Wednesday March 29 2017

Agriline

Agriweek


Agriweek Canadian agribusiness authority since 1967

MARCH 22 BUDGET IS SILENT ON AGRICULTURE

March 22 budget was far more notable for what was not in it than for what was. Pre-budget consultations traditionally held by the finance minister with various interest groups led to an expectation of hostile changes to capital gains taxation. Small business owners and farmers are well treated under the present law with the lifetime exemptions and the 50% effective rate. These provisions remain. It was also feared that tax rates on corporate and higher personal incomes would be raised. In the end there were no significant tax increases. Excise taxes on alcohol and tobacco were raised by amounts almost too small to measure. However the government intends to make changes that will restrict the use of private corporations to lower taxes to small-business corporate rates from high-income personal rates and also the use of dividends and capital gain by small business corporations for income splitting in a family. A discussion paper outlining these changes will be issued shortly. Highly technical changes are proposed for treatment of spread trading in derivatives to defer taxable income, which could apply to individual commodity futures traders. A change in the way insurance companies are taxed on farm policy premium revenue may have the effect of slightly raising casualty insurance premiums in the future. A change will be made in the trade remedy system to allow interested parties to request an investigation by the Canada Border Services Agency to determine whether specific imported products fall within the scope of a trade remedy measure. Unions will have the right to participate as interested parties in trade remedy proceedings. Agriculture is mentioned a few more times without specifics, in connection with research and innovation support and transportation. The Canadian Food Inspection Agency gets an extra $149 million over five years to improve meat plant inspection. The finance department will propose restrictions on the use of crop sales cash ticket deferrals as a way to defer income but that is for another budget. And that's about it, except for a 6-cent-per-$100 increase in employment insurance premiums. Use of the unemployment insurance system as a delivery vehicle for welfare will be expanded further. Most big-money budget provisions simply detail how the $81 billion allocated to so-called infrastructure programs stretching out as far as 17 years will actually be spent. The emphasis is on expanding welfare and deeper federal government intervention into every part of the economy. Most new programs extend beyond the government's present mandate. It gives effect to the Trudeau principle that indefinite deficit spending is fine and the government does not have a year in mind in which it will start to pay its way from current resources.. (03/27/2017)

MANITOBA HOG INDUSTRY FREED

The Manitoba government has introduced legislation that will end the 11-year de facto ban on hog barn construction and renovation imposed by the former NDP government. The measure is Bill 24, the Red Tap Reduction Act, which repeals a total of 15 different regulatory schemes. The hog-farming prohibition is in the Environment Act. The bill will also remove the restrictions against manure spreading on fields during the winter months. However the regulation is not opposed by livestock groups and will remain under another law. Both measures were intended to reduce phosphorus run-off into Lake Winnipeg, and eventually covered the entire province, including areas far from the lake. Hog production and manure disposal were long ago shown to be minor contributors to lake pollution. Most of the phosphorus entering the lake comes from cities and towns in the watershed, including Winnipeg and communities south of the US border along the Red River. Phosphorus loading has been reduced in recent years. Under the hog-barn restriction, new construction and expansion were permitted only if they included prohibitively-costly industrial-type waste treatment facilities using anaerobic digestion or a similar process. A pilot project in 2015 allowed the use of two-cell manure lagoons for manure treatment but created little interest or new development. Hog production in Manitoba is dominated by Hutterite colony farms and large operations owned by or otherwise linked to the two large packers. Both are in a good position to expand quickly, with the most logical locations in western and southwest Manitoba, closer to packing houses in Brandon and Neepawa. (03/27/2017)

US ACREAGE RESTRAINT COULD TRIM WORLD SURPLUS

The US agriculture department will release its annual prospective plantings report, based on a national survey, on March 31. But numerous private broker and market advisory firms have already released acreage predictions all of which point in the direction of increased soybean area, much less corn and record-low wheat acreage. With the return to more normal yields from the records of 2017, US crop production could fall substantially with or without adverse growing season weather. If demand in 2017-18 holds up, especially this season's brisk exports, world grain and oilseed stocks could drop noticeably for the first time in five years. Other major producers are not cutting acreage because their prices, in weak currencies, are not low enough to discourage production. But in the US spot wheat prices under $4 a bushel are cash-money-losing. Corn at just above $2.75 is barely break-even in high-yield areas. Soybeans at $8.50 are making a few dollars an acre. So, according to the average of the credible estimates, some based on surveys of farmers, projected US corn area at 90.3 million acres compared to 94.0 in 2016, soybeans at 86.5 vs 83.4 and all wheat 45.7 against 50.2. Winter wheat was estimated at 32.7 million vs 36.1 last year, non-durum spring wheat at 11.3 million compared to 11.6 and durum at 3.05 million, up from 2.41. Corn area would still be the seventh largest area of recent years, although 7.3 million acres below the recent high in 2012 when it was 97.3 million. Soybean area would be a new record. Wheat acreage would be the smallest since 1919. In 2016 US average yields for corn, wheat and soybeans set new records at 174.6, 52.6 and 52.1 bushels per acre respectively. These were exceptional results that are not expected to be repeated soon. Trend-line yields are projected by USDA at 157.0 bushels for corn, 45.2 for wheat and 43.4 for soybeans. Assuming an average ratio of harvested to planted area, the US corn harvest should drop to 13.88 billion bushels from last year's 15.15, soybeans to 4.14 billion against 4.31 and all wheat to 1.86 billion from 2.31 billion. With carry-in from 2016-17, corn supply would be 16.20 billion bushels for 2017-18, soybeans 3.093 billion and wheat 2.885 billion. Using the same export and domestic use as in 2016-17, US corn carryover would drop 32% from 2.320 billion bushels to 1.580, soybeans would increase to 485 million from 435 million and wheat stocks would fall 40% to 614 million bushels from 1.025 billion. Corn carryover would be the smallest in almost 10 years and wheat the smallest in four years. Soybean carryover would be a record but by only 50 million bushels. (03/20/2017)

CFIA GOES OVERBOARD IN TB INCIDENT

Bovine tuberculosis was discovered in a cattle herd in South Dakota on March 2. The differences in the way that case is being handled compared to the hysterical reaction to the TB incident in southeast Alberta by the Canadian Food Inspection Agency are arresting. The South Dakota herd and 12 directly adjacent properties with 8,000 head were quarantined for testing, which is well along after less than a month. Herds in which no positives were found were immediately pronounced clean and released. Only 26 cattle on the origin ranch have been euthanized and there is no plan to wipe out the entire herd. Control of animal disease is a state matter in the US and this case is being managed by the state veterinarian. South Dakota retains its TB-free status and officials stressed that there is no human health or food safety risk. No meat-importing country took or mentioned any trade action. Standard protocol is to track all cattle that can be identified brought into and sold from the affected herd over the last five years. Up to eleven states could be involved but as of last week no other state had placed restrictions on cattle from South Dakota. A single case of bovine TB was also confirmed in Michigan last week, a two-year-old steer thought to have been infected by wild deer. As of last week the CFIA still had 53 farms in southeast Alberta and adjoining Saskatchewan under quarantine, seven months after the first case came to light. Just 20 farms with 7,500 head have been released. Six animals have tested positive, all in the original herd. Over 10,000 cattle have been destroyed. The CFIA said last week that the investigation could take several more months and more sites could be quarantined. There are international standards for handling animal disease outbreaks. The CFIA has decided that greatly exceeding them enhances Canada's reputation as a source of safe food. We know that the costs of this policy are very substantial. We have not seen anything in the way of a market advantage. (03/20/2017)

