Hursh Consulting & Communications: Kevin Hursh on Agriculture

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Hursh on Agriculture

January 29, 2009

Re-birth of ag extension
True to his promise, agriculture minister Bob Bjornerud has moved to kick-start an agriculture extension service in the province. Ag extension was decimated when the previous administration closed down rural service centres and moved away from providing advice and information directly to farmers. Specialists across the province were replaced with a toll free number for calling the Agriculture Knowledge Centre in Moose Jaw. In addition to the call centre staff, Moose Jaw will now have a new office with people you can drop by and visit. New offices will also be established in Watrous and Kindersley, each with a crop specialist, livestock specialist, forage specialist and farm business management specialist. The existing regional offices in seven other locations will get back to serving farmers again. Many of the offices need proper signage so that you can find them. The doors of the regional office in Prince Albert have actually been locked to prevent people coming in without an appointment. For the first time in years, specialists with Saskatchewan Agriculture are going to be accessible and visible. Now the department should move to fix its website which is disorganized, disjointed and often out-of-date. I’m Kevin Hursh.

January 28, 2009

Cattle producers need to speak up
It’s like the Ian Tyson song entitled Cowboys don’t Cry. Cattle producers have done a poor job explaining their plight to the general public. Maybe that’s changing. Here are excerpts from an e-mail I just received:
My family and I have ranched here for nearly 50 years now. We are not poor managers, nor are we ignorant marketers. We use futures and have finished cattle for years, here in Canada or in the U.S. We understand the business of beef production very well - so well that we are very close to selling out all of our cattle. Does the population of Canada want to see acres and acres of land with no positive production value? The lack of understanding or concern by the provincial as well as the federal government is almost beyond ridiculous. Whether you run 700 cows like we do, or 50 like my neighbor, we are all soon done with this foolishness. We need to make a living for our family’s survival. Doing what we are good at matters not if you’re broke and cannot feed your own family much less the people of Canada or the world.
This e-mail came from a cattle producer in southern Saskatchewan. The general public needs to know the tough times cattle producers are facing. That will only happen if more producers speak up. I’m Kevin Hursh.

January 27, 2009

Budget fails to answer livestock support questions
Are beleaguered cattle producers going to receive any support from the federal government? The information released last week sounded hopeful, but with yesterday’s budget, it remains to be seen if any dollars will actually end up in the pockets of cow-calf producers. Before the budget, agriculture minister Gerry Ritz told reporters about a $500 million commitment to a program called Agri-Flexibility. How much of this might come to Saskatchewan and whether any of it would be used to prop up the ailing livestock sector remain open questions. Ritz also talked about a billion dollar Community Adjustment Fund, which would help communities adjust to the current economic hardship. This would be similar to programs announced for rural communities built around the forestry and manufacturing industries. While Ritz implied this will provide assistance to the livestock sector, it’s hard to fathom how a program to support communities will translate into dollars for primary producers. The budget didn’t make this any clearer. The feds are also throwing $50 million at new slaughterhouse initiatives. Hopefully attempts at new facilities will be more successful than the initiatives that were launched during the BSE (mad cow) crisis a few years ago. To his credit, Premier Brad Wall has raised the problems in the livestock sector at the national level. To the discredit of his government, the province has done very little to help producers either. I’m Kevin Hursh.

January 26, 2009

Crop acreage and price predictions
The Market Analysis Division of Agriculture and Agri-Food Canada has taken a stab at estimating seeded acreage and crop price levels for the upcoming crop year. On wheat, the prediction calls for a five per cent drop in Canadian acreage, along with a 6 per cent drop in the Canadian Wheat Board’s pool return – nearly 50 cents a bushel. On durum, seeded area is forecast to drop by 7 per cent, while the new crop year price is expected to be 12 per cent lower. That would be a drop of well over a dollar a bushel. The CWB will release its new crop Pool Return Outlook in a few weeks time. Ag Canada is calling for barley acreage to increase by three per cent with off-board feed barley prices unchanged from the current crop year. Oat acreage is expected to rise marginally, with prices forecast to remain unchanged. A slight increase in canola acreage is forecast with prices declining in the new crop year. Flax acreage is expected to be unchanged, with prices lower. On pulses and specialty crops, Ag Canada is calling for a seven per cent decline in pea acres, while the forecast calls for 12 per cent more lentils, eight per cent more mustard and about 17 per cent more canaryseed. Pea prices are expected to be slightly lower. Lentils and mustard are expected to be down significantly, while the canaryseed price is forecast to remain stable. I’m Kevin Hursh.

