Farm auction season Auction sale season is just beginning. Ritchie Brothers has a big auction today at its sales yard at Rouleau, south of Regina. Throughout the month of April and well into May, there will be scores of auction sales across Western Canada. In recent years, farmers and ranchers have been travelling farther from home to pursue the particular piece of farm equipment they’re after. Bidding over the Internet has become commonplace, so you don’t actually have to be in attendance on sale day. With the late arrival of spring-like weather, this year’s early auction sales will be hampered by wet yard conditions. However, towards the end of April and into May, farmers start getting into the field and that can mean poorer attendance. In the south, sales start to peter out as May approaches. In northern grain belt regions, sales into the beginning of May are more common. While good used farm equipment seems to always be in demand, many observers expect competition to be a little less frenetic than last year. Sales at farm equipment dealerships aren’t as brisk as a year ago and that may translate into a few more bargains for those buying at auction. I’m Kevin Hursh.
March 29, 2009
Lentil and peas acres will be key to price direction The April 24 seeding intentions report from Statistics Canada is expected to set the tone for prices on a number of crops where Canada is a major player in the world marketplace. In the most recent Pulse Market Report, Brian Clancey of Stat Publishing gives his opinion on what lentil and field pea acreages to watch for. Clancey says if lentil acres in the seeding intentions report are over 2.1 million, it will be bearish for prices. On the other hand, if the acres are under 1.9 million, it will be bullish and there will be pressure for new crop prices to rise. New crop contracts are now available for both red and green lentils with prices in the 23 to 25 cent a pound range. While lentils stocks are currently tight and prices are high, the opposite is true with field peas. We seeded nearly 4 million acres of peas last year and a record carryover is expected at the end of the current crop year. Clancey says this year’s plantings would have to drop below 3.1 million acres before the new crop price outlook would improve. He says if field pea seeding intentions are above 3.5 million acres, markets will believe prices need to drop to attract livestock feed demand. I’m Kevin Hursh.
March 27, 2009
Wheat outlook improves while durum and malting barley decline Based on the new Pool Return Outlook from the Canadian Wheat Board, there won’t be much difference between spring wheat and durum prices in the new crop year. Wheat PROs are up by $8 a tonne as compared to the first new crop estimate made a month ago. While the next wheat crop is still expected to be the second largest on record, the winter wheat growing areas of Texas, Oklahoma and western Kansas are dry. As well the flooding conditions in the Red River Valley are likely to mean less spring wheat seeded in Minnesota, North and South Dakota and Manitoba. Thus the strengthening wheat price outlook. The durum PRO, on the other hand, is down by $3 a tonne, primarily due to the very good durum crop outlook in North Africa. If you assume that average Saskatchewan freight and handling are going to stay the same for the new crop year, top grade durum with 12.5 per cent protein has a price outlook of $6.51 a bushel, only slightly higher than spring wheat at $6.23. The news wasn’t good on malting barley. The new crop PRO has fallen by $8 a tonne as compared to a month ago. Two-row malting barley after deducting freight and handling now has a price outlook of only $4.08 a bushel. I’m Kevin Hursh.
March 26, 2009
Pay farmers for Ecological Goods & Services A conference is underway in Regina to explore the topic of how land owners can be compensated for Ecological Goods and Services. The conference is co-sponsored by APAS, the Agricultural Producers Association of Saskatchewan. Farmers and ranchers provide many services for the public good. In addition to carbon sequestration, proper stewardship of the land base provides watershed protection, erosion control and wildlife habitat. There have been pilot projects on ecological goods and services in a number of locations across the country. In Manitoba, producers in the Rural Municipality of Blanchard participated in a multi-year project and were compensated for retaining potholes for waterfowl and for protecting riparian areas and sensitive land. A driving force in this whole concept has been Ian Wishart, the president of Manitoba’s Keystone Agricultural Producers. Wishart is presenting at the conference underway in Regina and he points out that now is an opportune time to press the federal government on this issue. In the last budget, the feds announced $500 million over five years would be allocated to something called Agri-Flex. They’ve indicated this money won’t be spent on the existing farm income safety net programs and that it must be trade neutral. It would make a lot of sense to use these funds to initiate a program to compensate farmers and ranchers for ecological goods and services. I’m Kevin Hursh.