CBC FAKE NEWS STORY HAMMERS BANK STOCKS

Grown-up stock market investors don't mind it when a stock price drops. Prices fluctuate all the time for hundreds of reasons. Share prices go up and down. But when a stock drops 5.5% in one day (as happened on March 10) because a bunch of little boys and girls at the CBC decided to do a hatchet job on the biggest Canadian bank, it is beyond the pale. TD shares dropped from $70 to $66 after a spurious story alleged that its employees have to break banking laws to keep their jobs because of 'incredible' pressure to grow revenue. The CBC has a 'Go Public' portal to attract story tips, which are usually about cell phone bills and bad dental work. But when three complaints about a big bank turned up, the CBC saw some real dirt. A stream of pumped-up, sensationalized, repetitive stories was spread on radio, TV and its web sites, and was picked up by dozens of financial news outlets. When the stock tanked the CBC literally gloated. TD Bank has 81,000 employees and 10 million customers. It is regularly on lists of the top employers in Canada in ratings that assess workplaces from the employee point of view, and has been first or second in the respected JD Power customer satisfaction survey for 10 years. It has an internal hot line where employees can report any issue directly to top management. Everything a major financial institution in Canada does is under the constant purview of the Superintendent of Financial Institutions. Either the things the CBC alleged are false, were invented by disgruntled ex-employees who could not do their jobs and embellished, or occurred so rarely as to be completely not notable. The CBC wiped $6.7 billion off the assets of TD shareholders in 12 hours. Share prices of other banks also fell. Lasting and quantifiable damage has been wrongly done to TD's reputation and to that of the Canadian banking system. Bank stocks are held by pension funds and are the core of many people's old age security. With similarly malicious, twisted intent the same could be done to literally any company, any time. Every employer, including the firm that publishes this newsletter, has felt the wrath of vengeful separated employees and experienced the ensuing complications. There is no news here except fake news. A few irregularities in millions of transactions a month are insignificant. The CBC stories were irresponsibly written to create the impression that a tiny tip of a gigantic iceberg has been discovered by 'investigative journalists'. TD Bank won't sue the CBC for defamation, but shareholders should, forcing it to reveal the quantity and quality of its evidence and to account for its grossly, deliberately misleading conclusions. Short-selling activity in TD stock in the preceding month should be investigated. Then the CBC should be switched off. (03/20/2017)

PHONY INDIAN PHYTOSANITARY DEMAND THREATENS PULSE SECTOR

After March 31 India will accept incoming shipments of pulse crops and wheat only if they have been fumigated to Indian specifications using methyl bromide at the port of loading. This has crested a crisis in the Canadian pulse crop industry, which developed largely because of the huge Indian market. Ostensibly the purpose of fumigation is to kill certain nematodes and other insects to prevent their entry into India. However all these pests are already present and widely dispersed in the country. Most are not present in Canada, and those present do not survive winter temperatures. Peas and lentils that have been stored in the conventional way over a prairie winter cannot possibly harbor any of these insects. Until now Canada and several other countries were exempted from the rule and their bulk and container cargoes were fumigated on arrival. The exemption was in the form of a 'derogation' for six-month terms that have been renewed without incident since 2004. This was considered a bureaucratic formality and the renewal was until now automatic. Fumigation involves the use of a gaseous form of methyl bromide. It is ineffective below 50 degrees F and most effective above 80 degrees. The applicable Indian regulation runs to 167 pages and covers more than 2,000 designated items from wood (with and without bark) to seeds and plants for propagation. In many cases imports without fumigation are specifically allowed subject to certification by a competent authority in the exporting country guaranteeing the goods are pest-free. But when the Canadian Food Inspection Agency proposed such a solution for pulse crops it was turned down flat. Canada cannot meet the fumigation requirement. Indian officials know it and they know exactly what they are doing. The renewal was declined with the expectation and intention that Canadian pea, lentil and chickpea imports would be immediately terminated. The Indian government pretends that this is a phytosanitary issue and is not interested in a resolution. It will not co-operate in the search for one. US exports to India are in the same situation, but not those from Australia, which also harvested a record pulse crop in 2016. Australian shipments to India have always been fumigated at the source and there are excellent facilities at export ports. India also has its own bumper crop of pulses, estimated at 22 million tonnes, a 35% increase from the prior year. The difference of about 7 million tonnes from 2016 is close to recent annual imports. The Indian government has a vital interest in maintaining prices to its growers, both to encourage higher domestic production in the future and alleviate rural poverty that is even more threatening than in China. Subsidies to both farmers and low-income consumers are already an overwhelming fiscal strain. Artificially supporting pulse prices by blocking imports is a way to transfer wealth from consumers to farmers without directly involving the government. It has chosen a crude, highly unethical way to keep unwanted imports out, probably taking a cue from China. (03/06/2017)

SMALL DROP IN WORLD WHEAT: IGC

The International Grains Council last week forecast world wheat production in the 2017-18 crop year at 735 million tonnes, 2% less than in 2016-17, with both area and yields expected to be slightly lower. It is a very small decline in view of the size of the world wheat surplus. For 2016-17, it raised its forecast for total cereal output to 2.102 billion tonnes from 2.094 a month earlier, up 4.8% from 2.006 in 2015-16. Global cereal consumption was raised to 2.069 billion tonnes from 2.062 in the January report. Its forecast for 2016-17 world wheat production at 752 million tonnes was unchanged from January, 2.0% above 737 million in 2015-16. Global wheat carryover was estimated at 236 million tonnes, up from 235 million last month. The world soybean estimate for 2016-17 was raised to 336 million from 334 million tonnes last month. Consumption was put at 334 million tonnes, up slightly from 333 million in the prior year. Carryover remained at 35 million tonnes. (03/06/2017)

CANADIAN FARM INCOME EXPECTED TO BE QUITE STABLE

Agriculture Canada has released an annual outlook report, including farm income forecasts, for 2017. The report is a consensus forecast developed with the provinces and Statistics Canada. It expects virtually no change in gross farm receipts between 2016 and 2017. Farm cash receipts, including government payments, are forecast at $59.08 billion in 2016 and $58.88 billion in 2017, after the record $59.77 billion in 2015. Similarly small changes are expected for individual provinces. Crop-based farm cash receipts are estimated to have increased by 2% in 2016 to $32.59 billion, and are expected to gain another 1% in 2017 to $32.87 billion. Crop receipts are projected to increase primarily because of larger marketings and high prices of canola. However year-to-year changes are similar in eastern and western Canada. Farm gate income from livestock sales is expected to drop to $22.80 billion in 2017 from $23.87 billion in 2016 due to erosion in North American cattle and hog markets from record highs of 2015. Farm gate receipts from cattle and calves are expected to drop by 13% in 2017, partly offset by higher marketings. Hog revenue is forecast to drop 2% in 2016 and 8% in 2017. All livestock receipts, which declined by an estimated 7% in 2016, are forecast to slip by a further 4% for 2017. Government program payments rose by 24% in 2016 from the historic low of 2015 to $2.63 billion and are projected to rise another 22% in 2017 to $3.21 billion. Most of the increase is accounted for by crop insurance payments. (02/27/2017)