January 25, 2009

Should cow-calf producers receive government support?
The annual meeting of the Saskatchewan Cattle Feeders Association wrapped up with an interesting panel discussion on Friday. The panel members were Bill Jameson, president of the Saskatchewan Cattle Feeders, Ed Bothner, president of the Saskatchewan Stock Growers and Jack Hextall, president of the newly formed Saskatchewan Cattlemen’s Association. Bill Jameson expressed the opinion that in order to help preserve the province’s cow-calf sector there should be a government support payment of around $100 per cow. Ed Bothner and Jack Hextall didn’t argue with Jameson’s opinion noting that many producers are exiting the business, tired of dismal returns. However, Brad Wildeman took the microphone and expressed different sentiments. Wildeman is president of the Canadian Cattlemen’s Association, but he made it clear that this was his personal opinion. Wildeman believes that an ad hoc payment would do nothing to preserve the industry and that permanent fixes are needed on trade issues and business risk management programs. That appeared to be the minority view at the meeting. Most seemed to believe that short term help is needed or a large portion of the industry is going to be lost. I’m Kevin Hursh.

January 22, 2009

Beef cattle market looks brighter
It’s never possible to predict price trends with certainty, but there are lots of positive factors in the market outlook for beef cattle. Anne Dunford of Gateway Livestock Exchange spoke yesterday to the Saskatchewan Cattle Feeders Association annual meeting in Saskatoon. The Statistics Canada numbers haven’t been released yet, but Dunford is predicting a drop in the Canadian beef cow herd to 4.63 million animals. That would be the smallest since 2001. Cows have been going to market at a brisk pace and replacement heifer retention is low. The American herd also continues to decline. Dunford says U.S. cow numbers are probably at their lowest level since 1963. There’s more beef from each animal than years ago, but the decline in numbers is significant. It’s also significant that Canadian beef cows as a percentage of U.S. numbers is dropping. We hit 16 per cent back in 2003. That has fallen back to the 14 per cent range. Another positive is that U.S. pork and poultry supplies are also down. Anne Dunford says it’s difficult to predict consumer demand in the current economic climate, but the supply side of the equation points to better cattle prices ahead. I’m Kevin Hursh.

January 21, 2009

Railway costing review needed
The Western Grain Elevator Association, the Canadian Wheat Board, the Western Canadian Wheat Growers Association, APAS and the Saskatchewan Canola Growers Association. These are some of the many groups expressing an opinion about the freight rate overcharge in the last crop year. Approximately $60 million dollars plus a 15 per cent penalty is being paid by CN and CP to the Western Grains Research Foundation. Most groups are saying the money should be returned to farmers instead. At over $2 a tonne, it’s a significant amount of money for a lot of growers. Some say that only the 15 per cent penalty should go to the Western Grains Research Foundation. Others are suggesting that when railway overcharges are relatively small, the money should go to the foundation, but when the amount is larger it should go back to producers. There certainly seems to be an appetite for re-examining the regulations. The most valuable part of the whole situation is that more producers are now pressing for a full railway costing review. That would have the potential to produce savings that would dwarf the $60 million overcharge. I’m Kevin Hursh.

