Tuesday December 01 2015



Agriweek Canadian agribusiness authority since 1967


Statistics Canada on November 25 reported surprisingly upbeat gross farm income for the first nine months of 2015. Despite weakness in some crop prices and declining hog and cattle prices during the latest months, nine-month cash income was 1.6% above the year-ago 2014 period at $42.64 billion. Farm cash income for all of 2014 was a record $57.82 billion, up 4.7% from the prior year. By quarter, cash income was up 4.3% in the first quarter, down 3.1% in the second and up 3.5% in the third. National farm-gate receipts from crop sales rose 0.7% to $22.3 billion as large volumes continued to be sold and the eroding dollar exchange rate held up most prices. A 58% jump was reported in cash sales of lentils to a remarkable $960 million, making the pulse the fifth-highest-grossing crop for the period in Canada, exceeding durum wheat. Canola was the most valuable crop, bringing in $5.91 billion, up 6% from the 2014 nine months. In eastern Canada revenue from soybean sales rose 14% to $1.12 billion but lower prices slashed corn receipts by 25% to $1.05 billion. Farm cash income from livestock sales was 2% higher at $18.86 billion mainly on a 16% gain in cattle and calves, to $7.59 billion. Receipts by province with 2014 comparison in brackets, $billion: Alberta 10.16 (9.56); Saskatchewan 10.01 (9.41); Manitoba 4.44 (4.57); Ontario 8.71 (8.79). (11/26/2015)


The Quebec government is headed firmly in the direction of European and Ontario-style restrictions on certain pesticides, including neonicotinoid seed treatments. Like corn and soybean growers throughout North America, those in Quebec use neonic-treated seed on almost all corn and over half of soybeans, 1.2 million acres. The provincial government issued an environmentally aggressive pesticide strategy for the period 2015-18 and plans legislation to be introduced within six months to modernize its Pesticides Act. The strategy calls for extensive reviews of pesticide use well beyond neonic-treated seed. It proposes a total ban on the use of neonics for non-agricultural uses. It proposes restrictions on atrazine, which would be the first in North America, and on the chlorpyrifos group which includes such mainline products as Lorsban, Nufos and Citadel for cutworm, midge and grasshopper control. Quebec already has some of the oldest and most extreme regulations preventing or discouraging pesticide use in urban areas. Quebec is not a serious crop-producing or pesticide-using province but all such actions cumulatively could increase the pressure in other provinces to look at these issues. (11/25/2015)


US ethanol production set a record of 1.008 million barrels (42.3 million gallons) per day during the week ended November 20, up 33,000 barrels or 3% over the prior week. The old record was 994,000 barrels last June. Ethanol stocks increased by 400,000 barrels to 19.6 million, the highest since late July. Year-to-date production is 12.37 billion gallons vs 12.39 billion a year ago. (11/25/2015)


A USDA survey to gather information on farm land tenure, ownership and transition, the first since 1999, found that nearly 40% of all American farm land is rented. Over 2 million landowners last year rented out 354 million acres valued at $1.1 trillion; 87% of owners were not farm or ranch operators. Landlords collected $31 billion in rental payments and incurred ownership expenses of $9.2 billion. Debt related to land ownership was $33 billion, or 3% of asset value. About 10% of all US farm land will change ownership in the next five years. No comparable survey has been conducted in Canada but would probably show a similar trend in which farm land is gradually passing to non-farm owners. (11/24/2015)


According to the weekly reports of the Ag Transport Coalition, the railways supplied 84% of hopper cars in the required week during the 13th week of the crop year, and 8% a week early. At only 9% of cars arriving late, it is the best on-time performance in a long time, certainly in the history of the ATC weekly reports. It is the result of reduced demand, not operational or capacity improvements. Normally off-farm deliveries at this time of year would be well over a million tonnes a week; the latest four-week average is 885,000. However there is a big gap between the performance of the two major railways. Shippers captive to the CPR continue to get poorer service than competitors on CNR lines. In the latest week of the crop year CNR spotted 92% of cars at country points in the week for which they were needed and CPR 74%. CPR points had 1,042 outstanding orders and CNR 423. For non-bulk shipments, including special crops, the CNR filled 95% of car orders on time and the CPR 72%. Similar differences were seen in dwell times at country points (the time which loaded cars waited to be picked up). The CNR average for multi-car blocks was 14 hours to the vs 41 hours for the CPR. However for both railways in the crop year to date only 54% of loaded cars were taken away within 24 hours and 22% were still on sidings 48 hours after being loaded and released. The only area in which CPR outperformed the CNR was in dwell times at the destination (the time between arrival and unloading at terminals). CNR trains were unloaded an average of 81 hours after arrival at Thunder Bay and 23 hours at Vancouver compared to 28 and 12 hours for the CPR. (11/20/2015)


