After years of bitter debate and several months of legal battles, a new grain marketing era started on Wednesday.

Western Canadian farmers have the option of selling wheat, durum and barley to the grain company of their choice, or they can go through a voluntary CWB. Before Aug. 1, producers were required to market those crops through the Canadian Wheat Board’s single desk selling system.

Prime Minister Stephen Harper and several hundred open market supporters attended a celebration on a farm near Kindersley, SK on Wednesday afternoon.

"The prices look great and I think there couldn’t be a more opportune time for it to happen," said Cherilyn Nagel, a Mossbank, SK farmer and past president of the Western Canadian Wheat Growers Association. Spring wheat prices are nearing $10 a bushel due to droughts in the U.S. Midwest and the Black Sea region.

The CWB is also looking forward to the open market. Chief executive officer Ian White believes farmers will commit between 30 and 40 per cent of their wheat production to the voluntary marketing agency.

"We will add value for farmers," he says. "We have streamlined our operations. We have negotiated new business arrangements that will help us succeed."

The CWB has commercial grain handling agreements with Viterra, Richardson Pioneer, Cargill, Louis Dreyfus and a handful of smaller independent companies. Farmers who market their crops through the CWB can deliver grain to more than 170 delivery points.

The agreements are needed because the CWB does not own any country elevators or port terminals. It is still in negotiations with other companies such as Richardson Pioneer, Paterson Grain and Parrish & Heimbecker.

Meantime, federal agriculture minister Gerry Ritz acknowledges having received inquiries about selling the CWB.

"We have already had a couple of entities come forward saying they would love to buy the CWB," says Ritz. "They (CWB) have a tremendous rolodex of marketing (contacts) around the world and they wanted to capture that."

"We are not prepared to entertain a takeover that quickly," Ritz continues. "I think there are some great roles for the CWB to play in the next two to three years and we will analyze it at that point. So, there is no rush."

The federal government has a five year window where it will continue to guarantee initial payments. Ritz says the CWB will have two to three years to come up with a plan on how it will move forward.

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Two new sampling programs were launched this week by the Canadian Grain Commission in response to the growing use of containers for grain export.

The programs allow for more efficient use of CGC resources. At the same time, they provide growers and grain companies with a useful marketing tool to assure export customers that high quality standards have been certified by the CGC, says Laura Anderson, national manager, process verification and accreditation with the commission.

The Accredited Container Sampler Program allows grain companies to register with the CGC to use the services of an accredited third-party. Once the commission approves the sampling sites and equipment at the container loading facility, the third-party draws an official sample and submits it to CGC inspectors, who then issue an official inspection certificate.

The CCSP allows the grain company to have its own trained employees do the sampling once they have demonstrated they are fully compliant with CGC procedures. The sample is then inspected by the CGC which issues a certified submitted sample certificate.

The Aug. 1 rollout follows a four-year pilot project with industry stakeholders. Participants told Anderson they gained invaluable experience and assurance that they were using consistent and sound principles of sampling that allow export buyers to rely on the quality of the product.

Zeghers Seeds Inc., based in Holland, Manitoba, was part of the CCSP pilot. The marketing of flax, which is subject to strict export guidelines due to concerns over genetically modified seed, is an important part of their overall business strategy.

Doug Hyde, program coordinator with the company, believes the program gives growers and broker partners a high level of confidence when they sell to the company because of the certification. And off-shore buyers know the product is what they say it is based on an internationally recognized certification.

"The CGC is the glue that holds the system together to protect the system’s integrity," says Hyde.

Although the use of container shipments remains fairly price sensitive, Anderson says there has been steady growth in both the ports of Vancouver and Montreal especially for specialty crops such as pulses and bagged grain. For more information on the program check www.grainscanada.gc.ca.

Canada’s pullet growers are asking a federal regulator to create a supply management agency for their industry.

Pullet Growers of Canada recently applied to the Farm Products Council of Canada for agency status under the federal Farm Products Agencies Act.

If approved, it would be the first supply managed marketing board in Canada since the Canadian Broiler Hatching Egg Marketing Agency was formed in 1986.

Having such a board would give pullet growers the ability to set prices and establish production quotas, just as the other poultry and dairy industries do.

Pullet growers raise female chicks immediately after hatching to 19 weeks of age before placing them as layer hens in egg barns.

Pullets are the only sector of Canada’s feather industry not covered by a national supply management marketing board. Eggs, chickens, turkeys and broiler hatching eggs all have their own agencies.