March 24, 2009
Improved cattle prices Cattle prices have been trending upwards in recent times. Prices right now are substantially better on all classes of cattle than they were a year ago. Statistics compiled by the Saskatchewan Ministry of Agriculture show the average price of a 600 to 700 pound feeder steer at nearly $1.12 a pound last week. That’s about 18 cents a pound higher than the price in mid March of 2008. On 800 to 900 pound steers, the price last week average 96.5 cents a pound, nearly 16 cents a pound better than last year. A similar difference exists on the live weight price of slaughter steers. On D1 – D2 cows, the price last week ranged from 41 to 59 cents a pound, about 8 cents better than a year ago. There are big problems in the beef industry ranging from packer concentration to the American country-of-origin labeling. The beef breeding herd continues to contract due to low or even negative margins. But prices do look considerably better than a year ago. I’m Kevin Hursh.
March 23, 2009
Check the premiums on Crop Insurance options The deadline for making changes to Saskatchewan Crop Insurance coverage is March 31. I predict a limited amount of interest in the revamped variable price option and the new in-season price option. With the variable price option, grain prices in July are used for coverage levels. In the past, the premium would increase or decrease by the same amount as the change in the crop price. This year, the premium will be known in advance. Having that certainty is viewed as an advantage, but the variable price premium is going to be higher than the base premium. In other words, you’re going to pay a higher premium, but your coverage might go up or down. The same is true with the in-season price option where an average of crop prices from September to February will be used. You’d think that there would be about an equal chance of prices increasing or decreasing under both options, but somehow the statistical analysis has convinced Crop Insurance that it has to charge higher premiums. The variable and in-season premium rates were not forwarded to producers with their package of information. You have to call to get those rates. I’m Kevin Hursh.
March 22, 2009
Weather forecasting lacks priority How much would more accurate weather forecasts be worth to farmers? Environment Canada is now providing seven-day forecasts, but there’s only human input on the first day of the forecast and usually for only the first 12 hours. The rest of the forecast comes completely from computer models. Computer modeling has limitations. An experienced human can adjust the computer assumptions and come out with a much more realistic forecast. Bob Cormier of Saskatoon is one of the few people working for Environment Canada in the province. He notes forecasts are generated with the general public in mind rather than farmers. And he says there’s no plan in plan to increase the usefulness of the forecast for producers. For years, Environment Canada has operated with a skeleton staff. The initial indignation over staffing cuts many years ago failed to convince the federal government to revisit the decision. However, a relatively small extra investment could still provide a substantial improvement in the weather forecasts from Environment Canada. I’m Kevin Hursh.
March 20, 2009
Weather watch for grain markets Grain market analysts are watching weather conditions in a number of different regions of the world. Bruce Burnett, the director of weather and market analysis for the Canadian Wheat Board spoke on Wednesday in Kindersley. Burnett says winter wheat in the southern United States is being stressed by dry conditions. It’s been dry from Texas all the way to western Kansas and soil moisture levels are low. The winter wheat is actively growing and in Texas it’s at the jointing stage. Rain in the next week will be very important to maintaining yields. In the northern states, the problem has been too much moisture. Flooding is expected in the Red River Valley. Burnett says more moisture could cause a switch in seeded acres away from spring wheat and into soybeans. The durum price outlook is being affected by normal to above normal moisture conditions in North Africa. Morocco, Tunisia and Algeria have good durum crops coming, more than offsetting dry conditions in Turkey, Syria and Iran. On malting barley, Burnett says Australia is the country to watch. There is still a lot of time for it to turn around, but drought is persisting in southeast Australia and that is a major barley production area. The Canadian Wheat Board will release another Pool Return Outlook next week. I’m Kevin Hursh.
March 18, 2009
Potash to thank for Saskatchewan's strong budget The balanced Saskatchewan budget is the envy of other provinces. It’s a good budget for farmers. After decades of injustice, the education tax on farmland has finally been addressed in a meaningful and sustainable way. As well, the Ministry of Agriculture budget is increasing by $177.5 million, a whopping 58 per cent. Most of the additional money, 87 per cent of it, will go into the business risk management programs of Crop Insurance, AgriStability and AgriInvest. Details on new federal – provincial Growing Forward programs should be announced in the next few weeks. This will include funding for a province-wide water infrastructure program. The main reason for Saskatchewan’s good fortune is potash revenues which now account for about 20 per cent of provincial income. PotashCorp has just issued more layoff notices even as it plans for longer term expansion. The company has a strategy of matching potash production to market demand. In other words, it has so much market clout that it can cut production and keep prices high. It’s ironic that Saskatchewan farmers are benefiting from PotashCorp’s ability to put the screws to farmers in countries that rely on potash fertilizer. I’m Kevin Hursh.