While some part of the Canadian public supports it, a substantial public backlash is developing against the new government’s plan to import 25,000 refugees from the Middle East in 38 days. It takes someone unbelievably naive to think that among the 25,000 there will be not one with a fanatic ambition to harm Canada. Not all of those to be scooped up are refugees and not all are from Syria. TV images are surely representative and they show a big proportion to be unattached, able-bodied young men, exactly the demographic of terrorists, and of the group that should be defending their own countries and families instead of running away. Even if so many new entrants could be satisfactorily screened there would be a high risk. Would-be terrorists do not announce their intentions and are very good at concealing them, the more easily in an environment where positively establishing true identities is next to hopeless. Nor is establishing identity and a benign background any security against future criminality. Only sheer luck will prevent a some sort of incident. Some number of those whom the government is inviting see a path to the US, which is taking only 10,000 over two years. In the unthinkable eventuality that a terrorist incident is perpetrated by one of these refugees, in Canada or the US, it can be counted on that American controls on the Canadian border will be instantly clamped down to the extent that cross-border transport of goods and personal travel will be hampered possibly for decades to come. There is already a feeling on the US extreme right that the Canadian border should be treated exactly like the Mexican border. We don’t need this. (11/20.2015)


The Geneva-based The World Meteorological Organization said the current El Nino is the most intense in 15 years, but evidence of the usual effects on agricultural weather remain scant. The WMO said climate change may be masking El Nino impacts. All of Australia’s main wheat states received heavy rain in the last two weeks, up to triple normal, whereas El Nino should be bringing dryness. Mato Grosso state of Brazil and tropical regions were dry in October but rains are now slowing soybean planting. Past phases have not had much impact on Brazil. Effects have been more pronounced in Argentina and Chile, which appear to be having fairly normal weather currently. Severe drought covers much of Africa but the connection to El Nino is unclear. (11/19/2015)


The 2015 navigation season at Churchill ended prematurely early last month after a late start, with just six ships loaded with 187,000 tonnes (123,000 of spring wheat, 33,000 of durum and 32,000 of lentils). Normally 12 to 15 grain ships would call. Volume was 549,000 tonnes last year and 636,000 in 2014. Under the federal Churchill Port Utilization Policy a subsidy of $12 a tonne was available for Churchill shipments to encourage its use and offset additional costs and logistical difficulties. The $5-million allocation for 2015 was not taken up. If the port has or ever had the advantages some claim for it, there would be a waiting list for berth slots every spring. It was the Canadian Wheat Board that kept it running from the 1960s to the 1990s. The port’s experience without such a patron has not been promising. If fully utilized the port could handle upwards of 800,000 tonnes, the limitation being the rickety rail line. Its underperformance was once blamed on civil-servant mismanagement, so in 1997 it was sold to Omintrax of Denver and $25 million invested in port and rail improvements. If Omnitrax can’t do better with a $12-a-tonne head start, it looks like the end may well be near. (11/13/2015)


Canadian farm tractor sales during October in sizes above 40 hp were 1,470 units, down 42% from 2,525 in the year-ago month. Deliveries included 546 high-horsepower two-wheel-drive models and 124 large four-wheel-drives compared to 1,067 and 224 in October 2014, according to the Assn of Equipment Manufacturers. Year-to-date tractor sales were 9,320, down 21%. Harvester combine sales were 342 for the month and 1,614 so far this year vs 411 and 1,914. U.S. tractor sales during October were 9,039 vs 10,211. US combine sales dropped 20% to 457 for October and 35% for the year to date to 4,489. (11/12/2015)


