Almost all Canadian farmers, from wheat growers to cattle ranchers to potato producers, can look forward to good times for up to the next 10 years, according to new government projections.

Agriculture and Agri-Food Canada says by almost any measure, average farm income set new records in 2011.

Net cash income -- money available for everything from machinery replacement to living expenses -- is expected to total nearly $12 billion. This is a 24 per cent increase over 2010 and a 47 per cent increase over the five-year average.

The results came in spite of an eight per cent increase in operating expenses.

What's more, the prediction includes almost all agricultural sectors.

Grains and oilseeds farmers are expected to reap record net operating incomes 44 per cent higher than 2010. Incomes for hog producers should reach new highs, driven by rebounding prices that have sent market receipts soaring 20 per cent.

Dairy income should be up seven per cent over 2010. Poultry and egg producers can expect an average 21 per cent increase. Potato farmers are looking at 20 per cent increases.

Only cattle producers faced a setback in 2011 over rising costs. However, AAFC experts say that comes after several years of gradually rising incomes. Cattle prices are expected to keep improving and Canadian herds are gradually rebuilding.

Farmers will face challenges in the years to come, mostly from increasing expenses.

Fertilizer costs are expected to rise "modestly," the report says. As well, livestock producers are expected to face continually rising costs for feed, as demand for grains drives up prices.

However, the report says the conditions that led to a profitable 2011 are likely to stick around for a decade.

"Many of the factors that will influence farm income in 2011 and 2012 will continue to be felt over the next 10 years," it states. "These include continued increase in world demand for feed grains, a rising price of petroleum, slow-moderate Canadian population growth and a Canadian dollar near par with the U.S. dollar."

The impact of a healthy agriculture isn't likely to have a big effect on Canada's overall economy, experts say. They point out that agriculture accounts for about three per cent of Canadian gross domestic product.

Marketing Wheat, Durum and Barley in a New Era

Mike Jubinville, President of Pro Farmer Canada, sits down with Kevin Hursh to discuss how to navigate through the changes in marketing for wheat, durum and barley.

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The Canadian beef cow herd is smaller once again, but there are signs of a reversal next year.

Statistics Canada reports there were 4.2 million beef cows as of Jan. 1, 2012. This is down one per cent from the previous year and continues a downward trend that started in 2006.

The inventory of beef replacement heifers increased by 4.3 per cent to 554,300 head. Higher numbers suggest producers are beginning to replenish their herds with young cows.

Beef replacement heifers in Saskatchewan jumped eight per cent to 164,500.

"The signs are there that producers are starting to think about slowing the reduction and moving into more of a retention phase," says analyst Sandy Russell of Spring Creek Land and Cattle Consulting in Outlook, Sask.

"Obviously, the price signals are there. The cattle business is returning a profit to the cow-calf sector.

Older producers used the excellent cattle prices as an opportunity to exit the business last fall. Despite this, the Saskatchewan cow herd declined by less than one half of a percentage point to 1,294,000 head.

"It certainly looks like in 2012 and beyond that there is going to be some sort of slow gradual expansion in the beef herd," says Grant Zalinko, Saskatchewan Agriculture's provincial cattle analyst. "It would also look to be concentrated in western Canada."

Statistics Canada also tallied up the hog and sheep populations. The national hog inventory climbed 1.1 per cent to 12 million head.

Saskatchewan saw the largest increase in hog inventories, rising more than 15 per cent to 895,000 on Jan. 1, 2012. However, the fast growth rate may be a little deceiving, says Sask Pork's Mark Ferguson.

"The growth likely occurred over the past two or three years," he says. "The reason it is showing up now is due to some readjustments from new census data. The growth didn't just happen over the past year."

Saskatchewan has seen some empty hog barns repopulated as pork profitability improves. Feeder pigs are being imported into the province, while the breeding stock numbers are holding steady. Alberta hog numbers grew by one per cent and Manitoba edged up 0.4 per cent.

