The feds don't get it Hooray for the Saskatchewan government’s support of the livestock industry. The province has decided to go ahead even though the feds have refused to cost share. The feds say other provinces don’t support direct payments. And, say the feds, this kind of support could lead to retaliatory action by the Americans. That argument is pretty weak, especially in regards to beef cattle. Alberta has the biggest beef herd in the country and it has already made large direct payments to its producers. That hasn’t caused any talk of retaliation. Besides that, Canada can justify direct support in a couple of different ways. This country has more onerous rules than the U.S. on the removal and disposal of Specified Risk Materials. It’s a part of the effort to rid Canada of BSE, but it’s expensive. It could be argued that direct support to producers is compensation for this extra regulatory cost. Direct support can also be justified on the basis of COOL. Country of origin labelling in the U.S. is an unfair trade practice that’s costing Canadian producers large amounts on every animal sold. Despite what the feds say, AgriStability is of limited benefit. It’s based on historical margins, and after years of trouble in the beef industry, those reference margins have been squashed. The provincial government understands. The feds obviously don’t. I’m Kevin Hursh.
Agrium makes bid for CF Industries The big players in agriculture just keep getting bigger. Calgary-based fertilizer giant Agrium has just submitted a $3.6 billion takeover bid for CF Industries. The bid involves Agrium shares as well as cash. Chicago-based CF Industries has North America’s largest nitrogen fertilizer complex located in Louisiana and it also has Canada’s largest nitrogen plant located in Medicine Hat. As well, CF has extensive phosphate operations in Florida and lots of fertilizer terminals and warehouses, particularly in the American Midwest. If the Agrium takeover proposal goes ahead, the new company would be a global leader in nutrient production and distribution with revenues of nearly $14 billion. CF Industries has issued a news release saying it will evaluate the Agrium proposal carefully. Agrium says there will be big operating synergies by bringing the companies together. It may be a good move for shareholders of both companies. Agrium says customers will also benefit. However, farmers have good reason to be wary about the ever increasing concentration within the fertilizer industry. Having fertilizer giants that are Canadian-based seems to bestow very few advantages for Canadian farmers. I’m Kevin Hursh.
February 24, 2009
On-site grain grading will end August 1 Legislation to amend the Canada Grain Act has been introduced in the House of Commons. This is basically the same legislation as the bill that died on the Order Paper when the federal election was called last year. The bill will eliminate Canadian Grain Commission inward inspection and weighing and it also eliminates the security requirements for licensing of grain buyers. No replacement system has been formulated to provide payment protection to producers. While the bill has just been introduced, the Canadian Grain Commission has announced that it is going to end on-site inspection services on the Prairies effective August 1. Canadian Grain Commission service centres will be closed in Brandon, Melville and Moose Jaw and other offices will be restructured. The Commission says on-site services are not mandated by the Canada Grain Act, so the change is not related to the bill in the House of Commons. While it hasn’t received much attention, ending on-site inspection is going to be costly for farmers. An elevator will no longer be able to get an official grade at the time of loading rail cars. That means more grading uncertainty and as a result farmers won’t be able to get as good a deal on grades. The owners of port terminals will no doubt like the change. For elevator companies without port terminals and for farmers, this isn’t a good deal. I’m Kevin Hursh.
February 23, 2009
New crop price predictions The Canadian Wheat Board has released its first Pool Return Outlook for the upcoming crop year. On number one spring wheat with 12.5 per cent protein, after deducting average Saskatchewan freight and handling, the new crop price is forecast at $6.01 a bushel, down from $6.42 expected in this crop year. Durum takes the biggest drop. The new crop price on No. 1 durum with 12.5 per cent protein is predicted to be $6.59a bushel, down from the current crop year’s expected price of $8.15. Durum is still predicted to have a premium over spring wheat, albeit a much smaller premium than in the past couple years. The Pool A feed barley price in the new crop year comes out to only $2.02 a bushel, about the same as the $2.04 a bushel expected in Pool B of the current crop year. Usually when the price is that low, there isn’t much feed barley sold into the export market. Malting barley prices are expected to see a significant decline. The new crop two-row price is being pegged at $4.26 a bushel, way down from the $5.50 that’s expected as a pooled price in the current crop year. Predicting new crop prices five months before the beginning of the crop year is a difficult task, but these numbers, while disappointing, are the best estimates available. I’m Kevin Hursh.
