Recent changes to Quebec's revenue stabilization payments to agriculture producers have led many sheep producers to abandon direct farm sales.

And the move impacts customers who rely on direct farm purchasing to provide live lambs to be killed as part of their traditional Easter custom.

Until 2009, subsidy payments to producers were calculated based entirely on the number of ewes. That resulted in expansion among the province's 1,100 producers.

Now, subsidies are paid according to kilograms of lambs produced, which is gauged by slaughterhouse and sales. As a result, the industry is in transition and producers who sell from the farm gate will lose government-backed subsidies for those animals, which represent about two-thirds of the cost.

Some groups, particularly Coptic Christians and Orthodox Jews, have complained about their inability to find producers willing to supply live animals for ceremonial slaughter for Easter or Passover -- or having to pay up to triple the price than previous years.

"Sheep and lamb producers here are going through a very difficult period of adjustment," says Marie-Eve Tremblay, director general of the Fédération des producteurs d'agneaux et moutons du Québec. "They are dealing with a lot of major changes."

In addition to the ewe-to-kilogram subsidy shift, Tremblay says producers must also cope with a closed subsidy envelope and production ceiling of 173,000 lambs.

Those changes, she adds, are a result of the major report released a year ago on the state of Quebec's Farm Income Stabilization Insurance program, better known by its French acronym, ASRA, which ties payment to production rather than market demand.

Tremblay says Quebec sheep and lamb producers are now at a crossroads.

"A lot of them are wondering whether to continue or get out of the business altogether," she says. "It's a time of reflection for many."

Many farmers are planning to pay down debt this year and pull in their horns a bit on spending. Those are among the main findings of the second annual Farm Credit Canada Vision Panel national survey, involving nearly 1,200 primary producers and agribusiness operators nationwide.

Almost half of the survey respondents say they'll reduce debt in 2010. At the same time, producers say they're spending on inputs is expected to drop. This year, 44 per cent of respondents say it's unlikely they'll spend more on inputs. That's five per cent more than 2009.

In fact, producers from Quebec (38 per cent) are more likely to anticipate no change in overall spending whatsoever, compared to those from Saskatchewan (24 per cent) and Ontario (24 per cent).

Faith Matchett, FCC Vice-President, Eastern Ontario and Atlantic Operations, says managing cash flow against input costs and interest rate potential increases will be two of the top challenges in 2010.

"With interest rates lower than we've seen in 50 years, those in the industry need to look closely at their debt structure and be sure to manage their interest rate risk," she says. "Taking time to do this will help with plans for future development and expansion of their operations."

Mike Hoffort, FCC Vice-President, Manitoba and Saskatchewan Operations, says a combination of internal and external factors are weighing on producers' minds in his region.

"Trade issues with canola and flax could impact delivery opportunities and worldwide supplies," he says.

According to Hoffort, another challenge is the stronger Canadian dollar, which he describes as "acting as a drag" on commodity prices for crops, beef and pork.

"The overall downturn of the red meat sector cannot be understated," he says. "It is anticipated that Canadian hog and cattle herds will continue to shrink in the coming year."

FCC encourages producers to consider expanding their horizons in the face of potential challenges. Barry Smith, FCC Vice-President, Western Ontario Operations, suggests producers and agribusiness and agri-food operators look at new and innovative business models for inspiration and templates that might be useful.

"It's always a good idea to think outside the box in the areas of technology and partnerships, both local and international," he says. "I've seen producers looking to optimize production by partnering with greenhouses in Mexico and other countries, and even using satellite positioning technology to understand the variations of their land."

Alberta cattle feeders need to plan or at least make contingencies for a market without the northwest United States as a backstop, says Kevin Grier, senior market analyst with the George Morris Centre, an independent think tank based in Guelph.

The comments come in an article entitled Alberta's Future Beef Packer Landscape, which examines the potential effect on Alberta cattle feeders of losing an important destination plant in the U.S. northwest.

According to Statistics Canada, fed cattle exports to U.S. packers were 15 per cent of total 2009 marketings for Alberta and Saskatchewan feeders.

Key packers in the U.S. northwest include Tyson Foods and AB Foods, both located in Washington and JBS Swift, with a plant in Hyrum, Utah.

Grier argues these packers provide an effective floor price to the Alberta market.

