Farm Credit Canada - March 7, 2008

Note from Editor Kevin Hursh & Associate Editor Allison Finnamore

If you have any questions or comments about AgriSuccess Express, e-mail us kevin@hursh.ca.

The federal government has introduced legislation to amend the Canadian Wheat Board Act, which will remove western Canadian barley from the central desk selling authority of the CWB.

“This bill will deliver on our Throne Speech commitment and will bring barley marketing freedom to the strong and growing majority of producers who are demanding it,” says Agriculture Minister Gerry Ritz.

The courts have ruled that changes to barley marketing cannot be made without legislative changes. The federal government appealed the original court decision, but lost in a decision handed down on Feb. 26.

CWB chair Ken Ritter, a producer from Kindersley, Sask., says changes to the CWB’s single-desk authority can only be legislated after the minister has consulted with the CWB board of directors and held a valid referendum among producers.

Ritter says the plebiscite held last year by the federal government cannot constitute a valid referendum.

In the latest Pool Return Outlook for the current crop year, wheat and durum price expectations have continued to increase. Wheat is up $10 to $30 a tonne compared to the January PRO, with milling durum increasing by $31 a tonne.

The Canadian Wheat Board says new wheat crops are still months away from being harvested and ongoing consumptive demand will continue to lighten old-crop wheat supplies. Concern continues about dryness in the Mediterranean basin and the southern plains of the United States.

With the increase in the wheat PRO, No. 1 Canada Western Red Spring wheat with 13.5 per cent protein is now expected to have a total price in the 2007-08 crop year of $9.05 per bushel in Manitoba, $8.93 per bushel in Saskatchewan and $9.18 per bushel in Alberta. This is with the applicable provincial average freight and handling deducted.

For most classes and grades, the wheat prices expected for the current crop year are very close to the PROs, which were released early last week for the 2008-09 crop year.

Regarding durum, the CWB says an acreage increase is expected this spring in both Canada and the United States, but dry conditions have persisted in the durum-growing regions of both countries, increasing the uncertainty about new crop supplies.

After deducting average Saskatchewan freight and handling, the PRO for No. 1 durum with 13.0 per cent protein is now $12.87 a bushel. Durum prices for the upcoming crop year are predicted to be more than $1.50 a bushel lower.

The current crop year PRO for designated barley was unchanged from the estimate made in January, while feed barley in Pool B, which covers the second half of the crop year, saw a PRO decrease of $7 a tonne.

The CWB says weak offshore feed barley demand, larger than expected export supplies from Australia and increased supplies of substitutable feed grains are among the factors that pushed feed barley price expectations lower this month.

In the 2008-09 crop year, feed barley prices are expected to be lower, while designated barley prices are forecast to improve.

The Manitoba hog industry says it is shocked by the provincial government’s decision to keep a hog barn development moratorium in place in three areas of the province.

“We asked the Clean Environment Commission if the hog industry in Manitoba is environmentally sustainable. Quite clearly their answer was that in some parts of Manitoba, the answer is no,” says Conservation Minister Stan Struthers.

The halt to new or expanding hog barn development will continue in the Southeast, a region classified as being intensively developed, the Red River Valley Special Management Zone, which is prone to flooding and the Interlake, which the government says has ecologically sensitive land, making it unfit for further hog industry expansion.

Since fall 2006, all hog barn expansions or construction have been banned across the province while the arms length Clean Environment Commission (CEC) conducted its review of the hog industry and its impact on the environment. The ban is being lifted elsewhere in Manitoba, however, there will be strict new requirements as recommended by the CEC for any new or expanded hog operation.

Yet hog producers have maintained they are already taking measures to deal with environmental concerns, including worries about hog manure ending up in the province’s waterways. The extended ban, they say, is politics.

“To put a complete or permanent moratorium on part of our industry was not a recommendation out of the CEC. That was completely a political move by our government," says Karl Kynoch, chairman of the Manitoba Pork Council. “All of the hog industry in Manitoba is only responsible for about one per cent of the phosphorus issue they are talking about in Lake Winnipeg.”

The pork council is also worried about the ramifications this decision has on the economic viability of many family hog farms that operate in the restricted areas.

“They've basically devalued and destroyed a lot of these family farms. If you want to bring a new family member in, you need to enlarge it to make it viable – those producers have had that option completely taken away, for no scientific reason,” Kynoch says.

The Manitoba Pork Council says it will be considering its options, including legal action, to lift the moratorium in these areas.