The Second Trudeau Era officially began on November 4 with naming of the cabinet. The completely out-of-the-blue choice for agriculture minister turned out to be Lawrence MacAulay of Prince Edward Island. He has once a dairy farmer (still listing his occupation as farmer) but for the past 27 years has been a Liberal MP, the longest-serving in the history of the province. He was the labor minister and solicitor general in the last Chretien government, resigning over accusations that he used his office to direct government contracts to friends and family. He denied all and was cleared of serious ethics issues but did not return to the cabinet. Former Liberal agriculture critic Mark Eyking, ex-vegetable grower from Nova Scotia, was passed over. Ralph Goodale of Saslatchewan, agriculture minister in a previous Liberal government, is now public safety minister, point man if there is ever a terrorist attack. The new trade minister is Chrystia Freeland, quadralingual (English, French, Ukrainian, Italian) former journalist and author with impressive academic credentials but no experience in politics policy. Transport minister is ex-astronaut, military officer and engineer Marc Garneau, who has also been president of the Canadian Space Agency and chancellor of Carleton University. The new finance minister is Bill Morneau of Toronto, principal in a pension consulting firm started by his father which manages $500 million of private employers’ pension money; it is the largest such firm in Canada with 1,400 employees. He is also a former chairman of the CD Howe Institute, the conservative-inclined public-policy think tank. In agriculture it is going to be quite a learning curve. Any actual farming experience of 25 or 30 years ago is irrelevant today. The important agricultural policy issues in the west and Ontario are involved, complex, highly politicized and controversial. However MacAulay should know his way around cabinet and government, is mature and otherwise accomplished and presumably arrives without preconceived ideas. (11/04/2015)


Not only quantity but also quality of the 2015 prairie grain harvest was unexpectedly high. The annual Canadian Grain Commission harvest sample survey revealed that 44% of hard red spring wheat from the 2015 crop graded 1CW, 34% No 2, 14% 3CW and only 7% feed. Durum samples showed 36% No 1, 22% No 2, 23% No 3 and 19% No 4 and 5. Wheat protein content is also exceptional, running between 13.9% and 14.2% for milling types and 13.6% to 14.1% for durum. Over 95% of canola samples graded No. 1 Canada, several percentage points higher than the long-term average. Mean oil content was 44.3%, similar to 44.2% last year 44.2% and right on the 10-year norm. Crude protein averaged 20.9% vs 20.2% last year. With similar results in the northern US states, wheat protein premiums have collapsed except for extremely high levels that are most efficient for blending. (11/05/2015)


The 2015 growing season in western Canada will be remembered for the peculiar but fortunate fact that long stretches of little or no rain and scorching temperatures during its critical early part did not collapse crop yields. Things looked worst in late June into July, when crops in Alberta and Saskatchewan were rated only 20 to 40% good or excellent and up to 50% poor or very poor. Then the rains returned. Crops began to improve, in many cases amazingly. The 2015 experience shows how effective advanced cropping practices is use today are in producing a reasonable harvest in the worst of conditions. Each area of technological improvement contributed. Trash cover from reduced tillage limited evaporation. Proper fertility allowed seedlings to make the most of what moisture was available. Precision seed placement promoted the best possible germination under the circumstances with less loss from uneven seeding depths. Advanced varieties have better seedling vigor. Better weed control, especially in vulnerable crops like canola, reserved more of the scarce moisture for the crop. Each year brings incremental improvements in crop technology which, when accumulated over a period of time, make the huge difference seen in 2015. In its final report for the season to be issued December 4, Statistics Canada will probably report only about a 5% decline in production from 2014 in Saskatchewan and perhaps 9 or 10% for Alberta. These will be dramatically better results than anyone could have expected before the harvest. (10/30/2015)


The International Grains Council in its monthly global grain report today projected the global wheat harvest at 726 million tonnes, down from 727 million tonnes last month but up from 721 million tonnes in '14-15. Wheat use was put at 718 million tonnes vs 719 last month and 707 last year. Wheat trade was up 1 million tonnes from a month-ago at 150 million tonnes. Global wheat is expected to be 209 million tonnes, down from 211 last month. Wheat stocks held by the top 5 exporter countries will drop to 67 million tonnes vs 71 last month. Coarse grain output was estimated at 1.273 billion tonnes, up from 1.269 last month but below 1.305 last year. Coarse grain use of 1.273 billion is expected vs 1.267 last month, reducing carryover to 245 million tonnes vs 247 last month. The world corn crop is expected to be 970 million tonnes, up from 967 last month. (10/29/2015)