March 17, 2009
Diesel fuel way down from last year One farm input cost that has come down dramatically from last year is diesel fuel. Allyn Tastad, a partner in the Saskatoon accounting firm of Hounjet Tastad Harpham has analyzed diesel consumption costs for some of his farm clients. Back in 2007, farm diesel averaged 73.1 cents a litre, which generated a cost of $8.26 per farmed acre. In 2008, the average diesel price jumped to $1.038 per litre which gave a farm cost of $10.93 an acre for Tastad’s farm clients. Currently the price of farm diesel is in the range of 57 cents a litre. If that carries through for the year, the cost per acre would be around $6.00. Every farm will be a bit different, but in these farms the saving as compared to last year is nearly $5 an acre. That isn’t a large amount compared to what you can make or lose with grain pricing decisions, but every little bit helps. Despite a grain price outlook that’s a lot lower than a year ago, the bottom line is still positive for most producers when they crunch the numbers. Some moderation in the cost of inputs such as fertilizer and fuel is definitely helping that bottom line. I’m Kevin Hursh.
March 16, 2009
RRSP eligible farmland fund An increasing number of investors are counting on farmland to deliver long term returns. One of the investment companies buying Saskatchewan farmland is Agcapita Farmland Investment Partnership. The Calgary-based Agcapita buys Saskatchewan farmland and rents it back to farmers, with a longer term plan of selling the land for a capital gain. Agcapita claims to have the only RRSP eligible farmland fund in the country. The minimum investment is $10,000. One of the people on the advisory board of Agcapita is financial guru and author Jim Rogers. Rogers recently gave a speech in Toronto in which he suggested to the assembled investment bankers that they “sell their houses in the city, move to Saskatchewan, buy tractors and farmland and start farming.” A growing number of financial experts believe that farmland is a strong investment, particularly in Saskatchewan where land values remain far lower than any of the neighbouring jurisdictions. Financial experts don’t always pick winners. However, investment capital flowing into farmland is one of the factors currently pushing prices upwards. I’m Kevin Hursh.
Canadian canola allowed into Europe After being banned for more than a decade, Canadian canola will again be allowed into Europe. Reports indicate that the European Union has finally dropped its last nitpicking requirement and genetically modified canola can now be sold into European countries. The ban started when the first GM varieties were grown commercially and it has taken all these years and all sorts of scientific submissions to get the Europeans to drop their opposition. Before the ban, Europe was sometimes an important customer taking up to a million tonnes a year. In most years, the amounts were much lower. In Canada’s absence, Australia would sometimes pick up the slack since it didn’t start producing GM canola until recently. Analysts say that with the ban ended, there won’t be any immediate rush of Canadian canola into Europe. The market conditions aren’t right. The biggest significance may be that opposition to GM crops is gradually eroding, in Europe and elsewhere. With billions of people consuming GM crops for more than a decade, the nonsense about unknown health risks eventually rings hollow. I’m Kevin Hursh.
March 13, 2009
PotashCorp market dominance The shining star in the Saskatchewan economy has been potash. Potash prices have remained high even though worldwide nitrogen and phosphate prices tumbled. Most analysts attribute that difference to market concentration. While fertilizer production generally is concentrated in the hands of fewer and fewer companies, potash production is extremely concentrated and Saskatchewan is a world powerhouse. When worldwide grain prices declined last year, dropping fertilizer demand eventually caused nitrogen and phosphate prices to soften. In potash, companies cut production a bit, but refused any significant cut in prices. Most farmers here don’t need to apply a lot of potash. That isn’t the case in many other regions of the world where potash is required to grow a good crop. In this province, it’s heresy to criticize PotashCorp because they’re a Saskatchewan success story. However, it doesn’t take too much imagination to know how Potash Corp must be viewed by farmers in other parts of the world. There’s a very interesting article on this topic by a magazine called Corporate Knights. You can see the article at www.corporateknights.ca. I’m Kevin Hursh.