The Canadian sheep population was two per cent higher at 828,600 on Jan. 1. Ontario and Quebec are home to more than half of the national sheep inventory.

As livestock numbers stabilize or increase, Statistics Canada reports there are fewer farms with cattle and hogs -- 95,105 farms were home to cattle or calves at the beginning of the year, down 1.4 per cent from Jan. 1, 2011 and 4.3 per cent lower than 2010. There were 6,820 hogs farms in Canada at the beginning of this year, down 2.5 per cent from the same time one year ago.

Farmers now have the option to remotely monitor the temperature, moisture and level of grain in their bins without the need to physically check.

The system is designed to allow users to maintain control over their inventory in real time from virtually anywhere, eliminating the need to drive to isolated bin sites or battle snow drifts in the dead of winter.

According to Scott Robson, operations manager with Mifarm.ag, the technology is available through the Mifarm.ag web portal using three basic proprietary elements. 

The website is accessible by any device with Internet connectivity such as a computer, smartphone or tablet. Wireless cellular communication is then used between the farm site and the website, so almost any location can use the technology no matter how remote.

Finally, sensors communicate with the cellular site module and the website through a wireless mesh network. Sensors use solar power with battery backup to ensure continuous operation.

Robson says systems like this not only offer freedom and peace of mind for farmers, but help minimize the potential for expensive grain damage or theft. The Mifarm.ag portal uses three main pages for asset tracking and, according to Robson, is easy to set up.

The site view provides the physical layout of each bin site, showing the bins by number, capacity and contents. Alarm status is displayed by green, red or yellow. Users set the alarm levels to trigger a text message to cellphones or computers so there's an alert to a problem as it occurs.

The history page provides a historical record of system readings done every 15 minutes for each bin. A weather page will also show current and historical information provided via a partnership with WeatherFarm.com. It is also possible to set up a weather station on-site.

Two Alberta locations are currently up and running with plans to expand installations in Alberta and Saskatchewan in 2012 and to offer the ability to monitor fertilizer and fuel. Robson says billing arrangements will be similar to a cellphone contract. More information is available at www.mifarm.ag.

Peru has reopened its border to Canadian cattle starting immediately, says the federal government.

The Canadian Livestock Genetics Association says it is pleased with the reopened trade opportunity and satisfied that negotiations on a health certificate for the export of live cattle to Peru have ended.

Canada Beef and the CLGA estimate the market to be valued at more than $2.5 million in 2012 for the Canadian cattle sector.

Canadian exporters are eligible to send all cattle born after Aug. 1, 2007 to Peru. The bulk of expected sales are expected to be in dairy genetics. The resumption of trade is an important step, says the federal government, that sets the stage for greater market access for Canada’s cattle producers, as well as for beef producers, as efforts continue to restore full beef access to Peru.

Agriculture and Agri-Food Canada notes that Peru is one of the few Latin American countries to have sustained a positive economic growth rate following the 2008 recession. The country is projected to reach approximately six per cent growth in 2012. It becomes the seventh market in Latin America and the Caribbean to reopen to Canadian cattle, following Colombia, Mexico, Panama, Barbados, Bermuda, and Trinidad and Tobago.

Manitoba farmers are applauding a government promise for a provincial water management strategy but say landowners should not bear a financial burden because of it.
 
Instead of being told to practise good water management on their farms, producers should be rewarded for doing so, says Doug Chorney, Keystone Agricultural Producers president.
 
"I think if you use the incentive approach to behaviour, you'll find much better stakeholder support."
 
Incentives for on-farm water stewardship should include financial compensation for flood mitigation practices, such as building structures to store water on the land instead of simply releasing it downstream, Chorney says.
 
He was reacting to a recently announced provincial task force to look at last year's flooding in Manitoba and to recommend improvements in flood management.
 
A late winter and unusually heavy spring rains in 2011 caused record flooding in central and western regions of the province. It left nearly three million acres of annual cropland either unseeded or drowned out. Extensive land and property damage also occurred along the Assiniboine River and around the lower Lake Manitoba basin.
 