A spokesperson for Pullet Growers of Canada says it only makes sense for his sector to be included as well.

"If the principles of supply management are good for the other poultry sectors, it’s difficult to argue that the pullet sector should not also organize in that way," says Cal Dirks, the association’s Western director.

Currently, pullet growers in Manitoba, Ontario and Nova Scotia fall under the authority of their provincial egg marketing boards. Growers in Quebec recently received stand-alone supply management status outside the province’s egg board.

But growers want an autonomous national agency with legal authority to make decisions on cost of production, housing standards and disease control programs, says Andy DeWeerd, PGC president.

"The time has come for the Canadian pullet industry to come into its own. We are ready for the challenge," says DeWeerd, an Ontario producer.

Dirks, who is also a producer from Steinbach, Man., says a national agency will involve all pullet growers in the egg farmers’ national food safety program, which involves testing for diseases such as salmonella enteriditis.

Dirks says his organization has the support of Egg Farmers of Canada and provincial egg marketing boards in its quest for national agency status.

The Farm Products Council of Canada is obliged to hold public consultations before making a decision. Dirks says PGC hopes to hear back from the council by the end of this year or early 2013.

There are approximately 550 pullet growers in Canada. Dirks says growers in Manitoba, Ontario, Quebec and Nova Scotia represent 57 per cent of the nation’s producers and 73 per cent of production.

British Columbia’s tree fruit industry has sustained more than a million dollars in losses because of rain and hail storms in the Okanagan in the past couple of weeks, reports the provincial agriculture ministry’s production insurance branch.

Some growers have lost their entire crop of cherries as a result of a series of storms that tore through the valley the last half of July. General manager Byron Jonson says there were 10 distinct hail events and a lot of small storms in the past two weeks.

Worst hit was the south Okanagan, where there are moderate to severe losses to the cherry crop, he says.

Rain caused more damage than hail, because when too much moisture hits a warm, ripening cherry, it plumps it up to a point where the skin can’t stretch anymore -- and it splits, rendering the fruit inedible.

Some varieties of cherries are more prone to damage from splitting when it rains just as fruit is colouring. Some of the newer varieties, on the other hand, developed at the Pacific Agri-food Research Centre in Summerland are resistant to such damage.

Jonson says there was also some damage to peaches, but it’s too early to say whether apple or pear crops were damaged by the hail.

He estimates there are around 350 producers in the southern part of the valley who were affected by the stormy weather.

Growers are required to file a notification with the production insurance branch to say they may have sustained a loss, even though it’s not yet known how widespread that loss is, or if there was definitely any damage.

There were significantly fewer growers in the northern half of the valley who sustained damage, although even there some growers lost their entire crop, he says.

It had been estimated this year’s crop would be larger than usual, but this will reduce the overall amount of cherries that will head to market.

The news will also mean growers have to spend the same amount to grow the crop and harvest it, but won’t have the returns to pay for those inputs.

Manitoba hog farmers are warning that escalating feed prices caused by the U.S. drought could put them back in the financial hole they have struggled to escape from over the past four years.

Producers could start experiencing significant losses later this year if feed prices don’t ease up soon, says Karl Kynoch, Manitoba Pork Council chair.

"We’re looking at some fairly heavy losses of anywhere from $30 to $50 a pig coming this fall," Kynoch says.

Pork council officials held an emergency meeting with Manitoba Agriculture Minister Ron Kostyshyn last week to discuss the situation.

Both sides agreed to monitor market prices and crop reports closely and will meet again in September.

"We don’t have any solutions yet at the moment," says Kynoch, who farms near Baldur, Manitoba. "We’re going to see where these prices go and then go back and talk."

A sharp increase in corn prices this summer because of severe drought in the U.S. is causing major concern among pork producers. Corn is a main ingredient in mixed hog rations, which make up over 60 per cent of a producer’s costs.

Earlier this week, Manitoba Pork Council reported the price of corn was $8.75 per bushel, up 23 per cent from $7.10 a bushel in April. At present, it costs a producer between $120 and $140 to feed a pig to slaughter weight.

The council says the average producer is still showing a profit because a market hog sells for around $170.

But hog prices usually peak in summer and decline later in the year. It’s expected an average hog will be worth $136 this coming winter, judging by the traditional price cycle. There’s also concern that corn prices could eventually go as high as $10 a bushel if the U.S. crop is short.

Kynoch says if hog prices decline as predicted and the cost of feed continues to rise, producers will be operating in the red by the end of 2012.