He also notes the importance of Alberta to the U.S. market where the kill share ranges from 15 to 40 per cent in the three northwest plants despite the effects of the country of origin labelling rules.

On the U.S. side, local feed totals have declined by 25 per cent in the last five years in Washington and Idaho, highlighting the dependency of the three packers on outside cattle.

In Alberta, the herd continues to drop dramatically while feedlot capacity has remained fairly static, but Grier anticipates a rationalization to compensate for feedlots currently running at 55 to 60 per cent of capacity.

Grier believes ongoing herd reductions increase the likelihood of a plant closure in Alberta or the U.S., noting, "Alberta feeders need to think and strategize what will happen if the U.S. market declines and one of their plants closes."

Such a closure would reduce demand and could also see domestic supplies flow to the other plants, making the U.S. northwest close to self-sufficient. This would have serious implications for Alberta price discovery and overall basis levels.

Grier warns, "U.S. plants supply an important competitive balance to Alberta packers, in a province where there are currently more cattle than they can kill."

Canada's dairy industry is working hard to control greenhouse gas levels emitted by all stages of dairy production and process, but work needs to continue.

About 110 dairy-chain stakeholders recently attended the Conference on Dairy Sustainable Development and Environment in Ottawa, where they heard greenhouse gas reduction is fast becoming the key ingredient for success in a green-focused world.

"There is no one thing that any one group can do that will change things," says Gilles Froment, senior director policy and corporate affairs with the Canadian Dairy Commission and president of the Canadian arm of the International Dairy Federation, which hosted the event.

"But if everybody does little things -- like producers spreading manure less often, processors improving their packaging and transportation and consumers recycling -- we can continue to mitigate our industry's environmental impact."

According to Froment, the goal of the meeting was to bring together Canadian dairy producers, processors and scientists to exchange ideas, learn from each other and discuss the carbon footprint of their industry.

That footprint has been of concern since the United Nations Food and Agriculture Organization came out with its 2006 study, Livestock's Long Shadow. The 400-page report concluded that cattle were responsible for 18 per cent of the world's greenhouse gases.

Since then, the Brussels-based IDF, a scientific organization of 56 voluntary member states that represent over 85 per cent of total world milk production, has been studying the share of dairy cattle.

The preliminary results suggest dairy cattle represent between two and 3.5 per cent of the U.N.'s 18 per cent mark -- or roughly one-sixth of all cattle emissions.

"Canadian producers have made a lot of improvements over the years, as have processers," says Froment.

Still, he says there is room for improvement -- and this conference was another step on the journey to sustainability.

"The discussions will help us put together a road map or strategy for the future," says Froment, adding that IDF will likely lead that effort. "We can all do our bit."

New Brunswick potato growers are playing the waiting game as negotiations for their 2010 contracts continue with McCain Foods Ltd.

In mid March, growers learned the Florenceville-based company will cut the amount of potatoes it buys from them for processing by 20 to 30 per cent.

"Last year’s export market was softer than expected so we had carryover from last year and not as much need this year," McCain spokesperson Calla Farn says, explaining other influences in the decision include the high Canadian dollar, the low cost of raw potato in Europe and the fact that people aren’t eating out as much. "This situation is affecting the entire North American market, not just McCain’s."

She adds it’s important to note that, for McCain Foods, this is just impacting its export market, which is approximately two thirds of what it produces. "The Canadian market is meeting our expectations."

For competitive reasons, Farn would not reveal the exact volume of potatoes they purchased from New Brunswick growers in the past or what they will purchase this year. And whether the number will be closer to 20 or 30 per cent is still up in the air. "Negotiations are ongoing right now," Farn says.

Joe Brennan, chairman of Potatoes New Brunswick, says he hopes contracts will be settled before New Brunswick's 200-plus potato growers start planting in early May. He says half have contracts with McCain Foods. While he doesn't anticipate seeing any growers forced to eliminate their contracts, he says a 20 to 30 per cent cut in one year will be a huge number for growers to digest.

"I can see at least a $15 million reduction in farm gate sales," Brennan says. "That’s in the value of potatoes alone. Seed farmers will be impacted as those farmers are requiring less seed and it will impact the suppliers of all products."

Brennan says he wasn’t surprised there were reductions coming. The magnitude was surprising, however, even though there were no cuts last year to New Brunswick growers’ contracts.

