In this edition - July 14, 2017
After record farm income in 2016, agriculture is well positioned to handle the modest interest rate hike announced Wednesday… and even the one after that, expected this fall.
Wednesday’s quarter per cent hike, to 0.75 per cent, marks the first interest rate jump by the Bank of Canada in seven years. Chartered banks responded by increasing their prime rate to 2.95 per cent.
More jumps in the Bank of Canada rates are expected in October and perhaps in early 2018.
And while he considers the hikes significant, J.P. Gervais, chief agricultural economist with Farm Credit Canada, is optimistic about the farm sector’s ability to respond.
“Agriculture can adjust to Wednesday’s hike,” Gervais says. “Farmers are coming off a record year. There’s no need to panic.”
He suggests producers “take time to pause, and ask yourself if your operation is sitting where you want it to be, consider risk, and review your financial strategy.”
Gervais says that rather than focus on the initial hike, he’s more concerned about the slow and gradual increase in interest rates.
“I think we can handle them, but it’s the next hike, and the one that may follow after that, that has me concerned,” Gervais says.
Indeed, despite repeated signs and warnings over the past month from the financial community, the hike startled many Canadians - farmers and non-farmers alike - including those who experienced 20 per cent–plus interest rates in the early 1980s, and young people unfamiliar with any degree of higher interest.
“There’s a whole generation of people who have never experienced rising interest rates,” Gervais says. “Rates have been going down, and have been low for many years. So to them, this is something new that leaves them wondering.”
A rate hike was inevitable. The continually improving economy meant Canada would ultimately raise interest rates to spark further investment here and strengthen the Canadian dollar, which has languished in the shadow of the American dollar.
The low dollar has been good for exports. But it’s made buying the likes of U.S. farm machinery more expensive.
Following Wednesday’s announcement, Gervais recommended producers with variable rate loans consider their options. It may be time to move to a fixed rate, he says, “to take some risk off the table if deemed too high for the operation.”
But he urges established producers to proceed with carefully planned expansions or other investments.
“Asset values will not change because of an increase in interest rates,” Gervais says. “Farm income trends are doing well. Producers have strong balance sheets. Commodities are good. Canadian agriculture will be fine.”
The announcement of a new $15.5-million beef research facility at the University of Guelph’s Elora agricultural research complex has Ontario’s 17,400 beef farmers feeling confident about their future.
The new facility, called the Livestock Research and Innovation Centre – Beef Facility in Elora, will be dedicated to studies about beef quality and genetics, as well as forage productivity, food safety and animal health and welfare. Construction will start this fall.
Fergus cattle producer Joe Hill, vice-president of the Beef Farmers of Ontario, was among the agriculture, government and academic leaders who ceremonially broke ground for the centre recently.
“The new centre will ensure we have the capacity to continue to advance beef cattle research in meaningful and integrated ways for years to come,” he says.
“It builds on the investments by the University of Guelph in new beef research faculty, giving the group of scientists the best possible facilities and equipment to work with.” The university has added new faculty positions in beef nutrition and beef genomics.
Beef is big business in Ontario, with farm gate revenue of $1.3 billion, processing revenue of $3.3 billion and retail sales of nearly $9 billion. Research is integral to its success, says Agriculture and Agri-Food Minister Lawrence MacAulay.
“This investment will make the beef industry even stronger and more competitive, supporting jobs and economic growth in Ontario and across Canada,” he says.
Collaboration was key to the facility’s development. The province has the lion’s share of investment, at $12.4 million, via the Agricultural Research Institute of Ontario. The federal government is providing $2 million, with the Beef Farmers of Ontario contributing the rest.
Last week’s announcement is the latest move in major agricultural research facility developments at the Elora complex. Two years ago, a $25-million dairy research facility – likewise supported by industry, government and academia - opened its doors.
Agriculture and Agri-Food Canada says research at the new facility is expected to have a direct benefit for producers by reducing the amount of feed needed for every pound of beef, with each cow producing less methane and less manure. It says with industry research showing feed costs account for 25 per cent of beef input costs, a one per cent improvement in feed efficiency can save producers $11.1 million annually.
Planting a cover crop later this month after wheat harvest in Ontario, and in the fall when other crops are harvested is one of several tools for farmers to manage glyphosate-resistant Canada fleabane.
The weed has spread to 30 counties, from Essex County in the west to the east’s Glengarry County, since first being discovered in 2010 in an Essex field.
Peter Sikkema, field crop weed management specialist at the University of Guelph’s Ridgetown Campus, says growers responding to a Grain Farmers of Ontario survey two years ago identified glyphosate-resistant Canada fleabane as “the No.1 weed management issue” in Ontario.
Mike Cowbrough, Ontario Ministry of Agriculture, Food and Rural Affairs weed management specialist, says if the weed is left unchecked or uncontrolled, it can cut corn and soybean yields by 60 to 90 per cent.
Mainly in Ontario
In the rest of Canada, Drew Black, Canadian Federation of Agriculture’s director of environment and science policy, says “from what we’ve heard this remains an Ontario specific issue.” Only one to four per cent of the acreage affected by the weed is in western Canada.
Sikkema says seeding cover crops after harvesting wheat in July “is very effective in suppressing glyphosate-resistant Canada fleabane.”
Vigilance is key in management of the week, which Sikkema calls a “manageable problem.”
Cowbrough says control options include fall tillage, cover crops and pre-planting herbicides.
New Canada fleabane seedlings germinate in the fall and spring so fall tillage is one way to knock down the weed population, cutting it by 70 to 80 per cent, he explained. Cover crop usage and pre-planting herbicides are other tools to suppress remaining weeds.
Cowbrough says if a crop can emerge before the weeds, that benefits the crop and there’s less impact on yield.
This spring, Sikkema fielded many calls on control options, including from areas outside southwestern Ontario where he usually doesn’t get calls, such as the Ottawa Valley.
Farmers should have acted earlier in the growing season, but they still have some herbicide control options for the weed in their fields, except for IP and Roundup Ready beans. Growers of those crops had to use control methods before plant emergence, as there aren’t any good management options once the beans are growing.
Farmers need to stay on top of managing glyphosate-resistant Canada fleabane by using control options before planting crops, including fall tillage, cover crops and herbicides. But there are still some herbicides for use in most crops during the growing season.
Canadian barley production has dropped 35 percent over the past 10 years as livestock operators switched to feed wheat, distillers dried grain and corn.
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THE CANADIAN PRESS