Manitoba hog farmers are just beginning to recover from four years of financial stress resulting from depressed markets, high costs and U.S. trade barriers.

Now, high feed prices threaten to set back producers who were starting to pay off debts accumulated during the financial crisis, Kynoch says.

He adds, though, that not everyone is equally affected. Producers who locked in a futures price on the commodity exchange or signed long-term contracts with buyers may avoid the worst financial losses.

Parched livestock farms in Ontario have drawn the province’s attention -- and its commitment to help.

Earlier this week, the Ontario Ministry of Agriculture, Food and Rural Affairs said farmers who have operations in what is being called "prescribed drought regions" will get relief from Queen’s Park. Anyone farming in a prescribed drought area can defer a portion of their sale proceeds to a future year.

Minister Ted McMeekin said farmers will be protected from reductions in their AgriStability coverage if they are experiencing challenges from the lack of rain and dry conditions, or if hay and pasture shortages force them to sell breeding stock.

AgriStability is a type of income insurance, where the trigger is a decline in income or an increase in costs. When farmers’ income one year falls well below their usual annual average, AgriStability will help offset the difference.

Producers who are experiencing financial distress and are in need of immediate help can apply for an interim AgriStability payment.

McMeekin said Ottawa has been asked to join with the province in assessing support options for livestock producers through the AgriRecovery framework, a disaster relief program for farms. AgriRecovery is designed to provide a rapid response for producers affected by events such as droughts, flooding, hailstorms, ice storms or wildfires.

The province may request an AgriRecovery assessment, which is done together with the federal government.

"Many farmers are having a tough time with continued hot, dry conditions this year, especially in eastern Ontario," said McMeekin.

In Ontario, about 15,000 farmers are enrolled in production insurance, 10,000 in risk management programs and 18,000 in AgriStability.

The double-digit increase in the value of Quebec farmland in 2011 is a double-edged sword for producers, agricultural experts in the province say.

According to figures released last week by Quebec's farm financing agency, la Financière agricole, which does an annual analysis of farmland sales from the previous year, the market value of both idle farmland and farmland in production jumped by an average of 18 and 16 per cent respectively.

In monetary terms, the average cost of an acre in Quebec in 2011 was $7,490 per hectare for farming-zoned land and $8,885 per hectare for farmland in production.

The increases were even higher in the farm-intensive regions around Montreal -- notably Montérégie, Lanaudière and the Laurentians -- where market prices reached as high as $12,000 per hectare.

Real estate prices for agricultural land in more isolated, less fertile regions of the province dropped last year by as much as three per cent.

Market analysts compared the jump to similar increases in the American Midwest, where skyrocketing commodity prices for corn and soybeans -- also the two largest commercial crops in Quebec -– drove farmland prices up by 16 per cent in 2011.

While acknowledging the importance of the impressive gains on the net worth of producers, Quebec's farmers' union warned that such sharp increases in the price of farmland were also a cause for concern.

"This increase will also increase the interest of private investors and fund managers who are looking for places to park money," the Union des producteurs agricoles says in a news release.

The union called on the Quebec government to take a serious look at the situation to counter what it calls "the phenomenon" of private speculators before the price of farmland becomes prohibitive for producers wanting to expand their operations or for young farmers who are starting out.

"Despite our laws and regulations aimed at protecting our farming heritage, (Quebec) is not isolated from the rest of the world (and) many rich Quebec investors are actively pursuing the purchase of farmland here and across Canada," says the UPA.

It notes the value of farmland has grown by an average of 9.5 per cent since 2007.

On July 18, the Bank of Canada released its quarterly report on monetary policy. Aside from the usual outlook on inflation and interest rates, the report provides important insight on the Canadian economy. It also contains implications for agriculture and the agri-food industry, based on economic drivers in Europe, China and Canada.

Inflation climbed at an annual rate of 1.5 per cent in June, well below the Bank of Canada’s target of two per cent. Forecasts call for a slowdown in the growth of global economic activity, which should keep the Canadian economy operating below capacity for a number of months. While it is not possible to predict the timing and direction of interest rate changes, it is expected that the Bank will not increase interest rates until 2013.

The Bank’s main objective is to keep inflation low and stable by changing its key interest rate, based on forward-looking assessments of inflationary pressures. One important tool used in setting the key interest rate involves measuring the difference between the potential of the Canadian economy and what it is actually producing; this difference is called the output gap. The pace at which actual economic activity in Canada will reach its full potential is largely determined by the economic situation in other parts of the world. This is similar to the Canadian agricultural industry, where supply and demand for most commodities is determined on the world stage.