WHEAT MAY BECOME A CANADA-US TRADE ISSUE

The Western Canadian Wheat Growers Assn has joined US Wheat Associates in urging the Canadian government to remove restrictions on US wheat imports into Canada and to allow as free a flow north as south. Both organizations agree that such action would improve the efficiency of the grain handling systems of both countries and narrow the artificial price differentials that are the main reason for large-scale US imports from Canada. They could have added that unless Canada takes such steps voluntarily, the inequality of market access and the large volume of Canadian wheat exports to the US will become an issue in the renegotiation of the NAFTA agreement. Currently Canadian wheat delivered by farmers to US primary elevators or traded commercially by grain companies receives the same treatment as US-grown wheat. But because of legislation and regulation, essentially the Canadian statutory grading system, virtually no American wheat is imported into Canada. US wheat delivered into the western Canadian elevator system, regardless of its quality, automatically receives the lowest grade, generally feed. US wheat does not qualify for a statutory grade even of varieties registered in Canada. It is not possible to see how the imbalance can be neutralized without abandoning the Canadian statutory grading system. The Canada Grain Act states that only Canadian wheat can be assigned a legal grade and that no wheat can be exported unless officially graded and inspected. Much American wheat is of varieties not registered in Canada, while the Act insists that wheat eligible for grading must be of an approved variety and class. (02/20/.2017)

USDA MAKES FIRST 2017-18 CROP PROJECTIONS

The annual USDA outlook forum was held February 23-24, with preliminary projections for 2017. The figures were anticipated as the first official assessment of 2016 prospects. All wheat area was projected at 46.0 million acres, down 8% from 50.2 million in 2016. The wheat crop was put at 1.837 billion bushels, 20% under 2.310 billion in 2016 as average yield was also projected to fall to 47.1 bushels per acre vs 50.2 last year. US wheat exports for 2017-18 are projected at 975 million bushels compared to 1.025 billion in the current crop year. Carryover at the end of 2017-18 is expected to drop to 905 million bushels from 1.139 billion, the lowest since 2014-15. Soybean acreage was expected to increase 5.5% to 88.0 million acres from 83.4 in 2016. The soybean harvest was projected at 4.108 billion bushels, down 5% from 4.307 billion last year. Average yield is expected to be 48.0 bushels per acre from 52.1 last year, which was the record. With carry-in, 2017-18 supply will rise to 4.625 billion from 4.528 in 2016-17. US soybean exports in the new crop year are expected to increase to 2.125 billion bushels from 2.050. Carryover at the end of the 2017-18 marketing year is seen unchanged at 420 million bushels. USDA projected the 2017 corn harvest at 14.065 billion bushels, down 7% from 15.148 in 2016. Corn planted area of 90.0 million acres was forecast, down 4% from 94.0 last year. Average yield was foerecast at 170.7 bushels, compared to the 2016 record of 174.6. Corn use for ethanol was estimated at 5.400 billion bushels, almost unchanged from 5.350 for 2016-17. Corn exports are expected to drop to 1.900 billion bushels from this year's 2.225. Carryover will drop just slightly to 2.215 billion bushels from 2.320 at the end of the current year. USDA's forecasts for average farm-gate cash prices in 2017: corn $3.50 per bushel ($3.40 in 2016); soybeans $9.60 ($9.50); wheat $4.30 ($3.85). The numbers had no evident market impact, though soybean area was smaller and corn area larger than many pre-forum estimates. Some expected soybean acreage to be higher than corn, which has not been seen since the 1980s. (02/24/2016)

CANOLA AREA HITS THE ROTATION WALL

The much-quoted German newsletter Oil World (350 euros for six months) passed the opinion last week that canola area in Canada will increase “slightly” (up to 10%) in 2017 because of attractive prices. There is no argument about prices; canola futures last week were 5% higher than a year ago and 15% higher than two years ago. But canola area in western Canada is maxed out. Soybean prices are even more attractive, with futures 23% higher than in January 2016. High prices over several years have stretched canola acreage beyond a reasonable limit for five years. In 2016 32% of cropped area in the west was canola, including areas where little or none is grown. The average rotation is just over three years instead of the universally recommended four. Canola acreage has hit the wall, and while it is most likely to be similar to last year's 20.25 million acres it could be lower. Soybean area will continue to increase in western Canada and could reach 2 million acres for the first time, and some of the gain could come from canola. According to production cost estimates for 2017 from the Manitoba agriculture department, a 36-bushel-per-acre soybean crop will return $95 per acre after expenses at present prices compared to $56 for canola. Wheat will net $29 and barley will lose $22 per acre. (01/20/2016)

ETHANOL MORE EFFECTIVE IN GHG EMISSION REDUCTION

A new study from the US agriculture department on the life-cycle greenhouse gas balance of corn ethanol should but probably will not silence claims that ethanol use provides little or no environmental benefit. The study found that GHG emissions associated with corn-based ethanol are about 43% lower than gasoline on an energy equivalent basis. The use of ethanol at current rates was found to reduce emissions by as much as 35.5 million tonnes per year. The study is based on actual experience over the past decade, the current GHG profile of corn-based ethanol and the latest information about corn yields, inputs and fossil energy use. Corn and ethanol production uses less energy than ever before because of advances in both corn growing and ethanol distilling. Corn growers are producing corn more efficiently, using conservation practices such as reduced tillage, cover crops and improved fertilizer management which lower GHG emissions. Corn yields rose over 10% between 2005 and 2015 with little or no additional input use. During the period US ethanol production rose from 3.9 billion gallons a year to 14.8 billion. Improved ethanol production technology reduced GHG emissions at ethanol plants. If and when all available practices are adopted by farmers and ethanol producers, GHG benefits of corn ethanol would represent a 76% reduction compared to gasoline. Potentially GHG emissions can be reduced by over 120 million tonnes of carbon dioxide equivalent annually by 2025. (01/20/2016)

WHAT A WAY TO RUN A GRAIN COMMISSION

In the issue of this newsletter for April 11 2016 it was first noted that the Canadian Grain Commission is drastically overcharging for its services. Most of them, under the Canada Grain Act, are mandatory, so everyone subject to the Act is a captive customer. Commission charges and fees come out of the value of crops at the farm level, as do all other costs incurred in getting grain from where it is grown to where it is consumed. The Commission was required, like all federal government agencies starting in 2013, to substantially finance itself out of user fees. About $5 million a year continued to be paid by Ottawa because certain of its activities (it is hard to imagine which) were deemed to benefit the country at large. The Commission was given unlimited freedom to set fees and conditions of service, with the proviso that the risk of unplanned subsidies from the government be irreducible. The arrangement took effect at the start of the 2013-14 crop year, when massive increases were imposed. The cost of an elevator license rose by 33 times. Most other fees doubled or tripled. An automatic increase of 1.6% was set for each April 1, the start of the government financial year. Over the next three years the Commission collected $46 million more than it spent, and a 'revolving fund' into which all fee revenues go and out of which all expenses are paid soared to $65 million. This is nothing less or more than retained earnings by a government agency that is not supposed to be a profit centre. The only commodity organization that noticed this is Western Canadian Wheat Growers and it took until last week to do so. By now the so-called fund is around $100 million. The WCWGA wants fees adjusted back to a cost recovery range and the excess rebated to farmers. The Grain Commission fell through the crack between the Harper and Trudeau governments. The Junior Trudeauistes have as irresponsibly neglected the Commission as they have frivolously neglected numerous other core responsibilities of a credible government. The CGC was left without a slate of commissioners for over a year, during which it went into a self-driving mode while retaining all its powers and authority. The Grain Act, the Commission and the comical statutory grading system need a top-to-bottom zero-base shakeup. It is unpredictable when the conditions favorable for such an event might pertain, but it is definitely not in the foreseeable future. (01/13/2016)