The province responded with a wide-ranging flood compensation program for farmers, homeowners, lakeshore cottagers, municipalities and commercial fishers.
 
Now the eight-person task force, announced earlier this month, will look for ways to improve flood preparedness, forecasting and protection.
 
The province will also conduct a flood mitigation study for the Lake Manitoba watershed and "a forum leading to a province-wide surface water management strategy" to control overland flooding, according to a government news release.
 
Chorney says KAP supports water management and does not oppose rules to enforce it.
 
"In principle, we support some sort of regulatory framework. But we want to see a practical approach that works for everybody involved."
 
Chorney says producers who drain farmland to make it more productive are sometimes seen as part of the problem in managing water resources. Several years ago, the province amended legislation to require licences for private on-farm drainage projects.
 
Chorney says KAP accepts drainage licences but feels the rules for approving them are not always applied consistently throughout the province.

British Columbia's finance minister has announced a review of the impact of the province's carbon tax, with particular attention to agriculture.

Finance Minister Kevin Falcon made the announcement earlier this week during his budget speech.

B.C.'s carbon tax is the only one of its kind in North America. According to the B.C. Agriculture Council, it adds about $45 million in direct annual costs to the production of food in the province. That will jump to $65 million annually following a scheduled increase in July 2012.

The greenhouse sector has been particularly hard hit by the tax. In an industry of narrow margins and intense domestic and international competition, energy now accounts for 25 per cent of production costs for B.C. greenhouse growers.

The carbon tax, calculated based on the amount of carbon in a fuel rather than the per litre cost, has added between 38 and 41 per cent to the cost of heating a greenhouse. At the current rate of $1.25 per gigajoule, a five-acre greenhouse will pay $50,000 in carbon tax per year.

"Mexico continues to expand on the belief that they can outcompete us based on lower labour costs," says Casey Houweling, owner of Houweling’s Nursery Ltd. "We can do something about that by increasing mechanization, motivating employees and improving production efficiencies. The one thing we can’t deal with is the carbon tax."

"These costs aren’t incurred by anyone in North America," he says. "What we really need is a carbon tax exemption to help our industry."

The executive director of the B.C. Greenhouse Growers Association, Linda Delli Santi, is cautiously optimistic about the planned review.

"We are pleased to see mention of it in the budget speech," she says. "It tells me that they have taken notice to our plight. Hopefully we can work together for a resolution that keeps our sector viable."

Maple syrup producers will see the benefits of a new reliable, state-of-the-art tool that uses cutting-edge technology to guarantee the quality and authenticity of maple syrup during the grading process this season.

Developed in co-operation with Centre Acer and Agriculture and Agri-Food Canada, the SpectreAcer is an electronic tongue that uses optical spectroscopy to analyze a sample of maple syrup. It has shown strong potential in detecting flavour defects, adulteration and presence of foreign sugars in maple syrup and sap, with 98 per cent accuracy.

“In good years and bad, some 200,000 barrels are graded and inspected by 15 teams who travel to federation and buyers’ warehouses,” says Serge Beaulieu, Federation of Quebec Maple Syrup Producers president. “This new tool will provide an efficient, reliable, affordable and user-friendly way to analyze multiple characteristics of syrup at the same time.”

The federation is testing two of these devices this season and hopes to have one for each team next year.

“We intend to continue improving them and using them across our industry, putting Quebec products far ahead of their competitors in terms of quality control,” Beaulieu says.

He adds that a draft regulation for controlling maple syrup quality in the retail market will soon be in the works, as maple producers have requested from the FPAQ.

“Authorized maple syrup buyers here and abroad who buy barrels of syrup must be assured the Quebec product is pure,” he says.

Quebec law requires every single barrel of maple syrup produced in the province to be graded and inspected. However, this does not cover maple syrup sold in small formats. That may change soon as the International Maple Syrup Institute, a forum for stakeholders in the North American maple industry, has developed a proposal for aligning international maple syrup grading standards.