Low crude prices have created a crisis for Persian oil exporters, who expected the market to stabilize long before now. The International Monetary Fund said last week that Saudi Arabian monetary reserves are shrinking alarmingly and that the rich oil sheikdom could be insolvent by 2020 if oil prices do not recover. To support its massive social welfare schemes and 15,000 members of the royal family, the Saudis need an oil price above $90 a barrel. Besides reduced revenues and on-going welfare schemes, Saudi Arabia has the worlds third-largest military budget of $81 billion, behind only the US and China and ahead of Russia. The point may be near when the Saudis and OPEC could realize the strategy to squeeze out competitors is not working, and pump less oil for more money. (10/29/2015)


Private weather forecasts for western Canada are for above- to well above-normal temperatures through the winter. A prevailing upper-atmosphere westerly flow is expected to deliver mild Pacific air across the region. Snowfall east of the Rockies is also predicated to be light with the majority of snow accumulation in the first half of the winter period. A drier pattern is forecast to set in during January and February as the polar jet stream swings further north. Average temperatures could be up to 3 degrees C above normal, especially across the western half of the prairie region. The primary storm track will also remain further south across the central and southern US. (10/28/2015)


The shipping season at the Manitoba port of Churchill is winding down with very disappointing volume, under 175,000 tonnes loaded compared to 485,000 last year. The elevator has less than 50,000 tonnes in storage with only one or two ships due before the season ends. The allocation for the $9.20/tonne federal subsidy, which ends next year, was not taken up. (10/28/2015)


Canola cash and futures prices are the highest since 2012, attracting heavy farm deliveries. Country movement has averaged about 550,000 tonnes a week since the start of the 2015-16 crop year, topping out at 673,000 tonnes in the week in the first week of October. Cumulative deliveries since August 1 are 3.28 million tonnes, up from 3.13 a year ago. About 22% of the 2015-16 supply has been sold with 83% of the crop year remaining. The 2015-16 canola supply is sufficient to support country selling for the rest of the crop year at only about 325,000 tonnes a week. Canola seed exports up to the ninth week of the crop year reached 1.66 million tonnes, 9% above year-ago and far above the five-year average for the period of 1.17 million. Domestic use is also surging with domestic crush during the week ended October 7 setting a record at 184,500 tonnes. (10/24/2015)


The outgoing Harper government promised to make good any loss in value of dairy and poultry the supply management marketing quota value that they could os on account of the Trans Pacific Partnership agreement, to the tune of $1.5 billion. It is unclear whether it will be proceeded with, but it would be a subsidy to quota owners who in many cases have made more money on quota appreciation than milking cow. Quota prices have reached extreme values because of the high, secure and guaranteed profit which owning them confers. The milk marketing boards have actually been trying to cap quota prices. Many older producers acquired quota for no or a low initial price and their descendants who inherited it. The TPP agreement does not give any reason for quota values to be depressed. The normal operation of the supply management monopoly will ensure that the tiny amount of extra imports does not hurt producers' profits. The TPP could eventually increase upward pressure on quota prices if domestic production is restricted or expands less slowly. (01/24/2015)


Canadian farm tractor sales were 19% lower during September compared to the 2014 month, the Association of Equipment Manufacturers reported. Sales of models above 40 hp were 906 compared to 1,116 a year earlier, including 344 large two-wheel-drives (499 a year ago) and just 37 large four-wheel-drives (76). Year-to-date deliveries are off 16% at 7,739 vs 9,259. Harvester combine sales were 154 during the month and 1,272 for 2015 to date compared to 274 and 1,503. US tractor sales declined by 24% during September to 6,679 but only 5% for the year to 65,193. US combine sales were down 20% for the month at 866 and 37% for the year to date at 6,366. (10/24/2015)


The Saskatchewan government has introduced amendments to its farm land ownership legislation, the result of a review initiated last May, prohibiting ownership of land in the province by pension funds, investment trusts and their administrators. Also, only financial institutions registered to do business in Canada and Canadian residents may finance farm land purchases. Foreign financial institutions and other entities are barred from such funding because they could become illegal owners in case of foreclosure. A recent public opinion survey showed strong opposition to any kind of foreign ownership and ownership by large investors including Canadian pension funds. The Farm Land Security Board will also get more authority to enforce the legislation. (10/20/2015)