FINAL US PRODUCTION NUIMBERS FOR 2016-17

The US agriculture department on January 12 issued its final 2016 crop production estimates, quarterly grain stocks and winter wheat seeded area. There were minor changes in both directions in corn and soybean production figures, not large enough to change the massive oversupply. Corn yield was lowered from 175.3 to 174.6 bushels per acre, still a record, and production reduced by 78 million bushels. Soybean yield was lowered by 0.4 bushel to 52.1 and production from 4.36 billion bushels to 4.31. Wheat figures were unchanged. Carryover at the end of 2016-17 was raised slightly for wheat to 1.186 billion bushels, an unprecedented 51% of production and 53% of crop-year use. Soybean carryover was lowered from 480 million bushels to 420, but still dramatically higher than 197 and 191 million for the preceding two years. Corn carryover was also reduced from last month but at 2.36 billion bushels is 37% larger than a year earlier
. US grain stocks as of December 1 were higher for all crops but close to trade expectations based on quarterly use. Wheat stocks were 2.07 billion bushels (1.75 a year earlier), soybeans 2.90 billion (2.72) and corn 12.38 billion (11.24). US winter wheat area seeded last fall was reported at 32.4 million acres, down 10% from the previous year's 36.1 million, with hard red winter at 23.3 compared to 26.6 million. Wheat area was the smallest since 1909 and the second-lowest since records began to be kept. Changes in world supply-demand estimates from the last report were too small to have market influence. Soybean futures prices rose by double digits following the report's release and wheat also rose, but the report was considered market neutral for old-crop prices. Reduced US wheat area for 2017 harvest is a positive sign but the report refers only to winter wheat. Spring wheat area could be maintained or increased because of strong prices, so that competition with Canadian wheat may be little changed in 2017-18. (01/13/2016)

CANADA'S 2015 HARVEST IS SECOND-BIGGEST

Statistics Canada issued its final 2016 crop production report on December 6, and it was immediately second-guessed by just about everybody. The farmer survey from which it was developed was taken between October 21 and November 13 when the harvest was far behind and the outlook for completing it was at its most bleak. Ideas of yield loss from weather were all over the map. Not only were yields much better than feared according to Statistics Canada, but the 2016 harvest turns out to be the biggest crop that Canada has ever seen except for the miracle year of 2013. It is only the second time that national output of mainline crops exceeded 90 million tonnes. In western Canada it was only the second to top 70 million. The December report commonly shows higher figures than the first survey conducted in July and reported in August. It happened again, though not to the extent of other recent years. Last week's report showed 4.5% or 3 million tonnes more production than Statistics Canada estimated in August. In 2013 the December estimates were roughly 18% higher than indicated by the July survey and in 2014 9% higher. Nationally the all-wheat harvest was put at 31.73 million tonnes, 15% above last year's 27.95 million because of a jump in durum in the west, and recovery of the Ontario crop after the unusually short 2015 result. The wheat harvest was the second-largest of recent times, exceeded only by 37.53 million in 2013. All-wheat production in Alberta was reported 19% higher than in 2015 and 12% higher in Saskatchewan but little changed in Manitoba. The Ontario wheat crop recovered to a more usual 2.54 million tonnes from 1.55 million in 2015, when acreage of winter wheat was sharply reduced by a late soybean harvest. The average wheat yield in Ontario was a record, 90.9 bushels per acre, a 16% increase over 2015. The durum crop was reported at 7.76 million tonnes, up 44% from last year on only a 6% increase in seeded area. Durum yield was estimated at an astonishing 48.8 bushels per acre, barely 3 bushels below the spring wheat yield of 52.0 and 14 bushels above last year's 34.4, difficult to believe given the growing season. Provincial crop reports said about 9% of spring wheat area in Alberta and 6% in Saskatchewan had not been harvested when work ended. It is not clear what will be salvaged in the spring or what amount of yet-to-be-combined production is included in the estimates. The canola crop was estimated at 18.42 million tonnes, almost unchanged from the revised 18.38 million for 2015. It was 1.4 million tonnes higher than the first figure in August but strikingly similar to the 18.31 million predicted by the September satellite-image model. Prairie-wide average yield rose to 42.3 bushels per acre, a new record, but harvested area relative to seeded area was unusually reduced because of excess rain. Harvested (or to be harvested) canola area was estimated at 19.19 million acres compared to 20.37 million seeded. In Alberta harvested area was estimated down 11% from 2013. Average yields in Alberta and Saskatchewan were records at 46.4 and 41.2 but unexpectedly dropped in Manitoba to 39.0 bushels from 40.3 in 2015 and 41.0 in the record year of 2013. (12/12/2016)

PULSE CROPS POST RECORD PRODUCTION

Lentil production reached a record 3.25 million tonnes but results overall were disappointing. The harvest was 28% larger than in 2015 but seeded area was 45% higher and harvested acreage 42.5% higher. Average yield dropped to 1,248 lbs per acre from 1,391 in 2015 or 10%. In Saskatchewan average lentil yield was 16% lower. Peas did remarkably well considering adverse growing conditions. Area and production set new records with 4.84 million tonnes harvested with an average yield of 42.7 bushels per acre, 10 bushels better than in 2015 and second only to the 2013 record of 43.7. (12/12/2016)

FARM INCOME POSTS NEW HIGH FOR 2015

Statistics Canada recently updated farm income statistics for 2015 and the first three quarters of 2016, which suggest that farm-gate revenue continued to climb to new records until the July-September period of 2016. Farm cash revenue grew by 3.2% for the 2015 calendar year over 2014 to set a fifth consecutive all-time high of $59.77 billion, following a 4.8% increase in 2014. The rising trend continued into 2016 with cash revenue 5.9% higher than a year ago in the first quarter and 2.5% higher for the second. However the bottom fell out in the third quarter with revenue down 8.8% because of lower prices for cattle and hogs and some crops, and lower quantities marketed in some cases. However 2015 was a banner year, according to the latest Statistics Canada figures. Nationally farm cash receipts from crop sales were 6.1% higher at a record $31.95 billion vs $30.12 billion in 2014. Canola sales generated $8.07 billion, 10% more than the previous year's $7.34 billion, accounting for 25% of national crop revenue and over a third in western Canada. Revenue from all wheat was $6.39 billion. Cash received from pulse crops also rose sharply in 2015, by 110% from lentils to $2.25 billion and 5% for peas to $870 million. For the first three quarters of 2016, farm cash receipts did not show the degree of decline that might be implied from downward movements in crop and livestock prices. The national total was $43.50 billion, a fractional difference from $43.59 billion in the same 2015 period. Nine-month cash receipts increased by 6% in Quebec, were unchanged in Ontario and Manitoba and declined by 1.4% in Saskatchewan and 2.4% in Alberta. Nationally, January-September revenue from crop sources was 6% higher at $24.33 billion and a new record, while livestock receipts were 7% lower at $17.81 billion. Nine-month canola sales were 12% higher at $6.70 billion, while wheat sales were 8% lower and barley 18% lower. Wheat marketings were slightly lower. Revenue from peas was 63% higher and lentils 3% higher, though the biggest gains will appear in the fourth quarter. (12/05/2016)