The prime advantage of this proposal, according to the FPAQ, is that it requires maple syrup to be graded to ensure syrups with off flavours are not bottled.

The FPAQ says the majority of Quebec producers are already on the leading edge in terms of quality control and expect this proposal to have very little impact on them. Producers in other provinces or states that do not have the same history of quality control, however, will have to adapt to these quality standards.

A rather interesting contradiction of results across ag markets lately. Oilseeds (canola and soybeans) are higher while the cereal grains (corn, wheat and oats) seem to be stalling.

Pressure on corn and wheat futures in recent days resulted primarily from anticipation of the release of the United States Department of Agriculture Outlook Forum, set for release late this week.

It's expected the forum will yield bearish projections for supply and acreage for these markets. Anticipation of the forum release triggered spread trade earlier in the week -- buy soybean/sell corn and buy soybean/sell wheat. Market Focus was written prior to the USDA forum release, so we’ll see if that actually plays out.

For weeks, the market has discussed how bearish the USDA Outlook meeting might be with 2012-13 corn end stocks projected to increase to 1.5 to 1.6 billion bushels, with 2012-13 U.S. wheat ending stocks near 900 million bushels. U.S. 2012-13 soybean stocks will be tight based on record large demand during the August to January timeframe.

Oilseed thoughts
Winnipeg canola futures have posted an impressive rally since the start of February, up $35 a tonne during this timeframe. Similarly, Chicago soybean futures are up 69 cents a bushel. Both markets at the time of writing are now trading at their highest levels since October.

The canola market bias remains high at this time, but technically, the charts are looking overbought here, in my humble opinion.

Prairie cash bids have gained these past two weeks with the record large domestic crush pace, solid export demand and chart-based buying in canola futures. However, ideas that canola may be at least short-term overbought, along with uncertainty in the global macro-economic picture, could temper the upward price potential immediately going forward.

Southern Manitoba, with firm demand coming from the U.S., is continuing to provide some of the best cash basis opportunities in Western Canada. Alberta traditionally offers the best value, as they are closer to west coast port locations.

Current spot bids for canola are as high as $12.95 a bushel in Manitoba, $12.75 in Alberta and $12.80 in Saskatchewan. That is up by anywhere from 86 cents to $1.01, compared to one month ago.

Meanwhile, new crop canola bids are coming in as high as $11.48 a bushel in Manitoba, $11.66 in Alberta and $11.53 in Saskatchewan, up between 58 cents to 73 cents from the previous month.

Some factors could undermine long-term price potential, including ideas that current canola cash prices may be overbought and could be due for a correction. Increased spring seeding estimates, which I currently project between 19 million to 20 million acres, could also weigh on prices. The looming South American soybean harvest (even if crop size is diminished) will be coming to market shortly. The uncertainty in the global financial markets could also limit the upside in canola bids.

But there is support under the market. The German newsletter Oil World is reporting that global canola/rapeseed stocks over the coming year will be tight. So then, despite estimates of a potentially record large 2012 Canadian canola acreage to be seeded this spring, canola bids are likely to remain well supported at least until this crop is in the ground and presumably off to a decent start. Current dry conditions across much of the prairie region will certainly keep canola buyers/users somewhat on edge.

For now, the canola market is holding firm, supported by its own very solid and steady crusher and export business, and domestic crush activity has in fact picked up in February. Spec fund buying has rejoined the long side of the market on this run higher.

I'm not sure where the top of this bull move is right now, as this run has admittedly surpassed my expectations. But I sense we are seeing overbought signals flashing, though again, no clear sign of a top yet.

Nonetheless, I think this rally is an opportunity for growers to scale in further old crop cash sales and also get a start with new crop forward pricing. I always prefer scaling cash sales into a rising market at profitable prices rather than chasing a falling market. I’m still interested in locking up some old crop cash pricing at $12.50 a bushel or better.

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.