The October 19 election again returned almost all Conservative MPs in the agricultural areas of southern Ontario and western Canada. The Liberal party was again left no members with qualifications and backgrounds traditionally required for the cabinet post of agriculture minister, either from east or west, but especially from western Canada. The new cabinet will be announced on November 4. It was speculated that the most likely candidate is Mark Eyking, a Nova Scotia vegetable grower before becoming a professional politician and Liberal agriculture critic. Numerous agricultural issues are on the horizon, including renegotiation of the $3-billion Growing Forward farm policy with the provinces, which expires in March 2018. The new minister will also have to decide whether to honor the Conservative plan for up to $4.5 billion in compensation supply management producers. The new transport minister will have to deal with the results of the Emerson transportation review whose report is expected in late December and in which grain movement will be a large component. Most important of all, the next trade minister will get the Trans Pacific Partnership file. The cabinet as a whole will decide whether to present it to parliament for ratification.


Monsanto and BASF are reported to be in the late stages of developing new corn GMO technology capable of increasing ear size by 12% with similar yield gains. Filings for regulatory approvals have already been made in the US and other countries, however it is still years away from commercialization. However it would be one of the first instances, if not the first, in which GMO modification has a large direct influence on yield. Up to now higher yields n GMO crops have been mainly due to more effective and economical weed, insect and disease control.


The US agriculture department's monthly supply demand report issued October 9 was remarkable for being a non-event. Small adjustments were made in key figures both directions, leaving carryover projections little changed. The US wheat production estimate was reduced to 2.050 billion bushels from 2.140 last month and carryover was trimmed slightly to 861 million bushels from 875, but up from 753 last year. The corn production number was reduced from 13.590 billion bushels last month to 13.550 and 14.220 last year. Corn carryover was projected at 1.560 billion vs 1.590 last month and 1.860 last year. Corn use for ethanol was estimated at 5.250 billion bushels, down slightly from last year but 5% above that of 2013-14. The ethanol industry accounts for 38% of all corn consumption, roughly equal to animal feed; without this demand the entire American crop economy would be on the ropes. USDA lowered the soybean harvest estimate to 3.890 billion bushels from last month's 3.940 but exports were lowered 1.680 billion from 1.730, 9% under 1.840 last year. Carryover at the end of 2015-16 is expected to be 425 million compared to 450 last month. The next monthly report is due November 10. Historically few large changes have been made between October and February. (10/09/2015)


USDA's latest estimate for world wheat production for 2015-16 is 732.7 million tonnes, up from 731.6 million tonnes last month and 1% above 725.4 million last year. The global wheat crop is a third consecutive record. Projected wheat use of 716.4 million tonnes is 1.3% higher but over 16 million less than production and just 79% of world supply. Global carryover was raised to 228.4 million tonnes from 226.5 last month. The wheat stocks-to-use ratio at the end of 2015-16 was estimated at 31.8% compared to 29.9%. Oddly, USDA raised its estimate for Australian wheat by a million tonnes while local sources are scaling back due to dryness and heat. Export estimates for wheat from competing countries including Canada were also raised compared to the September report. USDA estimated the world coarse grain harvest at 1.267 billion tonnes, down slightly from 1.274 billion last month. Coarse grain use is estimated at 1.275 billion (1.281 last month and carryover at 222.9 million tonnes (224.8). (10/09/2015)


The Trans Pacific Partnership negotiations finally concluded with an agreement signed on to by all 12 members, with compromises all around. Canadian negotiators were able to get away with giving up only 3.25% of the market for dairy products to duty-free imports, 2.3% for eggs, 2.1% for chicken and 1.5% for broiler hatching eggs. When Canada entered the talks New Zealand and the US said the whole Canadian system must go. Later talk was for a minimum 10% duty free access. Not only is new import competition insignificant, but the government has agreed to $4.3 billion in compensation to dairy and poultry farmers over 15 years, regardless of whether prices or quota values are impacted. This likely was the last threat to the supply management system for many years to come. (10/05/2015)