TRUDEAU HEALTH DEPARTMENT TO IMPOSE NATIONAL NOENIC BAN

Without notice or warning, the federal Pest Management Regulatory Agency of Health Canada last week announced it will phase out agricultural uses of the neonicotinoid insecticide imidacloprid over three to five years, ostensibly because it is toxic to aquatic insects which fish eat. The agency will also review the registrations of two other widely used neonicotinoids, clothianidin and thiamethoxam, with the obvious intent of eliminating them also. The PMRA ban would apply to all modes of application, whereas in Ontario only seed treatments on corn and soybeans are restricted and not completely banned. The PMRA will receive public comments for 90 days, a formality. The ban would be national and total. Neonicotinoid seed treatments are used on almost all of corn and canola seed in North America and a large percentage of soybean seed. Imidacloprid (trade name Gaucho and others) is also approved for use in pulse crops including peas, lentils, beans and chickpeas and some cereals for wireworm control. In canola it is used to control flea beetles, the most damaging insect in a crop that is notoriously vulnerable to insect attack. There is no viable alternative for canola. These insecticides have not been controversial except among the extremist outfits such as the Sierra Club and the Suzukists. They appear to have instigated this action with the new health minister. (12/05/2016)

TRUMP DUMPS TRANS PACIFIC TRADE AGREEMENT

Not that anyone doubted him when the US president-to-be repeated hundreds of times during the campaign his intention to not proceed with the Trans Pacific Partnership trade agreement. But when he said “I am going to issue a notification of intent to withdraw from the Trans-Pacific Partnership, a potential disaster for our country. Rather, we will negotiate fair, bilateral trade deals that bring jobs and industry back onto American shores” on November 21 he showed just how casually he takes the probability that the US will lose as much or more than it gains from backing out of free trade arrangements. The US Congressional Research Service estimated that the TPP would raise US agricultural exports by $7.2 billion and imports by $2.7 billion and increase US agricultural production by $10 billion. The whole American economy is likely the ultimate loser. The US farm and commodity organizations (more or less all of them) which supported both the Trump candidacy and the TPP have been made to look like fools. The unions are, or think they are, the winners. Potential agricultural trade in the TPP zone worth billions per year now will not be realized. What Trump did was not the worst thing from the Canadian point of view. The worst was the out-of-hand rejection by the Japanese prime minister of the notion that the TPP could be reworked with 11 members excluding the US. Perhaps the idea will be revisited, but to abandon the TPP without even trying to salvage it is irresponsible in the extreme. (11/27/2016)

US RENEWABLE FUEL TARGET RAISED

The US Environmental Protection Agency last week announced final targets for biofuel use in motor fuels for 2017, at a total of 18.80 billion gallons of all renewable types. The target for ethanol was set at 15 billion gallons and for so-called advanced biofuels at 4.28 billion including 2.0 billion of biodiesel (up from 1.9 billion in 2016) and 310 million gallons of cellulosic ethanol from non-crop feedstocks such as wood waste. EPA also proposed a requirement of 2.1 billion gallons of biodiesel for 2018. It is the first time in four years that the agency has announced the mandatory requirements before the start of the calendar year to which they apply. The total is 6% higher than 18.11 billion gallons mandated for 2016. The 2015 volume was and 16.93 billion, when the Obama administration scaled back the targets from amounts written into the Renewable Fuel Standard with the claim that the limit has been reached in the quantity that can be blended without exceeding 10%. The ethanol mandate is an about-face for the EPA and a win for the industry. It will increase corn needs for ethanol to approximately 5.5 billion bushels for 2017-18 from 5.3 billion for the current crop year and 5.2 billion in the prior two years. (11/27/2016)

ANOTHER NEW TERMINAL FOR VANCOUVER

Parrish & Heimbecker and Paterson GlobalFoods have formed a joint venture called Fraser Grain Terminal to build a grain export facility on the Fraser River in Surrey, with an annual capacity of 4 million tonnes. The proposed project would have 34 steel bins with a travelling shiploader, a semi-loop track and container loading capability. The site is the Fraser Surrey Docks across the river from New Westminster. Plans have been submitted to the Vancouver Fraser Port Authority for development approvals and public comment is being received. This is the fourth proposed or completed Vancouver port development in three years as grain companies seek more load-out capacity of their own to support country origination. (11/27/2016)

THE 2016 PRAIRIE CROP QUALITY DISASTER

According to Grain Commission sampling up to October 26, hard red milling wheat and canola quality are not far out of line. About 20% of CWRS spring wheat is No 1, 40% No 2, 20% No 3 and 20% feed. The top two grades normally make up 75% or more of the harvest; this year it appears is about 60%. In practice the large majority of buyers accept No 2 and many prefer it. CWRS wheat protein content so far averages 13.7% compared to 15.9 to 17.1% last year but very close to the ten year average of 13.9%. There is no quality problem with canola. Approximately 97% of samples have graded No 1. Average l content is 44.6%, better than last year's 44.2 and the ten-year average of 44.3%. Protein averages 20.3% vs 20.7% in 2015 and 20.5% over ten years. Average chlorophyll (green seed) content is 11.2 parts per million compared to 12.0 last year. However it is a much different story with other crops sampled. Roughly 14% of durum samples have graded No 1 (compared to above 50% normally), 14% No 2 and 14% No 3. There is not much of a milling durum market for quality below No 3, which makes up two thirds of the 2016 harvest. Of projected production of 6.8 million tonnes, only around 3.5 million may be saleable for semolina. Protein content averages a very poor 12.8% with Saskatchewan at barely 12%, compared to 14.1% last year. Lentils show the worst of all quality profiles. According to Grain Commission sampling 28% of the 2016 crop is No 1, 35% No 2, 26% No 3 and 11% No 4. Practically all production in 2015 and most other years is No 1 or 2. Even These figures suggest a much better picture than is being seen by pulse crop dealers. (10/31/16)

CANOLA CRUSH REACHES NEW HIGHS

Domestic canola crush is setting new records. For the week ended October 25 a new weekly record was set at 198,859 tonnes, only the third week in history to exceed 190,000. The prior four-week average was 177,120. The Canadian Oilseed Processors Assn reported canola plants worked at 93% of capacity, which implies that crush could be as high as 214,000 tonnes per week. Cumulative crush for the crop year to date is 2.12 million tonnes, also a record, vs 1.85 million to the same point in 2015-16. Crush is up 13% from a year earlier, 18% from two years ago and 20% from three years ago. Crush accounted for 53% of total use in the crop year so far vs 44% a year ago. Crush is high because it is profitable. The implied value of canola products based on futures prices last week was $614 a tonne, $100 above the seed future. (10./31/2016)

CANOLA PRICES TAKE OFF

On October 17, for the first time since June, canola futures in Winnipeg traded above $500 a tonne. Though roughly $30 below the contract high on June 8, the January month closed $55 above the contract low on July 23, set after the abrupt midsummer fall in all futures markets. Up to October 19 the canola future closed higher every trading day in October, an unbroken string of 13 trading sessions. Between October 1 and 19 canola futures gained 7% compared to 2.5% for soybeans. Spot-month canola futures traded at approximately 106.5% of the equivalent soybean price per tonne in Canadian funds compared to 102.8% a week earlier and 98.3% a month earlier. Canola futures volume soared with over 400,000 contracts traded up to October 20, exceeding monthly totals for July and August. Some of this remarkable strength was due to the stalled canola harvest and the possibility of substantial lost production. Between 3 and 4 million tonnes of the crop were still in fields as of October 12. Some of these fields will not be harvested this year and some not at all. But the big push came from the surge in world vegetable oil prices, especially palm oil, which posted six-month highs. Short supplies and higher prices for palm oil had been predicted for months, but the Kuala Lumpur futures market only reacted strongly on October 10. Palm oil futures jumped by 7% in four sessions ended October 17 as slew of statistics confirmed declining production, shrinking stocks and steady exports from both Malaysia and Indonesia. Palm oil strength was telegraphed to all leading oils including soybean oil, and of course canola oil. Since the oil content of canola is around 43% and soybeans 22%, the increase in oil value naturally moved canola seed prices by more than soybeans. (10/23/2016)