January 20, 2009

Budget fails to answer questions about livestock support
Are beleaguered cattle producers going to receive any support from the federal government? The information released last week sounded hopeful, but with yesterday’s budget, it remains to be seen if any dollars will actually end up in the pockets of cow-calf producers. Before the budget, agriculture minister Gerry Ritz told reporters about a $500 million commitment to a program called Agri-Flexibility. How much of this might come to Saskatchewan and whether any of it would be used to prop up the ailing livestock sector remain open questions. Ritz also talked about a billion dollar Community Adjustment Fund, which would help communities adjust to the current economic hardship. This would be similar to programs announced for rural communities built around the forestry and manufacturing industries. While Ritz implied this will provide assistance to the livestock sector, it’s hard to fathom how a program to support communities will translate into dollars for primary producers. The budget didn’t make this any clearer. The feds are also throwing $50 million at new slaughterhouse initiatives. Hopefully attempts at new facilities will be more successful than the initiatives that were launched during the BSE (mad cow) crisis a few years ago. To his credit, Premier Brad Wall has raised the problems in the livestock sector at the national level. To the discredit of his government, the province has done very little to help producers either. I’m Kevin Hursh.

A positive grain market outlook
Ag Days is underway in Brandon. It’s like Saskatoon’s Crop Production Show, only larger. In addition to the hundreds of exhibitors, filling building after building, there are a couple of speaking venues. Yesterday, on the first day of Ag Days, a big crowd was on hand to hear a market analysis from David Drozd of Ag-Chieve. Drozd does more technical analysis than most. This involves looking at key levels of support and resistance on the charts. Drozd and his Winnipeg-based company are well-regarded as evidenced by the number of people who crowded into the amphitheatre. His message was largely positive. He doesn’t believe crude oil will stay under $40 a barrel very long and he says the major grains are all sitting at prices that are higher than their key levels of support. Drozd expects grain prices to advance rather than retreat and he believes that investor and speculator money will flow into the commodity markets before stocks. Drozd says there’s no clear-cut sleeper among the main cropping options with all the major grains having relatively tight stocks to use ratios. The wild card, says Drozd, is China. They’ve been buying and if they come into the market in a big way, it could have a major impact. I’m Kevin Hursh.

January 19, 2009

Mild-mannered beef policy statement
The newly formed Saskatchewan Cattlemen’s Association has released a policy statement that’s meant to deal with the economic difficulties facing beef producers in the province. The policy committee of the SCA involves the presidents and other representatives of the Saskatchewan Stock Growers Association and the Saskatchewan Cattle Feeders Association. I have a great deal of respect for the folks who constructed the policy statement, but I’m not overly impressed by the content. The policy statement says that in order to sustain the existing cow herd and feeding infrastructure, immediate financial support is required. But instead of detailing what’s required and how to deliver it, the action plan is simply for the Saskatchewan Cattlemen’s Association to work with all levels of government to secure immediate financial support. Sounds like a formula for more inaction. The policy document does make some good suggestions for helpful changes to the AgriStability program, but it’s doubtful that any tinkering is going to solve the problem of declining margins which means most cattle producers have limited support. There are some other useful suggestions such as allowing farm licence plates and dyed diesel for custom contractors, but overall the policy statement is a mild-mannered document at a time of great distress in the industry. Check out the policy statement for yourself at www.saskbeef.com. I’m Kevin Hursh.

January 18, 2009

American ethanol production continues to increase
A number of American ethanol plants are in financial difficulty. The most prominent is VeraSun, the second largest U.S. ethanol producer. According to Associated Press, VeraSun is putting seven of its facilities up for auction as part of a bankruptcy court financing agreement. A lot of American corn farmers had attractive corn contracts with ethanol plants that are not being honoured. Despite the difficulties, projections call for a continuing increase in corn-based ethanol production, albeit at a slower rate of increase than in the past. Even though the economics of ethanol production are no longer lucrative, the U.S. Renewable Fuel Standard continues to increase. Ethanol production won’t exceed the Renewable Fuel Standard, but overall production levels will continue to rise. On Friday, at the Canadian Wheat Board meeting held as part of Crop Production Week, Bruce Burnett, the director of weather and crop surveillance, showed a graph of U.S. ethanol production and corn use. In the current crop year, about 9 million tonnes of corn will be used to make ethanol. For the next crop year, the projection is for about 10.5 million tonnes of U.S. corn going through ethanol plants. I’m Kevin Hursh.