February 22, 2009
Price options for Sask Crop Insurance Saskatchewan Crop Insurance has made changes in its Variable Price Option and has added a new In-Season Price Option. A December forecast is used to establish the base price for crops. With the Variable Price Option, a July ‘09 price forecast will be used and this new price can be as much as 50 per cent higher or lower than the base price. In the past, the premium would adjust up or down to correspond with the change in the price. This year, there’s going to be a set premium and Crop Insurance says it will be higher than the base premium. A set premium means you’ll know the cost, but you could end up paying more for less coverage if the grain price forecast declines. With the new In-Season Price Option, a six-month September to February average will be used to set the crop price, so it should reflect what producers actually get for their crop. This could be higher or lower than the base price by up to 50 per cent. As with the Variable Price Option, the premium will be known up front. If you think grain prices are going to stay about the same or decline, you’ll want to stay away from these two options. If you think grain prices are going to improve, these two options may be attractive, but check out the premiums you’ll need to pay. You can pick and choose which crops you want to enroll in the options. I’m Kevin Hursh.
February 19, 2009
Commendable changes to Sask Crop Insurance A number of positive changes are being made to Saskatchewan Crop Insurance. To its credit, the provincial government is contributing an extra $20 million to make the changes possible. Crop Insurance has studied yield trends and is raising canola yields by 11 per cent and winter wheat and fall rye yields by 9.5 per cent. Coverage for wildlife damage is going from 80 to 100 per cent. A pilot project on yield cushioning will help support yield coverage for producers with two or three bad years in a row. The payment for crops that fail to establish is going up. For instance, canola is going up from $25 to $45 an acre. On most crops, the insured prices are dropping, but not as much as you might expect. The spring wheat insured price is $5.72 a bushel, which is actually an increase from last year’s $5.31. Durum is dropping from $8.14 to $6.67. Barley is slipping from $3.27 to $3.16. Canola is going down from $9.19 last year to $8.96. Field peas are going from $5.78 a bushel last year to $5.17 this year. Large green lentils are down a couple cents a pound to 21, while red lentils are up a cent to 24. With the other changes being made, the overall average coverage will be up slightly, while producer premiums will be down just slightly. I’m Kevin Hursh.
February 18, 2009
COOL rules may get worse Rumblings from south of the border indicate the Obama administration will move to make country-of-origin labeling more onerous. U.S. secretary of agriculture Tom Vilsack made comments yesterday leading many observers to believe that more restrictive labeling rules are going to be imposed. Vilsack has apparently come to the conclusion that the final COOL rule does not meet the intent of the law passed by Congress. Vilsack is indicating that he will ask American meat packers to follow much stricter COOL provisions. If packers don’t agree, he is threatening a new rule making process. According to published reports, Vilsack is set to ask the meat industry to label each package with the country in which the animal was born, the country where it was raised and the country where it was slaughtered. The American meat industry will not welcome these changes, because it will increase system costs. For Canadian beef and pork producers, the changes will further limit market access while cutting prices. Adoring fans will welcome Barrack Obama to Canada today. Based on what seems to be happening with COOL, Canadian livestock producers can be excused for being less enthusiastic about the new American President. I’m Kevin Hursh.