THE 1%: CETA RUNS AGROUND

The Belgian government constitutionally cannot sign the CETA Canada-EU trade agreement unless all five of its provinces agree. As of last week the backward, rural, French-speaking province of Wallonia in southern Belgium (population 3.6 million) did not agree. The resistance came from farmers who fear grain and meat import competition, and that a CETA agreement will set the pattern for the much larger EU-US TTIP. The CETA deal requires unanimous consent of 28 European countries with a combined population of 350 million. For want of the Wallonian nail it is just conceivable that the whole CETA war could be lost. Panicky EU trade ministers and other officials met in Luxembourg, Paris and other places last week to try to resolve this almost unbelievable glitch, but no breakthrough was reported as of October 20. Elaborate concessions were offered, including a five-page declaration of principles to be added to the CETA text, some of which conflict with other parts of the agreement. The official signing ceremony was still on for October 27 but will be postponed if a settlement with the Wallonians is not reached. What happens after that is anyone's guess. To its credit the Trudeau government, which was between skeptical and openly hostile to the agreement during the election campaign of a year ago, is energetically trying to save it. However it is up to the EU to resolve what is an internal conflict. (10/23/2016)

2016: THE HARVEST FROM HELL

The 2016 growing season on the prairies could not have started in a much more promising way, and could not have deteriorated more dramatically, especially as the harvest began. Seeding started more or less on time with excellent moisture but cool weather. It turned dry in Alberta in mid-May, bringing back the spectre of another droughty year. The rains came in late June, maintaining moisture conditions while weather turned warmer, to raise optimism for what briefly appeared to be the possibility of a near-record crop. But the rains became unrelenting through the mid and late growth stages when dry, hot weather is usual and required. As the rain continued temperatures dropped below normals. Every wet-weather disease attacked every crop, and quality plummeted. Harvesting started late because of slow ripening and excess moisture, and continued slow because of rain interruptions. A pattern set in across the entire prairie grain belt in which showers and light rain fell every few days, just often enough to prevent proper drying. Some areas of Saskatchewan did not have more than three or four consecutive combining days through the entire harvest season. A possibly record-large proportion of cereals was harvested at high moisture and required heated drying or aeration in storage. As of last week harvesting in Manitoba was above 95% done but in Saskatchewan only at about 85% and in Alberta under 80%. Snow fell across all of Saskatchewan and northern and southern Alberta on October 5-6 and as of October 12 still had not entirely melted. Standing crops were flattened but the worst damage seemed to be in swaths, which were thoroughly soaked as the snow slowly melted. Further yield and quality loss occurred. Temperatures are seasonally and drying is slow. Only a spell of exceptionally warm and dry weather, which was not in forecasts, can prevent further yield and quality loss in crops that remain to be harvested. Some fields will be abandoned and others will be left for salvage in the spring. There have been late years before with harvesting into November, but losses get very high. The 2016 prairie harvest will go down as the one with the lowest overall quality in modern times, probably in over 30 years. Nobody remembers it being worse. Disease in the largest-ever lentil crop was so degrading that up to a million acres were not harvested. Fusarium and mildew in wheat and barley are at unprecedented levels and all canola diseases are rampant. (10/17/2016)

SLOW START FOR CANADIAN EXPORTS

Canadian grain exports are off to a slow start after week 9 of the crop year, compared to the two previous years. The total is 5.44 million tonnes, down 17% from a year ago and 25% from the same point in 2014-15. Off-farm deliveries and domestic use are similar. Commercial stocks are lower than a year ago but close to those of the same 2014-15 date. Shipments of all major crops are down from a year ago except peas, but most prominently non-durum wheat, which are only 2.25 million tonnes, less than two-thirds of the total reached by the same date in 2014-15. Canola exports are 25% lower than a year ago though domestic use is 3% higher. Commercial stocks are lower than a year ago but similar to week 9 of 2014-15. Country elevator stocks of the seven major western grains were 2.611 million tonnes, about 70% of capacity and low for this time of year, reflecting reduced farmer deliveries. Western terminal stocks were 2.472 million. also on the low side. Commercial canola stocks were 1.480 million, similar to 1.470 a year ago. Western crushers were well supplied with 177,000 tonnes vs 122,000 year-ago. (10/17/2016)

THE LIVESTOCK MARKET CRASH OF 2016

Agricultural economies work in cycles, in which periods of supply tightness alternate with shortages. Prices oscillate accordingly. In general, historically, times of strong crop prices tend to occur when livestock and meat prices are low and vice versa. During the last nine months cattle and hog markets erratically eroded along with most crops. As of last week prices of both were at multi-decade lows. Chicago hog futures dropped to $43.50 last week before a slight recovery, the lowest price for a spot month since October 2009. For the July-September quarter hog futures dropped roughly 40% for the worst three-month slide since late 1973. During September alone then nearby month lost 24%. Hog futures sold off ahead of USDA's September 1 quarterly hogs and pigs report (see page 3) which showed the US herd at its largest for any quarter since 1988 and 2% higher than a year earlier, also above all expectations. October live cattle futures fell to under a dollar a pound, to $98.90, the lowest on the continuous chart since November 2010. Live cattle futures dropped 17% during the quarter and 8% during the month, while feeder cattle lost 13% during the quarter, mostly during September with a drop of 11%. Cash markets did little better. US hog prices were under $40 per cwt live weight last week, prices last seen in 2008 and 2009. The cost of production in the US after accounting for all expenses including depreciation is in the low $60s. Cash cattle in the plains feedlot states were reported as low as $102 per cwt last week, a loss of $6 in seven days and over $20 in the past month. A year ago cash cattle were around $145. Canadian cattle and hog prices are American prices adjusted for the dollar exchange rate and transportation and transaction costs. Nothing that Canadian producers do affects continental prices noticeably. Canadian livestock numbers are about 10% of the North American total, so a change of a few per cent barely registers. Chicago futures prices are the basis for forward pricing programs offered by livestock organizations including the Western Livestock Price Insurance Program, available to hog and cattle producers in the four western provinces, and the Risk Management Program (RMP) in Ontario. Both programs currently pay off for producers because price guarantees are derived from hedges put in months ago when they were higher. These plans will not be able to lock in attractive prices if futures markets are in an extended decline. Fed and feeder cattle futures are currently inverted: nearby prices are higher than for later months. In the case of fed cattle the spot month was at around $102 last week and May 2017 at $96. Hog futures showed a more normal inter-month spread with spring contracts about $20 per cwt higher. These market disasters are the result of overproduction of meat and persistently slack domestic and export disappearance. They are also the latest instance of the peculiar tendency for livestock numbers to continue to rise for some time after it is amply evident that they are too high to sustain profitable prices. (10/10/2016)

ANOTHER WORLD GRAIN SURPLUS RECORD

The International Grains Council in its monthly world supply-demand report for September again raised its estimate of 2016-17 wheat carryover, by 2 million tonnes to 231 million, another new record. Carryover was 218 million a year earlier and will be 14% higher than at the end of 2014-15 according to this projection. The world wheat production figure was raised by 4 million tonnes to 747 million, up 11 million from 2015-16 with consumption expected top increase by 2 million. Larger wheat crops are expected in Australia, Canada, China and Kazakhstan than a month earlier. World coarse grain production was put at 1.326 billion tonnes, up 5% from the prior year with consumption of 1.314 billion up 4% and carryover of 263 million tonnes also 4% higher. Coarse grain trade in 2016-17 is expected to drop to 168 million tonnes from 178 the year before. World soybean production will rise to 325 million tonnes from 316 million but carryover will decline by 1 million to 32 million tonnes, the lowest since 2013-14. Consumption will rise to 327 million tonnes from 320 million in 2015-16. (10/10/2016)

