainly lead to highly variable amounts of rainfall. One quarter section can be flooded while another is bone dry. In June, there are sometimes general rains that cover broad areas. In July, any significant rain is much more likely to come as hit and miss thundershowers accompanied by spectacular lightning and thunder. Storm watching is a great source of entertainment, but amusement can turn to bewilderment. Each year, many thunderstorms turn violent with gully washers, hail, high winds and even tornadoes. No one likes to see crop and property damage, but without July thunderstorms, precipitation prospects would often be bleak. Even when soil moisture is good, a couple of weeks of hot weather can leave crops needing rain. If hot weather goes on and on without any accompanying storms, it quickly takes a toll on crop prospects. As crops develop, they need an increasing amount of moisture to retain yield potential. Over the past weekend, there will be areas which did well in the thundershower lottery. Other areas missed out or received much more than they bargained for. I’m Kevin Hursh.
July 3, 2008
Ontario cattle and hogs will take a big hit The George Morris Centre has issued a blunt assessment on the viability of the cattle and hog sectors in Ontario. The report says the sectors are operating at a scale well in excess of the indigenous corn supply that’s available to feed them. An increasing amount of Ontario corn is going to ethanol, plus the supply managed industries of dairy and poultry consume a great deal of the feed supply. In effect, the Ontario cattle and hog industries are importing corn from the U.S. and exporting livestock and meat back to the U.S., paying freight both ways. That makes the sectors uncompetitive as compared to their American counterparts. The George Morris Centre report suggests that based on the 2007 cattle and hog slaughter, 1.4 million fewer hogs or about 150,000 fewer head of slaughter cattle, or some combination of the two are needed to erase the corn deficit and return the red meat sector to a cost-competitive footing. The report warns that harsh adjustments could be coming. The cattle and hog sectors are facing difficult times across the country. The George Morris Centre analysis suggests that Ontario will see a bigger pull back in livestock numbers than Western Canada because that region has become a net importer of corn. I’m Kevin Hursh.
July 2, 2008
Carbon promises For years, there has been more talk than action regarding farmers getting paid for carbon sequestration. Alberta has initiated a plan, but critics say it’s complicated and the amount producers will be paid per acre is very small. There are rumblings of the federal government coming up with a carbon credit plan, but no details are available and critics wonder if farmers will truly benefit to any great degree. In Saskatchewan, a company called C-Green Aggregators has sold carbon offsets on the Chicago Climate Exchange. Producers who initially enrolled received payments for retroactive credits from practicing minimum tillage. About 1500 producers, mainly from Saskatchewan, signed up with C-Green for 2006 and 2007. They are to receive credit for minimum tillage and for seeding tame hay. Verification is being done by Saskatchewan Crop Insurance. Jeff Gross of C-Green says it has taken a lot longer than expected, but all the data has finally been verified and C-Green is in a position to start selling the credits in Chicago. Unfortunately, the value of voluntary credits on the Chicago Exchange has dropped back to around $4.70 a tonne, so C-Green may bide its time waiting for prices to strengthen before selling the credits on behalf of producers. At least there should be some money coming. This is about the only opportunity currently available for Saskatchewan producers to receive payments for carbon sequestration. I’m Kevin Hursh.
July 1, 2008
Concentration in Canadian beef packing A major sale is pending in the Canadian beef packing industry. Tyson Foods has signed a letter of intent to sell Lakeside Packers based in Brooks, Alberta to XL Foods. Lakeside employs 2,300 people and has the capacity to slaughter and process 4,700 cattle a day. XL is part of the Nilsson Bros. Group, a Canadian cattle feeding and marketing company. They have packing plants in Edmonton, Calgary and Moose Jaw, as well as a couple plants in the U.S. Tyson and Cargill are the two biggest players in the Canadian beef packing industry, while XL is number three. If the sale goes through, XL and Cargill will have about 80 per cent of the country’s total beef packing capacity. The National Farmers Union says it will strenuously oppose the Lakeside sale to XL, saying this level of concentration is bad for primary producers. Although the NFU makes valid points about industry concentration, times are tough in the entire beef industry and the big packers haven’t been doing well either. With the high value of the Canadian dollar and the cost of labour in Alberta, the business is a struggle. If the sale is blocked by the Competition Bureau, who else is going to buy Lakeside when returns look meagre to non-existent? Most efforts to establish producer-owned beef packing plants have been failures. 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).