"We’re hearing in the United States 15 to 20 per cent reduction. Industry numbers show french fry sales are down, but not 20 per cent. Export sales are down some six and a half per cent," Brennan says. "It’s the greatest we’ve heard, but we are playing catch up."

The next meeting to discuss the New Brunswick growers’ contracts is scheduled for April 5.

Flocks of European starlings are causing expensive problems for producers in British Columbia, wiping out tender fruits in hours and devouring thousands of dollars of cattle feed.

Flocks of 10,000 to 20,000 at a time have descended on an orchard or vineyard at harvest time, decimating the crop in hours and causing thousands of dollars worth of damage, even wiping out the entire crop.

At feedlots and dairy operations, in addition to what they eat, the bird droppings cause health issues. Flocks of up to 2,000 birds can consume a tonne or two of feed in a month and contaminate a further 500 to 1,000 kilograms of feed.

It’s estimated starlings are responsible for $3 million in damage to grape crops, $150,000 to cherries and $300,000 to apples, annually in British Columbia.

A non-native bird, they were introduced to North America in Central Park in New York City in 1890, but today there are an estimated 200 million on this continent. Starlings are now listed on the World Conservation Union list of the world’s 100 worst invasive species.

They are aggressive birds who push native songbirds such as bluebirds and chickadees from their nests and even lay eggs in their nests for native birds to raise.

But, you’ll likely never see them when you’re out in the wild because they’re urban dwellers who like to hang out with people. They’re opportunists, explains Connie Bielert of the B.C. Grape Growers Association.

All levels of government and farmers are collaborating on a project to reduce the numbers and to uncover the origins of flocks of starlings using a virtual fingerprint of the birds -- chemical signatures taken from analysis of a feather.

Stable isotopes such as nitrogen, hydrogen and oxygen are picked up from their environment when they are young birds and can help identify where that was, explains ornithologist and researcher Tom Dickinson of Thompson Rivers University.

He will use the feathers of birds trapped as part of a program to reduce populations in the Okanagan to build a library of such fingerprints to help identify the origins of starlings in various parts of the valley.

More than 276,000 starlings have been removed from the valley since the trapping program began in 2003. The trapped birds are euthanized using carbon dioxide and the dead birds donated to a raptor rehabilitation program in the South Okanagan.

By ridding the ecosystem of one female starling during the nesting period, you can rid it of 11 of the non-native birds. Sometimes starlings can have four clutches of eggs in a season, notes Dickinson.

Growers use a variety of methods of discouraging the birds from destroying crops, including scaring them with noise cannons and using mechanized birds of prey, netting crops or even hiring falconers to scare starlings away with their birds.

"You’re not alone. All over the world, wherever grapes and soft fruits are grown, starlings have been introduced and create problems," he says.

Canadian turkey producers now have more opportunity to stay on top of new science and food safety practices in their industry.

On March 24, Agriculture Minister Gerry Ritz announced the Government of Canada will invest more than $50,000 in the Turkey Farmers of Canada's On-Farm Food Safety program through the Canadian Integrated Food Safety Initiative.

The investment will help the Turkey Farmers of Canada update its OFFS program, including training course materials for turkey producers. OFFS is a national program that identifies potential on-farm food safety hazards and provides producers with best management practices to mitigate those risks. It ensures potential food safety problems are caught before products leave the farm gate.

"To assure our industry partners and consumers that our farmers take their roles very seriously, we work with our members to ensure the effectiveness of on-farm food safety practices," Mark Davies, chair of the Turkey Farmers of Canada says. "Canadian turkey continues to be a healthy protein of choice for the consumer."

For more information about the Canadian Integrated Food Safety Initiative, please visit www.agr.gc.ca/cifsi.

As expected, the Canadian Wheat Board last week lowered its 2010-11 Pool Return Outlook (PRO) for March. Wheat values are down a rather harsh $14 to $16/tonne from last month for all grades and classes -- more than I thought they would fall on this go-around. Durum values are $10 to $14/tonne lower. Malting barley has declined by $8 from the February PRO, while feed barley is down $7.

Ouch! This truly is getting ugly and once again confirms in my mind that from an economic perspective, Prairie producers should avoid growing wheat as best they can in 2010. It remains the dog of all cropping options, almost guaranteeing farming for a loss this year. I know that’s a cruel statement, but that is the reality of today.