With the ban staying in place for some parts of the province, the CEC has implemented new requirements for any new or expanded hog operations, including strengthening phase-in dates for regulatory phosphorus thresholds in the livestock manure and moralities management regulation so all operators are in compliance by 2013.

The provincial government will also extend the ban on winter spreading of manure by the same date. All new and expanding operations must also have sufficient land available at startup to ensure hog manure is spread in an environmentally sustainable manner.

“We are very intent we are going to protect Manitoba's waterways. We are very intent that anybody that contributes to the problem, contributes to the solution," stated Struthers as he accepted all 48 recommendations from the CEC.

As Prince Edward Island’s only federally-inspected hog plant enters its second month under the management of a government-appointed receiver, its fate remains a big question mark for the province’s beleaguered producers.

The P.E.I. Lending Agency took over the plant Jan. 21 when it called in a $1.5 million demand loan. The plant was owned by the Quebec-based Natural and Organics Food Group and four island hog producers, operating under the corporate name of P.E.I. Pork Plus.

A C. Poirier and Associates was appointed receivers to run the plant and expressions of interests were sought from potential buyers. There were some inquiries, however, no formal bids were made by the Feb. 25 deadline.

That doesn’t surprise Anthony Nabuurs, chair of the P.E.I. Hog Board. Given the national downturn in the hog processing sector and the millions of dollars in upgrades the plants needs to meet federal food safety regulations, Nabuurs wasn’t expecting companies to be beating down the receiver’s door with offers.

It remains business as usual for the facility, but both Premier Robert Ghiz and Agriculture Minister Neil LeClair have signalled the province is not planning a long-term future in the hog processing business.

Meanwhile, Nabuurs says the industry has not ruled out the possibility of running the plant as a co-operative. There were some discussions about the plant’s future, he says, but wouldn’t say if any decisions have been made.

Provincial Treasurer Wes Sheridan has indicated government might be willing to help a new owner with the cost of upgrading the 20-year-old facility to meet current requirements. The cost has been estimated to be between $6 million and $9 million.

At the time the company was placed in receivership, a report filed by the receiver pegged its assets at $3,910,000 and liabilities at $4,295,000 with $2,095,000 owed to the Prince Edward Island Lending Agency, $940,000 to hog producers and $600,000 to trade creditors excluding hog producers.

Funding provided by the Canadian Food Safety and Quality Program has been extended to March 2009.

Beef producers who participate in a Verified Beef Production (VBP) workshop are eligible to receive assistance to purchase equipment designed to carry out on-farm safety practices.

Qualifying equipment like hand-held RFID tag readers, computer software to track medication withdrawals, neck extensions for chutes, scale/calibration devices for medicated feed or water and disposal containers for used drug bottles are eligible for funding.

The program will cover 50 per cent of cost to a maximum of $750. The amounts are taxable and the producer must supply a valid social insurance and GST number, a copy of the invoice and a signed producer declaration form.

The VBP program is recognized as Canada’s on-farm beef safety program. It has been developed to promote best practices for beef producers and foster consumer confidence in beef products. Workshops are held regularly across the country.

Producers attending the workshops also have the option to become VBP registered. The process is designed to provide assurance that VBP standards have been met in order to help boost marketing advantages.

To participate in the VBP program, check out the workshop information at www.verifiedbeef.org. Look under “VBP Across Canada” to find the provincial coordinator closest to you. Information is also available by calling 306-737-2290 or 403-275-8558.

Blueberries are expected to maintain their strong prices for at least another year, strawberries are likely to see a small price increase while raspberry prices could double from a year ago.

“This is going to be a crazy summer,” says Abbotsford Growers Co-op manager Doug Edgar. “No matter how big a raspberry crop we have, the price will be crazy.”

Total world raspberry production was only 517 million tonnes last year, compared to the usual billion tonnes a year. As a result, demand is expected to be intense.

“The low yields and lower acreages of the Fraser Valley are being duplicated worldwide,” says Jesse Brar of Great Pacific Fruit Products.

He estimates the Chilean crop could total only 110 million pounds this year, about 20 per cent below normal. As well, a stronger Euro and a weaker U.S. dollar mean more Chilean berries are being exported to Europe, creating more opportunities for Pacific Northwest raspberries.

Edgar and Brar predict a grower price of at least 80 cents per pound, almost double last year’s price of 45 cents per pound. However, they warn the increase could be short-lived as strong prices will likely lead to more plantings throughout the world.