February 17, 2009
NFU aligns with R-CALF The National Farmers Union has become cozy with the American beef protectionist group known as R-CALF. The NFU issued a news release yesterday about a meeting in Billings, Montana that included Canadian, American and Mexican farm groups. The NFU release rails against corporate concentration in the beef industry and talks about how free trade deals need to be renegotiated or eliminated. The NFU release doesn’t talk about the much despised R-CALF organization, but if you get a copy of the R-CALF news release from the same meeting, there are lots of quotes from the National Farmers Union. Neil Peacock of the NFU is quoted as saying, “We no longer view R-CALF as a threat because our cattle producers are facing the same challenges as independent U.S. cattle producers.” Jan Slomp of the NFU is quoted by R-CALF as saying, “I can totally understand and defend R-CALF in public now. We need to be allies with R-CALF.” Funny how the NFU wasn’t brave enough to say those things in its own news release. The truth is that R-CALF is against trade and without trade the Canadian beef industry would have to contract to about half its current size. That’s a tough sell on this side of the border. I’m Kevin Hursh.
February 16, 2009
CWB review warranted The Grain Growers of Canada is calling for an independent review of risk management strategies at the Canadian Wheat Board. With members like the Western Barley Growers and Western Canadian Wheat Growers, Grain Growers of Canada is decidedly not a CWB supporter. However, unlike much of the anti-CWB rhetoric, this suggestion has merit. The CWB lost nearly $90 million in its pricing options programs in the last crop year. While 2008 was a wild time in grain markets, the CWB also had smaller losses in previous years. The Grain Growers correctly acknowledge that producers want a choice of pricing tools within the CWB, but they say it’s critical to identify the failures in risk management and then identify solutions for the future. While an independent review is a good idea, it unfortunately wouldn’t be as simple as it sounds. Various experts have studied other aspects of the CWB with very different conclusions. With farmers and farm groups so highly polarized around the CWB issue, the biggest problem would be finding people qualified and acceptable to all sides to conduct such a review. I’m Kevin Hursh.
February 12, 2009
More farmers adopt biotech crops Biotech crops are growing in popularity and acceptance. A group called the International Service for the Acquisition of Agri-Biotech Applications says that in 2008 the number of countries planting biotech crops increased to 25. Those 25 countries account for more than half of the world’s population. New countries in 2008 included Egypt, Bolivia, Brazil and Australia. In Australia, herbicide tolerant canola was grown for the first time. A new biotech crop, Roundup Ready sugar beet was commercialized in the U.S. and Canada. The first biotech crops were grown on a commercial scale back in 1996. By 2005, biotech crops had been grown on a billion acres. In 2008, the two billionth acre was planted. An estimated 13.3 million farmers grew biotech crops last year. Ninety per cent were small and resource-poor farmers in developing countries. Promoters say biotech crops increase yields, while reducing production costs. They also claim that pesticide and fossil fuel use is reduced, and that carbon dioxide emissions are lowered due to less tillage. Biotech crops with drought-tolerant traits are said to have enormous potential where water is a limiting factor. There are many biotech crop detractors that would argue about the benefits, but it’s hard to argue with the stats that show ever increasing adoption. I’m Kevin Hursh.
February 11, 2009
Money for carbon sinks? For about 15 years there has been talk about farmers being paid for sequestering carbon in their soil. Edgar Hammermeister and Laura Reiter, both producers who are active in the Saskatchewan Soil Conservation Association gave a presentation on carbon trading to the association’s annual meeting last night in Saskatoon. Alberta has developed a regulated carbon trading system that is returning some money to producers in that province for their minimum tillage and direct seeding. Producers there are working through a number of companies who are serving as aggregators. Many Saskatchewan growers have signed up with C-Green Aggregators, which is trading carbon on a voluntary basis through the Chicago Climate Exchange. Unfortunately, the value of carbon is low in a voluntary trading environment. The federal government has been making noises about a regulated carbon trading system for years. According to Hammermeister and Reiter, the country needs agriculture to have any hope of meeting its carbon reduction goals. However, the system being advanced by federal bureaucrats remains unattractive to farmers due to liability concerns and other issues. With a minority government and in the midst of an economic recession, carbon reduction isn’t receiving a lot of attention, but watch for the issue to re-emerge in the next couple years. I’m Kevin Hursh.