STATSCAN'S SEPTEMBER CROP ESTIMATES

Statistics Canada on September 20 released the second of its three 2016 crop production reports, this one based on a computer model using satellite images and agro-climate data in conjunction with seeded acreage results from the last farmer survey. This is the second year that the September assessment has been done in this way. As in 2015 yield and production results for some crops exceeded the first 2016 estimates reported in July by wide margins. The model-based method covers Quebec, Ontario and the prairie provinces. The year's final crop report, derived from the traditional farmer survey, will be released December 6. According to the report, Canada is on the way to the second-largest harvest it has ever produced. Production of the principal cereal, oilseed and pulse crops was put at 87.90 million tonnes, up 13% from 78.06 in 2015 and second only to the all-time high of 93.59 million in 2013. The total for western Canada was 68.01 million compared to 52.80 last year and the 2013 mark of 72.63. The new total was 3% above the July estimate nationally and 8% higher for the west. The biggest change from July was in canola. The latest report put the harvest at 18.3 million tonnes, 8% or 1.30 million higher than reported in July. Average canola yield was projected at 41.1 bushes per acre, which would be a new record, a startling 26% higher than in 2015 and 8% above the July figure. Average yield was put at an amazing 45.7 bushels in Alberta (compared to 41.2 in the first report), 38.4 in Saskatchewan (36.3) and 41.9 in Manitoba (38.1). The average in the record-setting 2013 year was 40.0 bushels. Last year the July survey came up with canola production of 13.3 million tonnes. The model-based September report raised it to 14.4 million with average yield of 32.6 bushels. The final report in December increased it further to 17.23 million tonnes and 35.1 bushels per acre. That was raised a fourth time to 18.38 million tonnes when data for the July 31 grain stocks report revealed a huge discrepancy between prior production and stocks reports. Between the first and last estimates for the 2015 canola crop there was a difference of 5.1 million tonnes or 38%. While estimates for other crops were more consistent, in the case of canola the credibility of these critical reports is the lowest of any government statistical agency of any agriculturally advanced country. These massive changes over short time intervals literally make these figures valueless for logistics planning by the grain handling and transport system. Clearly something much better is urgently needed. (09/22/2016)

THE CANOLA MARKET IS REALLY THE SOY COMPLEX MARKET

Never has it been more clearly shown that the Winnipeg canola futures market is a follower without a life of its own. On September 20, the date the crop report indicated an increase in supply of over a million tonnes, canola futures rose an average of 5%, up to $10.90 a tonne for later months. It was the biggest daily gain since May 10. Soybean oil and palm oil futures rose by about 3% for the day. Canola traders thought it more important to stay aligned with the other markets than to react to a 7% increase in the canola harvest. Canola futures dropped the following day, but so did soybeans, soy products, European rapeseed and palm oil. Canola advanced last week because the size of the crop and other fundamentals are more or less irrelevant. Canola will always be priced in a fairly constant relationship to soybeans and products, especially soy oil, and to a small extent palm oil, adjusted for the exchange rate. The MATIF rapeseed futures market in Paris behaves similarly. Historically canola futures have traded at a slight premium to soybeans per tonne in US funds. Lately there has been a small discount. (09/22/2016)

THE AIRTIGHT CASE FOR JOINING THE TPP

An economic impact study by the federal Office of the Chief Economist into the Trans Pacific Partnership, ordered by the Trudeau government shortly after last year's election, was released last week. Concluding that TPP benefits dwarf its drawbacks, it is a repudiation of just about everything Trudeau and the Liberal party had to say about the accord during the 2015 election campaign and since. The key benefit to Canada: guaranteed preferential market access to seven countries with which Canada does not currently have trade agreements. The TPP would place Canada at an advantage relative to countries that do not have free trade agreements with this group and ensure a level playing field with respect to other TPP competitors in these markets. Since Canada already has trade agreements with the US and Mexico (NAFTA) and Chile and Peru, the big potential for increased exports is in Japan, Malaysia, Singapore and Vietnam. Canada has generally lower tariff protection compared to most other TPP countries. All else being equal, liberalization under the TPP should provide a net advantage for Canada. The agreement would provide tariff savings to Canadian exports to the seven new partner countries estimated at $428 million per year, mainly from Japan, Vietnam, and Australia. When fully in effect, the TPP would permanently raise the GDP of Canada by 0.13% or $4.3 billion a year. Canadian exports to the new FTA countries would increase by $2.2 billion (all figures in US dollars). The most significant new export opportunities would be in Japan, where Canadian exports would increase by $1.1 billion a year, primarily pork, beef, and wood products. As is already obvious, major benefits of TPP membership would accrue to crop and livestock agriculture, while new competition would be confined to supply-managed dairy. Canadian agricultural exports to the US could also increase even though there are no new market access commitment from the US. Canadian dairy imports from TPP countries are estimated at $350 million annually after factoring in a likely reduction in imports presently coming from outside the TPP area. The majority of additional dairy product imports from TPP countries would go into value-added processing. Any loss in Canadian dairy production would be offset by gains elsewhere. The net effect of lower consumer prices from cheaper imported dairy products and losses in the dairy sector would be a wash. The study said that not joining TPP would put Canada at a disadvantaged relative to exporter members of the TPP, which happen to be our toughest competition. Existing agricultural exports would be threatened or lost in Japan; the study estimates that beef exports would drop by two-thirds and pork by 13%. Canada's preferences under NAFTA in the US and Mexico would be reduced whether or not Canada is a TPP member. Walking away from the TPP would lead to a loss of $5.3 billion in annual GDP. (09/16/2016)

ALBERTA'S $15 MINIMUM WAGE: SCREW THE POOR

If the stupidity, incompetence, irresponsibility and ideological perversions of Alberta's NDP government were not already well known, it would be well nigh unbelievable that it is planning to raise the provincial minimum wage to $15 an hour within two years. Under the disastrous circumstances it is the expected thing. The hardest-pressed employers in Canada will soon be forced to pay the highest minimum wage, the radical-left's magic $15 an hour. Between 2015 and 2018 the lowest-paid will have to be paid 47% more for the same work. Alberta already has the second-highest minimum of any province. The NDP will soon learn that employers will not simply pay up, shut up and continue as if nothing happened. Minimum wage laws challenge ability, skill and resourcefulness of managements of businesses of all types and sizes in the same way that any other obstacle to viability and growth does. There are numerous solutions to the threat of higher labor costs without higher labor productivity. The most obvious is to make sure that if pay must be raised, the lowest-performing workers need to be weeded out and replaced with ones capable of earning their more expensive keep. Employment in the bottom class can only fall. Marginal lines of business depending on low-skilled help will be abandoned. Retail businesses will reduce hours of operation. More workers will be hired on a temporary basis, easier to discharge. Low-level employees will be laid off sooner, more often and for longer periods. Higher-performing workers will see fewer and smaller raises because some of their effort will go to subsidize the lowest least performing tier. To the extent that minimum-wage labor costs cannot be controlled, higher costs can come only out of higher prices for goods and services or the earnings of the business. Some businesses will be out of business before the statutory minimum reaches $15. These are inescapable, inevitable end results: fewer employment opportunities for those who need them most, economic slippage and reduced competitiveness of Alberta business. The lowest-performing workers will face the reality that if they can't earn $30,000 a year they earn nothing. People will be forced out of the province to places where entry-level work is easier to find. Some day, at some convention, the NDP nobodys running Alberta into the ground will heartily congratulate themselves. (09/16/2016)