The Bank’s outlook paints a rather dim picture of the macroeconomic situation in Europe. The European economy is expected to contract further before the end of 2012 and negatively impact emerging markets. In fact, China’s economic performance has already been affected. Its economy is now growing at a rate below eight per cent per annum, the lowest level in the last three years. If the slowdown in emerging markets continues, this could create downward pressure on commodity prices over the medium term.

The Bank of Canada also continues to closely monitor the Canadian housing market, fearing that housing is overvalued in some parts of the country. A price correction in major Canadian cities would impact agriculture by affecting the demand for lifestyle farming operations and the value of rural properties and farmland near urban centres. This impact would be largest near cities, with the effect dissipating as the landscape becomes more rural. Any reduction in land values would only be modest, and influence only a small portion of Canadian agriculture as the long-term prospects for the industry remain bright.

Weather concerns in the U.S. Midwest and high commodity prices currently dominate market news. The rapid price climb we have witnessed over the past two months is having a positive effect on the bottom line of crop producers, especially in Western Canada. At the same time, it creates challenges for the red meat industry as feed costs climb. The drought has also depressed livestock prices due to herd reductions. Regardless, it is important for producers and agri-business owners to keep their eyes on key macroeconomic drivers.

The world economy is clearly not firing on all cylinders and poor weather conditions will not last forever. With increased economic uncertainty, it is important to prepare your business for potential swings in costs and revenue. The current environment leaves agricultural commodities susceptible to rapid changes in price. Knowing your cost of production and break-even prices are key when marketing your products.

Barley prices have been on an upward swing this summer, with fall delivered cash bids at $5/bu or better across the Canadian Prairies, including some delivery points through midpoint Saskatchewan.

The question for growers right now -- is $5+/bu a good enough starting point for new crop feed barley forward contracting? Regardless of your personal view of the market outlook, it is a very good price and makes for an excellent starting point on marketing relative to history.

Barley tends to lag the price trends of other commodities, and off-the-combine deliveries need to happen for most growers, given cash flow considerations, especially for product that will be harvested early.

The U.S. corn story still has irreversible production damage and high price. The likelihood of the Former Soviet Union being a passive feed barley exporter looms large, especially given their production problems this year. But for now, it appears the Saudi shorts are covered from European origin.

Prairie cash bids for feed barley of $245/t in northern Alberta to approximately $255/t in southern Alberta and $230/t in Saskatchewan ($5/bu) are too good to stand idly by in my opinion.

But any decision to initiate cash sales on feed barley right now should not be a reflection of any sense of panic or a belief that prices can’t go higher. Rather, Prairie cash bids are quite strong from a historical perspective, and metering sales into strong markets at profitable prices has always been a prudent strategy. Sure beats the alternative of chasing a market on the way down.

Up next on the radar for feed barley is to wait to see whether the FSU can actually export feed grain in a timely way. We’ll also keep a keen eye on whether or not the offshore market is substituting away from expensive corn to alternative feed grains (i.e. barley).

And of course, we remain watchful for any changes in the U.S. corn market trend.

Barley Exports

For a number of reasons, barley exports from Canada will be difficult to predict this upcoming year. First of all, the U.S. drought can potentially alter trade patterns. There is a possibility of a greater north-south flow, as there may also be opportunities for increased trade off-shore due to other global supply shortfalls, such as in the Black Sea countries.

Secondly, we have the movement from central desk selling for export to the private trade which began on Aug. 1. There will be more players carving a niche in the Canadian trade and seeking global opportunities to move Canadian grain. This group will explore all available options to get grain moved off the Prairies.

The question of efficiencies will also come into play as new players such as Glencore will be in control of key assets, both on the Prairies and on the west coast. Of course rail transportation will continue to be a factor and the development of the private trade from a logistics perspective will have to be closely watched.

It’s no secret that Canada has fallen short on barley export potential over the years. An open market environment populated by a few more competing players is likely to make the barley trade more responsive to sporadic offshore marketing opportunities as they arise -- opportunities that proved to slip by under the traditional pooling system of marketing. And that forced the feed barley market to evolve into more of a domestic market over the years and limiting the marketing option essentially to the Prairies only.

But as new crop export bids turn more attractive as I suspect, even if only on temporary opportunities, we’ll see the export market as a more viable option in the new marketing environment. Not all the time, mind you, as we’ll be quicker and more capable to respond as an industry when those opportunities present themselves.

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.