January 15, 2009

Wheat midge threat declines
Saskatchewan’s wheat midge forecast map looks a whole lot better for 2009 than it did last year. The 2008 wheat midge forecast map developed by the Saskatchewan Ministry of Agriculture showed a high risk for wheat midge over much of the moist dark brown, black and grey soil zones. A huge area had more than 1800 midge per square meter. The forecast map proved pretty accurate. There was a lot of spraying for wheat midge last year. That shouldn’t be the case in 2009. The recently released 2009 map shows only isolated areas with a very high midge population. Two of the notable ones are an area just northeast of Saskatoon as well as the rural municipality of Buchanan. There are a number of areas from Prince Albert through Saskatoon and down to Kenaston where the wheat midge population is over 600 per square meter. This also includes an area around Kindersley and some spots in east central Saskatchewan. At over 600 per square meter, midge may still result in significant damage if climatic conditions are favourable. However, the overall risk is far lower than last year. The new map is posted on the Saskatchewan Ministry of Agriculture website. I’m Kevin Hursh.

January 14, 2009

Fertilizer supply, demand and prices
David Asbridge of Doane Advisory Services out of St. Louis spoke last night at the Special Session of Crop Production Week in Saskatoon. His topic was fertilizer supply and prices. In the question and answer session, some producers made the point that it’s tougher to get a good price on anhydrous ammonia than it is on urea. Asbridge agreed saying many U.S. farmers are backing away from anhydrous for that reason. While world prices for nitrogen and phosphate have come down dramatically since the summer, he pointed out that the same is not true for potash. It’s still very expensive, especially when you consider that up until July of 2007 potash prices had long been around $200 a tonne. While Western Canada produces nitrogen, Western Canadian farmers do not get a price break. That’s because North America in total is a big importer of nitrogen, so pricing tends to be based off port position. Asbridge confirmed that fertilizer prices in Western Canada are typically the highest on the continent. He says it’s unlikely that there will ever be another nitrogen plant in North America. Natural gas, the main feedstock for making nitrogen, is far cheaper in countries like Russia. It’s cheaper to import nitrogen than produce it here. The PowerPoint presentation from David Asbridge will be posted at www.cropweek.com in the coming days. I’m Kevin Hursh.

January 13, 2009

Bearish lentil price outlook
Lentil prices are likely to drop. That was the view expressed yesterday at Pulse Days by Brian Clancey of Stat Publishing, Gerald Donkersgoed of Finora and Greg Simpson of Simpson Seeds. Red lentils prices have increased to over 30 cents a pound in recent weeks and are generating a lot of interest. Gerald Donkersgoed predicts prices will remain steady for a while, but fade going into new crop. Greg Simpson is predicting the same trend and suggests that the recent price increase is a gift that producers shouldn’t ignore. On large green lentils, Donkersgoed believes prices will sag due to the poor pace of exports. Simpson believes large green prices will be sideways for January, February and March, but lower for April, May and June. Pressed for a new crop price prediction, Brian Clancey suggested new crop red prices are likely to end up in the 15 to 20 cent a pound range, while large greens will be 20 cents or lower. A lot of things could happen to change the new crop forecast, but these three market watchers are not painting a bullish outlook. Still, as compared to alternative crops, lentils look pretty good and the seeded acreage is expected to increase. I’m Kevin Hursh.