March 11, 2009
Viterra loses money on fertilizer It’s no secret that many independent fertilizer retailers have lost a significant amount of money due to dropping fertilizer prices. They bought nitrogen and phosphate when prices were high and expected to go even higher. Instead, prices started tumbling in late 2008 and farmers delayed purchases hoping for even better prices. Well, it isn’t just the independent dealers that were affected. Fertilizer losses are also evident in the first quarter financial results for Viterra. The company has made a fertilizer inventory write down of over $28 million. In other words, they know they won’t be selling their fertilizer inventory for as much as they paid to purchase it. The write down contributed to a net loss of $33 million in the first quarter which ended January 31. Viterra President and CEO Mayo Schmidt says it is not unusual to record an operating loss in the first quarter, particularly if fall fertilizer applications do not materialize. He’s still optimistic about the spring sales season based on the level of prepayments and the increase in fertilizer volumes that the company has experienced since the end of the quarter. Many observers expect logistical problems this spring if too many producers wait too long before making their purchases. I’m Kevin Hursh.
March 10, 2009
Get good financial and tax advice Accountants say they still see farm operations that would be better off structured as a corporation, but for whatever reason the operators don’t want to incorporate. Farms that incorporated years ago were more likely to roll farmland into the corporation and often they later regretted that move. In more recent times, farmland usually remains outside of the corporation. However, for any farm generating significant taxable income, there can be considerable tax savings by rolling the equipment and inventory into a corporation. Top farm accountants advise that if a farm isn’t already a corporation, it should be structured as a partnership. If you incorporate a farm that has been in a formal partnership for at least two years, the promissory note you take back from the incorporated entity can be much larger. Production inventory and equipment transferred to the corporation can carry a higher value if it's transferred as a partnership interest, rather than individual assets transferred from a proprietor. Therefore, after incorporation, more money can be returned to the shareholders tax free. Good financial and tax advise doesn’t cost. It pays. I’m Kevin Hursh.
Everyone wants your money It’s the time of year when farmers make a lot of big buying decisions. Farm auction sales will be starting soon and there will be scores of sales across the Prairies before seeding starts. Producers are scouring the sales catalogues and auction company websites for the items they’d like to buy. It’s also a busy time at farm equipment dealerships as producers look to make adjustments in their lines of equipment. In most cases, the waiting list for new equipment doesn’t sound as long as last year, but business remains strong. Of course, this is the time of year for many farm input decisions – seed, fertilizer, inoculant, seed treatments and herbicides. Little wonder that producers are being bombarded by all sorts of sales pitches right now. Big dollars are being committed for the growing season ahead and the companies are fighting for their piece of the pie. The goal of the various advertising campaigns is to attract attention and cut through the clutter of information. It isn’t just grain producers who are making buying decisions. For cattle producers, bull sales are just ahead. For both grain and livestock producers, many farmland sales and rental agreements are still being finalized. There’s no shortage of places where you can spend money at this time of year. I’m Kevin Hursh.
March 8, 2009
A giant corporate farm on First Nations' land? A huge corporate farming entity is being planned for First Nations land in the three Prairie Provinces. Sprott Resource Corp. has announced the launch of One Earth Farms. Sprott says it will invest $27.5 million in One Earth Farms to establish operations, fund working capital and support initial growth. The intent is to build a long-term business partnership with First Nations. The news release issued last week doesn’t indicate if any deals have yet been established. The initial minimum target is 50,000 acres in the first year. The corporation says its access to large tracts of First Nations’ farmland will position One Earth Farms to become the largest, most efficient farm in Canada. The plan is to lease First Nations’ land and initiate job training for First Nations to provide the labour. The people at the helm have impressive qualifications: Larry Ruud, a partner in Meyers Norris Penny who is also a director of Viterra; Blaine Favel, former Grand Chief of the Federation of Saskatchewan Indian Nations; and Fred Siemens, former president and CEO of the Winnipeg Commodity Exchange. However, for me, the plan sounds grandiose a bit far fetched. I think it will face a number of daunting challenges. I’m Kevin Hursh.
March 5, 2009
Saskatchewan farmland prices at highest ever Saskatchewan farmland values peaked back in 1982. We’ve finally surpassed that level. According to Statistics Canada, the average value of farmland and buildings was $413 an acre back in ’82. That was the start of incredibly high interest rates and lending institutions ended up owning over a million acres of Saskatchewan farmland. Land prices declined from 1982 all the way to 1993 when they hit a modern time low of $253 an acre. Since that time, farmland prices have gradually but steadily increased. Numbers are only available up to 2007, but the stats show the average value hit $408 an acre. There was a fairly significant jump in the numbers between 2006 and 2007. I suspect when they’re finally available the 2008 numbers will also show a sizable increase, putting farmland values at an all time high. However, we’re still low compared to other provinces. While Saskatchewan’s average per acre farmland value was $408 in ‘07, Manitoba was at $695 and Alberta was at an average of $1,221. The highest average farmland values in the country were in Ontario at an amazing $4,388 an acre. I’m Kevin Hursh.