Will there be a fertilizer bottleneck? Based on some of the international pricing information, nitrogen and phosphate prices appear to have bottomed out and may be starting to increase. As strange as it sounds, that could actually be a good thing for farmers and for the entire industry. Many dealers say that total fertilizer movement to farmers for the 2009 growing season is running way behind normal. Fertilizer prices increased to astronomical levels last summer. When prices finally began dropping late last fall, the natural tendency for producers was to wait for prices to go even lower. Why buy when it might be even cheaper in a week or two? Observers believe that if too many producers wait too long before securing their spring needs, there are going to be logistical problems. A perception that prices could rise again may be what’s needed to encourage sales in advance of seeding. There is a school of thought that the potential logistical problems are overblown and industry self-serving. I think the concerns are legitimate. Of course, no one knows what the total fertilizer demand will be and no one knows whether seeding will occur in a rush or over an extended period of time. However, producers can’t go wrong by having a lot of their fertilizer needs under their own control. I’m Kevin Hursh.
February 9, 2009
Ag policy stuck in neutral The communiqué issued after yesterday’s federal – provincial agriculture ministers meeting in Ottawa was even more bland than usual. Here’s a quote: “Ministers discussed, in particular, the ongoing economic difficulties facing the livestock sector including the responsiveness of existing and future programs to meet both long and short-term challenges.” From that, it sure doesn’t sound like any new support measures will be coming anytime soon. Livestock producers can, however, look forward to a national agriculture and food traceability system. Ministers directed their officials to return in July with an action plan on food safety and a progress report on traceability. The ministers reiterated their commitment to have new Growing Forward programs up and running in all provinces by April 1. It appears that some very good programs are going to be toast within a couple months, but there isn’t any inkling of what, if anything is going to replace them. Last week, there was an announcement that producers won’t need to make a matching deposit for the AgriInvest program for 2007. That’s right. They’ve just now figured out what they’re doing for AgriInvest in 2007. The new Growing Forward isn’t going forward very quickly. I’m Kevin Hursh.
February 8, 2009
Selective climate change examples Southern Australia has been battling terrible bush fires. Bush fires are common in Australia, but according to news reports, the death toll from the fires has now surpassed 100, the worst in the country’s history. Most of the people who died were in small towns north of Melbourne. Meanwhile, some northern areas of Australia are experiencing severe flooding after huge rainfalls. Most scientists are reluctant to link specific weather events to global warming. However, the theory is that climate change makes severe weather episodes more likely. Some media and certain environmental groups are usually quick to seize on weather disasters and link them to climate change caused by mankind and that’s happening with these Australian disasters. Proponents of climate change are selective in the examples they use. Take this example. Production of all the major grains and oilseeds worldwide continues to increase. Last year saw the biggest crop of wheat ever grown on the planet. Yes, agronomic practices and wheat genetics have improved, but it’s hard to believe that production can be maintained at such high levels in regions around the world if climate change is actually as serious as the fear mongers claim. I’m Kevin Hursh.
February 5, 2009
A dry cold It seems like a long winter, but so far it’s been a relatively dry winter across Saskatchewan. According to the PFRA precipitation maps for November 7 through to February 4 (www.agr.gc.ca/pfra/drought), only a few isolated areas of the province have had above normal precipitation. Overall the grain belt is split about equally between regions with about average precipitation and regions that are below average. The wettest areas have had two to three inches of water equivalent over the past three months. This includes the northwest around Meadow Lake, an area east of Melville, and an area around Gravelbourg, Coronach, Weyburn and Estevan. The driest areas have received less than an inch of water equivalent. According to the PFRA maps, this includes a localized area around Swift Current as well as a chunk of West Central Saskatchewan from Kindersley into Alberta. There has been a lot of cold weather so snow cover has probably been maintained better than usual. However, precipitation overall has been average to below average. March and April are normally bigger precipitation months, so it’ll be interesting to see what they bring. I’m Kevin Hursh.