January 12, 2009

Lentils and mustard appear profitable for 2009
Most producers prepare their own crop budgets, but it’s always interesting to look at someone else’s numbers for comparison. Each year, the Saskatchewan Ministry of Agriculture publishes Crop Planning Guides for that purpose. The guides are currently being distributed at the Sask Ag booth at the Western Canadian Crop Production Show in Saskatoon and the guides will also be available on the Sask Ag website. Based on the assumptions being used, some of the best returns for 2009 could be on lentils and mustard – crops best suited to the brown and dark brown soil zones. The department is assuming 23 to 25 cents a pound for lentils depending upon the type. Those prices, combined with yields in the 1200 to 1300 pound per acre range, are producing strong net returns after deducting all the expenses. Strong returns are also being generated by yellow, brown and oriental mustard. The price assumptions are 40 cents a pound for yellow, 32 cents for oriental and 33 cents for brown. The assumed yields are just under 700 pounds for yellow and around 800 pounds per acre for brown and oriental. Producers should plug in their own numbers and make their own assumptions, but it’s interesting to see how the various crops stack up in the Crop Planning Guides. I’m Kevin Hursh.

January 11, 2009

Crop Production Week travel plans
Thousands of people will be on the highways this week heading to Crop Production Week and the Western Canadian Crop Production Show in Saskatoon. Difficult weather may cause some people to adjust their travel plans. Once people get to Saskatoon, most want to attend some of the Crop Week meetings at the Saskatoon Inn as well as the huge Crop Show at Prairieland Park. There will be shuttles between the two venues today (Monday) and on Wednesday. Today, Sask. Pulse Growers has shuttles going from many of the main hotels to Prairieland Park and back. The full shuttle schedule is available at www.saskpulse.com. Click on “Pulse Days 2009 Transit Schedule.” No shuttle service is planned for Tuesday. On Wednesday, there will again be a free shuttle service to get people from the Saskatoon Inn to Prairieland Park for the beef on a bun supper and the Special Session presentation on Fertilizer Supply, Demand and Prices. Shuttles will leave the Saskatoon Inn every half hour starting at 3:30. Shuttles will run the other direction every half hour from 9 to 11 pm. I’m Kevin Hursh.

January 9, 2009

Custom truckers keep the grain flowing
There’s an essential part of the grain transportation chain that’s seldom noticed. You hardly ever hear a news story about the legion of custom truckers that operate across the Prairies. Some are owner operators, while others are larger firms running Super-Bs with hired drivers. Some of the drivers are seasoned veterans and some are greenhorns. Some are from other provinces or other countries running the big trucks in god forsaken country wondering what the heck they’ve got themselves into. Some are retired farmers or part time farmers who are no strangers to Prairie life. All of them put up with bitterly cold weather, snowed in roads, ice, mud, farmyards that were never made for big trucks and grain augers that won’t run properly. Some can maneuver a big rig like a fine pianist at the keyboard. Others just muddle through. Most will talk your ear off while the grain is loading, happy to have someone to visit with after long hours on the road. Some will even pick up a shovel and give you a hand when the going gets tough on a bin bottom. They are the one cog in the system that never goes on strike and never receives much recognition. Here’s to all the gear jamming grain truckers. Thanks guys. I’m Kevin Hursh.

January 7, 2009

Grain price winners and losers
Corn, wheat, soybean and canola futures prices all dropped yesterday, giving up gains achieved the previous day. However, there are quite a few attractive pricing options available these days. Rayglen Commodities says it has a buyer for red lentils who is willing to pay 30 cents a pound. That’s the best price for lentils that anyone’s seen for a while and it’s well above the 23 or 24 cents a pound available for top grade green lentils. Mustard prices have held up better than many other commodities and new crop contracts are available at 37 cents a pound for yellow and 32 cents a pound for brown and oriental mustard. CGF Brokerage and Consulting is listing a new crop price for flax of $9.60 a bushel. Other crops don’t have a lot of good news right now. Yellow pea prices seem to be languishing well below $6 a bushel. Feed barley and oat prices aren’t showing much strength either. Canaryseed has declined to around 17 cents and hasn’t turned around. There are money-makers among the crops, but it isn’t like last year at this time when nearly all crop prices were rising. I’m Kevin Hursh.