Fraser Valley Strawberry Growers Association manager Henry Wiens says the outlook for strawberries is also strong, particularly in the fresh market. Wiens expects processing strawberries to fetch close to 80 cents a pound, with fresh, on-farm market prices double or even triple that. The fresh market absorbs two-thirds of B.C.’s production, which has dropped to only 38 growers due to crop disease, decreasing labour availability and a history of low prices.

The price of blueberries is starting to stabilize after over a dozen years of dramatic increases in both price and production. Blueberries in B.C. have grown from a $400 million industry 10 years ago to over a billion dollars last year.

The North American high-bush blueberry crop has increased from 250 million pounds in 2003 to 340 million pounds last year and is expected to reach 500 million pounds by 2013. Over the last four years, Latin American production jumped from 10 to 75 million pounds annually and is expected to rocket up to 350 million pounds a year by 2011.

The federal government’s decision to participate in a $12-million aid program to help the orchard and vineyard industries in Quebec is welcome news, says the head of Quebec’s apple producers’ federation.

But Robert Babeu thinks the program needs more work before its benefits come to fruition for Quebec growers.

“It’s a step ahead,” Babeu says about the $5.6 million announced last week. “But we need to make the program more accessible.”

The federal money complements the $12 million provincial replanting plan. The program runs until March 31, 2012, a year after federal funding ends. Producers can receive $4,000 per hectare to remove existing fruit trees and vines. To be eligible, however, they must own at least two hectares of fruit trees or vines and remove at least one-half hectare. Growers also qualify for funding to help replant popular varieties of apples trees and could receive up to $6,600 per hectare for the replanting of dwarf apple trees and $4,000 for semi-dwarf trees, double what they can for standard varieties.

Babeu, who has two apple orchards in the Rougemont area, says some of the federal program’s conditions puts its benefits out of the reach for many growers. He says the requirement that entire orchards be insured will cost producers a fortune to participate in the program.

“It makes no sense,” Babeu says. “I think we need to lobby and get the Quebec government to look at the situation realistically, from a grower’s point of view.”

In the face of changing market demands, Nova Scotia’s tree fruit and grape industries have received $2.3 million to help renew their sector.

The federal Orchards and Vineyards Transition Program in Nova Scotia runs until 2011. It will help cover some of the costs associated with removing fruit trees or vines in order to plant new varieties and other crops.

Producers with half a hectare or more of tree fruit or grape vines will be eligible for the program if they commit to keeping the land available to agriculture for five years. Eligible producers who have removed fruit trees or vines as of Oct. 25, 2007, or later will receive financial assistance of up to $4,000 per hectare to cover some of the costs of removing plant stock.

The program also includes $96,000 for Nova Scotia's tree fruit and grape industries to plan for the future and take advantage of new opportunities. Industry associations can apply to fund studies to help the association and their members improve the long-term profitability of growers.

A program committee made up of provincial and federal representatives will be formed to select a delivery agent for the program. Once the delivery agent is chosen, likely this spring, more details will be provided to growers and industry groups on the application process.

This federal funding is in addition to $1.5 million in provincial funding announced in November 2005. That five-year program is a province-wide apple replant program that is putting in about 600 acres of Honeycrisp apple trees. As well, a three-year federal Honeycrisp apple research study was announced in 2006.

The Honeycrisp apple variety will be replacing some of the older apple varieties in the province, like the McIntosh. Honeycrisp is a new variety that grows well in Nova Scotia and has good economic returns -– up to four times that of conventional varieties.

Nova Scotia’s wine industry has grown substantially since the first commercial vineyards were planted in the mid-1970s. The province's nine farm wineries and 22 commercial grape growers contribute over $6.9 million in economic activity to the province, with local wines now capturing 8.7 per cent of total wine sales in Nova Scotia. There are now about 160 hectares of grape vines in Nova Scotia and an additional 40 to 60 hectares are expected to be planted in 2008.

Alberta Agriculture and Food has released its 2008 Crop Variety Yield and Performance Data for major field crops. Although the information focuses on field crops grown in Alberta, there is a wealth of useful information applicable to producers across Western Canada.

The crop information portal on the AF website www.agric.gov.ab.ca is at the following path: Decision Making Tools>General>Variety Yield and Performance Data.

Users can choose from a list of crop families including cereals, grasses, legumes, oilseeds or pulses, then select from a variety of different crops in each category. For example, under cereals, users have a choice of several types of barley, oats, rye, triticale and wheat.

There is a discussion on market preferences under malting barley, along with a description of the characteristics of a good malting barley according to the Brewing and Malting Barley Research Institute. A listing of malting barley distributors is also provided, along with links to their respective websites.