March 4, 2009
Farmer owned elevator plans expansion There have been many failures among farmer-owned businesses. However, there are also many successes that don’t get much attention. One of these is Meridian Grain at Marengo, about a half hour west of Kindersley. When the two elevators that serviced the Marengo area decided to pull out of town, a local company was formed with about 150 shareholders to buy one of the elevators and move the annex over from the other elevator. Meridian Grain started in 2002 and it has been highly profitable. Each year, it has paid a dividend to the shareholders. Now there’s another share offering to expand the facility. The plan is to increase the car spot from 25 to 112. There will be 600,000 bushels more grain storage, a new weigh scale and a much faster grain leg. The ability to load 112 cars in 24 hours would mean substantial freight savings. The cost of the expansion is estimated at $4 million. The hope is to raise $1 to $2 million from shareholders and borrow the remainder. The business plan, even though it’s based on conservative assumptions, calls for the borrowed money to be paid off in five years. The producers involved in Meridian Grain have good reason to be proud of past accomplishments and excited by future possibilities. I’m Kevin Hursh.
March 3, 2009
Strong lentils prices will push acreage Lentil prices continue to defy gravity. Large green and red lentil prices have steadily edged upwards, while virtually every other commodity has stayed steady or dropped. Yellow peas continue to hover around $6 a bushel. The new crop Pool Return Outlooks for wheat, durum and malting barley are all lower. Canola prices have slipped below $9 a bushel. Flax prices are good, but they don’t match the strength in lentils. According to CGF Brokerage and Consulting of Saskatoon, the top grade of large green lentils is now in the range of 32 cents a pound. Both number one and number two red lentils are over 40 cents a pound. Even at average yields, those sorts of prices generate great returns. In fact, you’ll be hard pressed to find any other crop options that will produce a comparable return. Naturally, a lot of lentils are expected to go in the ground this spring. Some estimates suggest Saskatchewan will have more than two million acres. Unfortunately, there has been little in the way of new crop contracts, so there’s no way to lock in any price certainty for new crop production. I’m Kevin Hursh.
March 2, 2009
Benchmark prices published for feed peas Pulse Canada has come out with an interesting tool for valuing field peas for use in livestock rations. Benchmark prices for feed peas are being published based on a standardized least cost feed formulation for hogs. Most of the peas fed in Western Canada end up in swine rations so it’s the most relevant calculation. The benchmark price represents the price at which peas start to become economically feasible for hog producers to include in their ration formulations. According to Pulse Canada, the benchmark can assist buyers and sellers in arriving at a fair price, representative of the intrinsic value of the product. Benchmark prices are established for central Alberta, southern Manitoba and central Saskatchewan – the Saskatoon area. While the idea is a good one, you have to watch the assumptions that are used for the formula. Prices for the competing feed ingredients of feed barley, feed wheat, corn, canola meal and soybean meal are used in the calculation. For the February 23 to 27 timeframe, the feed pea benchmark comes to $5.50 a bushel, but that’s based on a feed barley price of $3.05 a bushel. Other sources put the feed barley price in the Saskatoon area in the range of $2.50 a bushel. You can check out information on the feed pea benchmark prices at www.pulsecanada.com. I’m Kevin Hursh.
March 1, 2009
Only two major beef packers left in Canada XL Foods and Cargill Ltd. are going to have a strangle hold on the nation’s beef slaughter capacity. The Competition Bureau says it isn’t going to challenge the XL Foods acquisition of Lakeside Packers. The only organization to raise concerns has been the National Farmers Union. The NFU says that Cargill and XL Foods are going to have more than 80 per cent of Canada’s beef slaughter capacity and 95 per cent of the capacity for fed cattle. The NFU correctly points out that XL, owned by the Nilsson Brothers, also owns many of the auction markets as well as cattle finance and insurance companies. However, the Competition Bureau says the primary concerns raised by industry participants were not related to the transaction, but rather to the possibility that the Lakeside plant at Brooks, Alberta would close if the transaction did not proceed. Industry participants are also concerned over how country-of-origin labeling is going to turn out, since this could limit purchases of Canadian cattle by American packers. The Bureau claims that it will not hesitate to take appropriate remedial action is there’s a substantial lessening or prevention of competition. Don’t hold your breath. The country is going from three main beef packers down to two. 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).