January 6, 2009

Taking a fresh look at grain prices
Crop Production Week in just around the corner and there are going to be all sorts of market outlook presentations for the various commodities. As producers, I think we’re still in shock over the dramatic decline in grain prices over the past six months. I suspect many of the market analysts next week will point out that a lot of grain, oilseed and specialty crop prices are still pretty good from a historical perspective. Canola is a good example. Yesterday, the January futures price for canola increased to around 438 a tonne. The November canola futures price was around $469. Those are a far cry from the $750 a tonne achieved last summer. However, 2008 notwithstanding, we’ve got some of the best canola prices of the last decade. Cash prices are over $9 a bushel and depending upon the basis, you can lock in new crop canola production at prices getting close to $10. Fertilizer prices have dropped dramatically, so crop budgets are looking better. The question now becomes whether or not producers should be locking in some of their new crop canola. It’ll be interesting to see what producers and analysts are thinking. I’m Kevin Hursh.

January 5, 2009

New sources of farm income
An interesting workshop is coming to Saskatchewan. Hosted by the Canadian Farm Business Management Council, the two-day workshop is called Value Plus and it’s all about finding and developing new opportunities on the farm. It’s often difficult for a workshop to live up to its billing when the aim is to build profits and find new sources of income, but the agenda for this workshop is impressive. Plus, the facilitator is Gary Morton, a specialist in this area. He’s co-author of a publication called Building Added Value Through Farm Diversification. The workshop covers identifying new opportunities, creating a simplified business plan and financing the different stages. In addition, there are lots of case studies on real farm businesses that are successfully adding value. Two workshops are being held in Western Canada. One is in Airdrie, Alberta on January 16 and 17, while the other is in Watrous, Saskatchewan on February 3 and 4. Space is limited so interested producers are urged to book early. To find out more, go to www.farmcentre.com/workshops. I’m Kevin Hursh.

January 4, 2009

Protectionism is costly
It’s easy to become cynical about the WTO, the World Trade Organization. The current Doha Round is stalled after years of on and off again negotiations. And it’s easy to loose sight of what countries are trying to accomplish. Here’s an example from John Masswohl, the Director of Government and International Relations with the Canadian Cattlemen’s Association. Masswohl says Canada and the U.S. share a small 11,500 tonne per year quota for hormone-free beef going into Europe. The tariff on that beef is 20 per cent. Quantities above that amount have a prohibitively high tariff of over 140 per cent. Beef is one of Europe’s “sensitive products.” They want to protect their domestic producers. Canada’s sensitive products are the supply managed sector – dairy, chicken, eggs and turkey. The government of Canada has not been willing to press hard for Europe to open up to Canadian beef because we have our own sensitivities. Masswohl says there are rumblings that Canada and the European Union are exploring the possibility of liberalizing bilateral trade, bypassing the WTO process. The Canadian Cattlemen’s Association will be supporting that initiative and hoping for better access. I’m Kevin Hursh.

January 1, 2009

Hail of a year will pressure 2009 premiums
Environment Canada has listed its top ten weather stories for 2008 and number six on the list is the hail which affected growers in many regions of the country over the summer. Environment Canada has compiled information on how 2008 was a hail of a year. In B.C.’s Okanagan, growers had fruit badly bruised from hail in early July. Ontario was hard hit as well. The Ontario Tender Fruit Board claims there wasn’t an orchard in the province untouched by hail. Wheat, corn, soybeans, peaches, pears, beans and cucumbers were among the Ontario crops affected. Here on the Prairies, hail insurance companies made record payments to producers in Alberta and Saskatchewan. On virtually every day in July, there was a hailstorm somewhere in Saskatchewan, with massive storms on July 9 and 10. Insurance payouts in this province were 129 per cent of the premiums collected. That loss ratio will have an effect on hail insurance premiums in the year ahead. Many of us should be penciling in higher hail insurance costs as we work on 2009 crop budgets. I’m Kevin Hursh.

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