Variety information including performance, agronomic, disease and environment data is summarized. It’s possible to select a specific variety and then drill down to detailed information.

For example, choose AC Metcalfe malting barley and you will find data regarding registration status, plant breeder’s rights, strengths and weaknesses, disease and lodging resistance.

Information is also available on performance data, including recommended varieties according to the Canadian Malting Barley Technical Centre, in addition to producer-reported yields. Links are provided to a barley seeding calculator, as well as to bushel-to-tonne and dollars per bushel to dollars per tonne converters.

Detailed crop protection information includes links to recommended fungicides, insecticides and herbicides.

The Ontario Wheat Producers' Marketing Board has helped attract a dessert manufacturing company to the province.

Representing about 16,000 wheat producers, the board will provide technical and research and development expertise to the privately owned dessert company — The Original Cakerie — at its new facility in London. The board is contributing $60,000 in eligible in-kind products and services towards the project.

The frozen dessert manufacturing facility will source ingredients from local flour mills, egg and dairy producers of rural Ontario and is expected to be completed by January 2009.

The Original Cakerie Ltd. was established in 1979 as a small industrial bakery for local restaurants in Victoria, B.C. The company produces layer cakes, dessert cakes and dessert bars sold across North America to restaurants and grocery stores like M & M Meat Shops and food service providers such as Sodexho and Aramark.

The story here is all about food demand in Asia. We are now hearing of reds priced as high as 38 cents a pound, picked up on-farm. Movement is still fairly prompt, but many buyers are beginning to push their movement out until May. I think we are pushing the upper end of the envelope here ahead of new-crop supply coming available from Middle Eastern sources.

On new crop, the demand outlook for the year ahead appears very strong, perhaps better than what we have seen this year on old crop. It means there is certainly room for further upside potential to new-crop values, which are rising. Just in this past week, I have heard new-crop red values jump another three cents to 28 cents a pound with full act of God protection for growers.

But Asian food demand is such that new-crop prices have the potential to rise further yet. Syria and Turkey will not be able to re-stoke supply adequately when their harvest comes online in about May, though the addition of that supply will provide a competitive supply influence to the market in the May to July period, which is typical.

Canada has very strong potential and is uniquely positioned to secure demand that will develop in that August-forward timeframe, at least until Australian competition emerges starting about January.

The last quote I received for No. 1 large green lentils is 35 to 36 cents per pound, up maybe two cents in the past week. But over the weekend, I received a report suggesting bagged prices at the port of Montreal have leapt higher in recent days, suggesting large greens are on a mission to soon tap 40 cents.

This is consistent with what markets need to do -– move higher to clamp down on what has been runaway or otherwise unsustainable demand through the first half of the current marketing year. It’s been a two-year process to whittle excess supply down. With that task seemingly now accomplished, we swing the pendulum to the other side of the price-supply spectrum where the task of the market now is to boost prices in an effort to slow demand and conserve declining stocks.

On new crop, there has been no real change to new-crop green lentil prices with 27 to 25 cents for No. 1 to No. 2 large greens. Some buyers may entertain 26 cents a pound for No. 2 or better. PFCanada feels new-crop prices need to rise another three cents -– all other markets holding steady –- to become price competitive to other better returning cropping options.

Old-crop values remain very impressive with Vancouver free on board (FOB) price at US$470 to $475, which arbitrages to C$10.75 to $11 a bushel at the Saskatchewan farmgate. Domestic processors need to stay one step ahead of export markets to secure supply, with bids posted as high as C$11.50 a bushel.

The market is on a mission to ration demand in old crop and transition to expectations of new-crop EU/Ukraine peas by mid-summer.

On new-crop yellows, demand prospects remain quite strong into the Indian subcontinent, which in my opinion has the potential to trigger new-crop bids of $10 a bushel. I’ve already heard fall-delivered bids as high as $9.25 per bushel at Swift Current, reflecting the $415 Vancouver FOB price.

India looks dry: chickpea prices are inching up and the supply/demand balance on pulses is starting to look even tighter next year.

New-crop yellow prices are likely to move towards old crop rather than other way around. I expect to see $10 a bushel new-crop. But that’s just a number, not necessarily a hard target to sell. Demand seems such that the market can support a higher price in time, especially if India stays dry.

Mike Jubinville of Pro Farmer Canada offers information on commodity markets and marketing strategies. Call 204-654-4290 or visit http://www.pfcanada.com to find out more about his services.

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