The following are the Canadian Wheat Board's Pool Return Outlooks detailing estimated payments to farmers for grain delivered during the 2010/11 (Aug/July) crop year, in Canadian dollars per metric ton, basis in store St. Lawrence/Vancouver.

     Source: Canadian Wheat Board.                               


                                   2010/11    2010/11   


                                     PRO        PRO    


 --Wheat--                          March     February  


1 Canada western red spring 14.5%   231.00     245.00  


1 Canada western red spring 13.5%   222.00     236.00  


1 Canada western red spring 11.5%   199.00     213.00  


3 Canada western red spring         189.00     203.00  


1 Canada prairie spring red         192.00     206.00  


1 Canada western red winter         188.00     202.00  


CW Feed                             145.00     159.00  



 --Durum--


1 CW amber durum 13.0%              187.00     197.00  


1 CW amber durum 11.5%              180.00     190.00  


3 CW amber durum                    166.00     176.00  



 --Barley                                           


1 CW barley Pool A                  143.00     150.00


Select 2-Row CW                     200.00     208.00  


Select 6-Row CW                     182.00     190.00

Wheat

The CWB notes that global wheat prices are expected to face continued pressure from large global stocks in the 2010-11 marketing year. Although wheat production is expected to decline in 2010-11, at 658 million tonnes (MMT) it will still be the third largest in human history, trailing only the past two years of record wheat output (678 and 683 MMT, respectively).

Down to the bottom line, the current forecast calls for world wheat ending stocks to increase again in the coming year. The current USDA estimate of world wheat stocks for 2009-10 is 197 million tonnes (International Grains Council today predicts 199 MMT), the largest level since the 2001-02 marketing year.

From the American perspective, USDA currently projects US wheat ending stocks at 1.001 billion bu for the 2009-10 marketing year. If realized, this would be the largest U.S. stocks figure at the end of a marketing year since the 1.261 billion recorded in 1987-88. And if that fact isn't bearish enough, consider that the 1.001 billion bu coupled with total demand of only 1.987 billion puts ending stocks-to-use (ending stocks divided by total demand) at a colossal 50.4 percent.

Think about that point for a moment. It means beginning stocks alone to start next year’s 2010-2011 marketing season would be almost enough to meet half of projected demand without even adding in a bushel of new crop production. U.S. winter wheat is right now emerging from dormancy and there are no significant issues due to an abundance of snow and precipitation this year in the soft-red and hard-red winter growing regions.

Looking ahead to 2010, global wheat area is expected to decline slightly as lower prices impact sown area. Growing conditions in the Northern Hemisphere have been largely positive for the winter wheat crop. Although Ukraine suffered more winterkill issues than in the previous two years, overall abandonment is expected to be close to average. Generally, European, Black Sea and Middle Eastern regions have reported excellent precipitation and crops are in good condition as the spring growth period begins.

The USDA prospective plantings report on March 31 will provide the first indication of U.S. spring wheat acreage. There appears to be some momentum in the eastern half of the northern plains to increase soybean acres at the expense of spring wheat.

The western areas of the Canadian Prairies are dry and there needs to be precipitation across the region to provide adequate moisture for seeding. Current estimates suggest that wheat production in Western Canada will be reduced in 2010-11.

Foreign exchange rates continue to have a negative impact on the PRO. The Canadian dollar has strengthened over the past month and has been moving towards parity. A strong Canadian dollar has a direct negative impact on farm-gate returns. The U.S. dollar also remains relatively strong against the Euro, which has increased the competitiveness of European wheat, especially in Asian and Latin American markets.

Developments in U.S. wheat futures markets were discouraging this past week. There was some hope recently of potential bottoming action at the October 2009 lows. Wheat futures have slipped slightly below those lows on all U.S. wheat exchanges and remain in that vicinity -- not a collapse, but a close lower nonetheless.

But the spec fund position in wheat futures remains heavily short, near record short in fact. Anything coming out of USDA’s report later this week that doesn’t match or exceed already very bearish expectations for corn, beans and wheat may be received with a “sell the rumor/buy the fact” market response. In that environment, some unwinding of this extraordinary spec short position in wheat may give that market a temporary boost. That’s not a prediction as I remain a wheat bear generally (as I have been for a year or more now), but merely an observation. 

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