February 4, 2009
Railways take advantage of a monopoly It isn’t only farmers in Western Canada who are concerned about freight rates charged by the big railways. The same concerns exist in areas of the U.S. where railways have a virtual monopoly on bulk freight movement. A group called Consumers United for Rail Equity or CURE has issued a news release pointing out that America’s big corporate railroads purchased some of the most expensive advertising time of the year on Super Bowl Sunday. According to CURE, this ad buy is an escalation in the railroad lobby’s ongoing multi-million dollar campaign to convince Congress to provide federal funds for railroad infrastructure development. At the same time, the railroads want to protect their unrestrained monopoly pricing powers. CURE claims monopoly rail rates are being increased as much as 100 per cent, even as the U.S. undergoes a deep economic recession. The big four railroad corporations in the U.S. – Union Pacific, CSX Corporation, BNSF Corporation and Norfolk Southern Corporation – all reported increased fourth quarter revenues even though their freight volumes declined. Legislation to apply U.S. antitrust laws to the railroads was introduced in both the U.S. House and Senate in January. It’ll be interesting to follow the progress of that legislation. I’m Kevin Hursh.
February 3, 2009
Farmland values defy economic downturn Compared to mutual funds, farmland investment looks pretty good right now. Most people with mutual funds have taken a big hit over the past year. Many are wondering if they have enough years left before retirement to recoup this big crash in values. While grain prices have dropped dramatically from their peak in the middle of last year, the sector is still optimistic. In many cases, cash rents are softening a bit. There doesn’t seem to be the opportunity for last year’s huge returns and that is being reflected in rental agreements that are up for negotiation. Land prices, on the other hand, continue to be strong. Top farmland in many parts of Saskatchewan has been trading hands at values of around $200,000 per quarter - $1,250 an acre. Even these top values are still cheap compared to farmland in other provinces and states. As a farmer, if you buy land, you’re also a land speculator. A piece of land usually has a tough time paying for itself, but your net worth can change a great deal depending what land values do. These days, the grain industry and therefore land prices are running countercyclical to the rest of the economy. You can find analysts who are extremely optimistic about the future of the grain sector and you can find others who claim the declining world economy is going to cause a crash in grain demand. At this point, however, farmland is looking like a better retirement nest egg than mutual funds. I’m Kevin Hursh
February 2, 2009
Too little too late from cattle lobby Cattle organizations in Saskatchewan and across the country have been too polite with governments. Now that it’s clear the feds have no plan for preserving the livestock industry, the gloves are coming off. The Saskatchewan Stock Growers Association sent out a strongly worded news release yesterday. “We are frankly both disappointed and alarmed by the absence of meaningful income support measures for cattle producers in the budget," says Stock Growers president Ed Bothner. The Stock Growers seldom ask for direct government assistance so this shows the magnitude of the problems facing producers. APAS, the Agricultural Producers Association of Saskatchewan, also issued a news release yesterday, “It is unfortunate that the recent focus on the economic downturn in the East has so overshadowed the continuing plight of western Canada’s livestock producers,” says APAS president Greg Marshall. Marshall says having 13 Conservative MPs in the province, including the minister of agriculture should ensure better understanding of the issue. Unfortunately, the strong words may be too late. Farm groups did not do a good job of defining the issue leading up to the budget and they did not show a united front. They’ve also let the province off far too easy. I’m Kevin Hursh.
February 1, 2009
Malting barley values decline dramatically - pool account closed The Canadian Wheat Board has announced that its malting barley price pool is essentially closed. Most malting barley business for the remainder of the crop year will be carried out using CashPlus, a CWB program that offers producers an upfront cash price. While this won’t be universally popular, it’s a logical decision for the board to make. Malting barley values were very strong in the beginning of the crop year. Now prices have declined dramatically and there’s a surplus of malting barley on the world market. The pool is expected to return a record high price of about $5.50 a bushel after deducting average Saskatchewan freight and handling. Malting barley sales through CashPlus for the balance of the crop year are likely to be at values of around $4 bushel. That’s still considerably better than the feed barley price, but it’s a major drop from the pool value. With the pool closed, values won’t be diluted from sales at the new lower prices. This kind of arbitrary decision on when to close a pool account is new for the CWB, but it was a logical decision. Sales have slowed and the price has plummeted. The market situation is dramatically different. Shorter pooling periods are one way for the CWB to more accurately reflect market realities back to producers. 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).
