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Agrimarketing : July August 2008
REVENUES, LAND VALUES CLIMB By D’Arce McMillan Farm Management Editor The Western Producer High grain prices have generated strong optimism among Western Canadian crop producers this year, causing them to invest in increased seeded acres, inputs, equipment and land. Saskatchewan market revenue in the first three months of the year rose to $2.37 billion, 44% above last year’s level. Manitoba market returns rose 16.6% to $1.08 billion despite a sharp decline in livestock rev- enues, and Alberta rose 13% to $2.23 billion. Prairie farm- ers sowed more spring wheat, durum, canola, flax, dry peas, lentils and mustard this spring. While overall seeded area increased, barley and oats acres decreased because other cropping options looked better. With crop farm income at its best level in years, farmers are updating their stable of tractors, combines and implements. Equipment dealers report brisk sales and long wait times. Canadian farmland values increased modestly in recent years but in the second half of 2007 jumped by 7.7%, with most of the gains occurring in the West. British Columbia led the pack with a 14.5% increase in the six months, Alberta increased by 10.3%, Saskatchewan rose by 7.8% and Manitoba climbed 7.3%. The West’s hot economy, fueled by the energy and resource boom, has raised competition for labour and like most industries, agriculture is scrambling to find experienced workers. Crop processing is increasing. Western Canada’s biofuel industry is comparatively small, but growing to meet a federal mandate for 5% renewable content in gasoline by 2010 and 2% in diesel fuel and heat- ing oil by 2012. In the past year, Husky Energy opened a 130 million litre ethanol plant at Minnedosa, MB, the twin to its plant at Lloydminster, SK. Terra Grain Fuels is starting up its 150 million litre plant in Belle Plaine, SK. The plants run on wheat. Several other biofuel projects are at the plan- ning and engineering stage. James Richardson International Ltd. and Louis Dreyfus are each building canola crushing plants in Yorkton, SK, that are capable of pro- cessing about 850,000 tonnes of the oilseed. Cargill is doubling the capacity of its Clavet, SK, plant to 1.5 million tonnes, On the policy front, the future is unclear for the role of the Canadian Wheat Board, which has a monopoly on all sales of food grade wheat and malting barley and on exports of feed barley. The federal minority Conservative government wants to end the monopoly on barley sales, but opposition from other parties in parliament and court challenges have derailed the plan to implement changes for the 2008-09 crop year. CONTINUED VOLATILITY by Ralph Pearce, Editor Top Crop Manager Contrary to conditions in past years, the spring of 2008 will go down as an uncommonly cool and wet season across much of Eastern Canada. Accustomed as they are to suitable planting conditions for corn in early April, many growers were faced with later planting of both corn and soy- bean crops. Some were fortunate enough to find a late April planting window with much of the rest of the corn going in around the 10th of May. According to estimates from Statistics Canada , the expectations for corn planting for Ontario was 1.8 million acres with provincial esti- mates set at 1.75 million, a drop of roughly 250,000 acres from 2007 levels. In soybean fields, aside from being about five days behind on crop development, conditions across much of Ontario and Quebec are reported to be fair to good, as of mid-July. There have been some water-logging issues, thanks to higher than average rainfall, pushing the potential for root rot diseases and some issues with nitrogen fixa- tion. But then there have been no reports of aphid or bean leaf beetles, which were problems in 2007. With a warmer July and August, it is believed the crop will rebound suf- ficiently to be of average yield. In terms of acreage, Ontario’s num- bers from Statis- tics Canada are down marginally, from 2.275 million acres in 2007 to 2.15 million for 2008. John DePutter, President of DePutter Publishing in London, ON, predicts continued volatility and wide price ranges for crops. Although some markets have proba- bly hit the upper ends of their new, higher trading ranges, others may still have farther to go before com- pleting their upward transitions. Current wide cropping margins will eventually be squeezed away by ris- ing input costs, he adds. According to DePutter, there are still a lot of “ifs” in the short-term future. The first thing necessary is better weather during the rest of the summer. The bulk of the U.S. corn crop, much less Ontario’s crops, have yet to pollinate, meaning a 12 billion bushel corn crop in the U.S. is still suspect, which would impact on the potential for making the high for December futures of just under $8.00 per bushel. “That high price was record-shattering, and it was roughly double the highs that used to contain most of the bull markets,” explains DePutter. “If this crop exceeds 12 billion bushels, there is a possibility that this market could gradually erode for a while.” Then all the other “ifs” come into play: if cattle and hog and ethanol and oil prices remain where they are, then a crop of 11.8 to 12 billion bushels is enough to sustain the sys- tem for this year, and perhaps 2009, as well. If cattle or hog prices move up or if the price of ethanol some- how increases, all that could change. “You may not see the cutbacks in usage that are necessary to make a crop of that size work,” adds DePut- ter. “In which case, the price of corn could potentially move to higher lev- els than $8.00, even with a good or reasonable crop this year.” AM CANADIAN UPDATE /What’s New continued from page 20 22 AgriMarketing ¦ July/August 2008 McMillan Pearce
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