Canada, along with other ag-exporter members of the TPP group, will get better access to Japan, Vietnam and Malaysia under the TPP agreement. Some duties in these net-importer fast-growth countries will be reduced or eliminated as soon as the agreement takes effect, but most of the most restrictive tariffs will be reduced or eliminated over five to 15 years. Canada already exports about $15 billion worth of grains, oilseeds and products to the TPP zone, but almost all are to the US, Mexico and Japan. Exports to the US and Mexico are already duty-free under NAFTA. Japan will eliminate tariffs on pork and beef, but over 10 to 15 years. Possibly the most promising market in the bloc is Vietnam, which agreed to eliminate duties on agricultural and food imports either as soon as the agreement takes effect or over two to five years. Overall, the competitive position for Canada relative to the US and Australia is little changed because these TPP competitors get the same concessions. Obviously it would have been catastrophic for existing pork, beef, canola and other exports had Canada not been part of the deal. There is still a long way to go, with ratification required by legislative bodies of 12 member countries. The outcome of the Canadian election may change everything. There is also much opposition in the US Congress, which will not vote until early 2016. The earliest that the TPP agreement can come into force is the start of 2017. (10/05/2015)


A news conference to have been held at the Trans Pacific Partnership trade negotiations in Atlanta on the afternoon of Sunday October 4 was again delayed and is now not expected until Monday October 5. Talks continued through Sunday. A news blackout was maintained but it was reported from Atlanta that the same issues were holding up finalization of an agreement: the period of patent protection for advanced biologic drugs (few of which exist up to this time), dairy imports by Canada, Japan and the US and auto and parts content. New Zealand, with a population of 4.5 million and GDP of $150 billion, was understood to be inflexible in demanding access to TTP dairy markets. NDP leader Mulcair may have seriously complicated the negotiations by stating on October 3 that he will not be bound by any agreement, would discard it if it did not leave dairy supply management intact and attacking the Harper government for engaging in negotiations during an election campaign. (10/04/2015)


Statistics Canada’s second crop production report of the season, issued October 2, was based on the standard methodology using aggregated results from a survey of 9,300 farmers. Figures were not directly comparable to the new model-based report issued September 15, which adjusts survey responses according to satellite images of vegetation and weather events. Estimates were significantly higher for western crops compared to the first report in August. Total production of the major crops was projected at 73.44 million tonnes nationally compared to 72.46 in August and 78.08 million in 2014. Manitoba, which did not experience drought, was projected to produce 9.90 million tonnes compared to 9.94 in the August report and 9.07 million in 2014. The Saskatchewan estimate was raised to 26.57 million tonnes vs 24.86 and 28.99, and Alberta 17.64 vs 16.51 and 21.38. (10/02/2015)


Compared to the August report, production of the main western crops was put at 55.77 million tonnes, up 3% from the special September report and just 4% above the August survey. The canola crop was put at 14.29 million, 7% above 13.29 million reported in August and 13% smaller than the 2014 crop, which was restated higher last month to 16.28 million. However it was close to the five-year average. The Saskatchewan and Alberta canola crops were estimated at 7.28 and 4.40 million vs 6.70 and 3.99 in August. In Manitoba it was put at 2.54 million, similar to 2014.0 Average yield for canola on the prairies was estimated 32.2 bushels per ac rev compared to 30.0 expected in July when the first survey was taken. The bottom line for western crops is that yields were remarkably high in the half the grain belt that had severe drought during the main part of the growing season. (10/02/2015)


Key figures in the USDA quarterly grain stocks report released September 30 were slightly less bearish than expected, below private pre-report estimates, but not by enough to support prices. All-wheat inventory was put at 2.09 billion bushels, up 10% from year-ago, though farm stocks of 647 million were 9% lower. The trade guess had been 2.17 billion. Durum stocks were 28% higher at 74 million with farm stocks up 15% at 44 million. Durum figures indicated good disappearance of a large supply. Corn stocks were up 41% at 1.73 billion, right on the trade estimate, with farm stocks of 593 million 28% higher. Soybean stocks were 191 million bushels vs 217 million expected but farm stocks of 50 million were 133% higher than a year ago. USDA lowered the 2014 soybean crop estimate to 3.93 billion bushels from 3.97 to make figures balance. (09/30/2015)

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