YEAR-END CARRYOVER LOWEST IN FOUR YEARS

Statistics Canada reported July 31 grain and oilseed carryover on September 7, showing the lowest farm stocks of the seven major grains plus lentils since 2012. Farm inventory of all main crops was lower than a year earlier except for barley, oats and flax. The last time total year-end stocks were in these ranges was in 2011-12 and 2012-13. July 31 commercial stocks were also lower, the result of more effective inventory control by grain companies. Commercial wheat and barley stocks were among the lowest of modern times, especially compared to the Canadian Wheat Board era, when Board-owned stocks often spiked towards the end of the crop year as it attempted desperately to dress up its crop-year performance. The total of major crops in storage was 10.08 million tonnes, 20% less than a year earlier and 43% less than on July 31 2014. Farm-held inventory was 19% lower. Combined farm and commercial wheat inventory was 5.17 million tonnes, down 27% from a year earlier and down 51% from the 2014 date. Total wheat stocks were 21% of the previous year's production compared to 29% a year earlier and 40% on July 31 2014. The Canadian wheat stocks-to-use ratio was 17.5% at the end of 2015-16 compared to 47.5% in the US. Wheat stocks on farms were 25% less than a year earlier and 63% smaller than two years ago. Alberta farms had only 495,000 tonnes of all wheat on July 31 and Saskatchewan 1.5 million. Farm and commercial stocks of durum were slightly higher than at the end of 2014-15 but 39% under the 2013-14 level. Canola inventory totalled 2.02 million tonnes, 21% under a year earlier with decreases at both farm and commercial levels. Farm stocks were reported as 26% lower and commercial stocks 16% lower. The canola stocks-to-use ratio at July 31 was 10.9% compared to 8.2% for US soybeans. Farm-held canola stocks of 915,000 tonnes were 26% lower than 1.23 million a year earlier. However, Statistics Canada increased the official size of the 2015 canola harvest to 18.38 million tonnes from 17.23 million reported last December, or by 1.15 million tonnes. It does not make much difference now, but it is another instance of the gross unreliability of information it obtains from the farmer surveys. Barley and oat stocks were higher, especially on farms, where 89% of barley and 69% of oats were stored. Combined barley inventory was 19% larger and oats 38% larger. (09/09/2016)

MASS PRESS MESSES UP CANOLA STORY

When it comes to distorting and generally screwing up on agricultural issue reporting, especially when involving western Canada, nobody beats the Toronto Globe & Mail. In a recent centrefold feature about the Chinese canola dockage matter, dominated by a life-sized picture of a canola plant and a square foot of white space, it advised readers that China is second only to the United States in purchasing Canadian canola (China bought 4.03 million tonnes in 2015-16 while the US was not in the top five) and that 25% of farm cash receipts in Canada are generated by canola, a statistic it attributed to the Canola Council (it was actually 13.5% in 2015). Not that much better was the normally more sensible Macleans magazine, where a recent article asked “Has Canada become too reliant on [canola] as a source of income?” It worried that if other importers adopt Chinese dockage standards, canola production may go into decline for lack of buyers. Better for the mass press to stick to what it knows: promoting the interests of the Liberal and NDP parties.

FIRST OFFICIAL 2016 CROP REPORT

Statistics Canada's August preliminary crop production report does not have a history of high accuracy, especially in canola. The report in 2013, when records were set, put average canola yield at 33.7 bushels per acre, the Octiber report at 36.8 and the final release in December at 40.0. That was revised to 40.6 bushels after later grain inventory surveys showed production to have been even higher. In 2015, a more typical growing season, the canola yield estimate was 30.0 bushels per acre in August and 38.0 in December, a 27% error. Thus the 2016 yield estimate will be similarly increased probably closer to 40 bushels in the final report. Two other crop production reports are scheduled, to be issued for 2016, on September 20 and December 6. In its first 2016 assessment, the agency reported production of the seven traditional major grains plus lentils in western Canada at 63.05 million tonnes, 2% more than 61.92 million last year from a nearly identical seeded acreage. This was somewhat disappointing in light of conditions at the start of the growing season, but almost certainly will may be revised higher in future reports. In eastern Canada the first corn and soybean estimates could be on the high side because the unusual drought continued beyond the survey period and did its worst damage after mid-August. The national all-wheat crop was estimated at 30.48 million tonnes, a 10.5% gain over 2015 on a 4% smaller seeded area. It is only the second Canadian crop above 30 million tonnes, though 19% smaller than the 2013 record of 37.52 million. Average yield was reported at 48.9 bushels per acre, up 14% from last year's 42.8. The durum wheat harvest at 6.81 million tonnes is a record, topping the 2013 high of 6.50 million. Average durum yield of 41.6 bushels per acre was 85% of the non-durum spring wheat yield, whereas 70 to 75% is more usual historically. All-wheat production is projected to increase by 5% from 2015 in Saskatchewan, 15% in Alberta and 67% in Ontario, while declining by 3% in Manitoba. In the west barley production increased while oats declined, as barley yield rose 6.5% while oat acreage dropped 12%. The western canola crop was put at 16.97 million tonnes, short of 17.17 last year, whereas a sizable increase was expected. Yield was estimated at 38.0 bushels per acre, identical to that of 2015. Given the record of canola estimates, the final yield could be up to 39.9 bushels and production could be about 17.75 million tonnes. Even with a small carryover from 2015-16 and 2016-17 requirements of around 17 million, supply should be comfortable, with a normal relationship between canola and soybean prices. (08/29/2016)

CHINA, CANOLA & DOCKAGE: A FLYING CIRCUS

As anyone could have predicted, no settlement was reached after meetings in Beijing during the week of August 10 between Canadian and Chinese officials concerning the Chinese decision to lower maximum dockage in canola seed imports to 1% from the world standard of 2.5%. The breakdown led to alarmist reports warning of the imminent loss of the multi-billion canola seed market in China. More talks were supposedly planned but no amount of talk will change this situation. The reduced limit goes into effect September 1. Chinese officials said canola cargoes already on the way would be accepted but new orders must observe the new limit. canadian export terminals are capable of cleaning canola to 1% dockage, and in fact producer deliveries often enter the system with dockage between 1.5 and 2%. Substantial additional cleaning capacity has been added at west coast terminals in recent years. Where double passes are required, the additional cost will be significant but not prohibitive. The extra expense will be resolved in some combination of higher prices to Chinese buyers and a wider basis between futures and cash to growers. The Chinese logic is impossible to follow in a scientific sense and of course is not meant to be followed. It is possible that blackleg can be transmitted through seed or dockage, though the evidence is not strong. The Chinese claim that while their own crops are infected, Canadian blackleg is of a more virulent type. If the fungus actually can be transferred through dockage such transfer would occur at all concentrations, at 1% as easily as at 2.5%. Furthermore, and this point has not been well made by anyone, the only way that blackleg spores in imported canola seed could get into Chinese rapeseed fields is if some seed, meant to be processed, is used as seed for planting. That would be a flagrant but not unimaginable abuse of intellectual property rights, since virtually all Canadian canola is of GMO varieties. Moreover if seed were so pirated it would presumably be cleaned to seed standards with virtually all dockage removed. Finally, if the blackleg threat is urgent, why would Chinese authorities allow the 2.5% limit to continue to apply between March (when the matter was first raised) and September? Of course disease has nothing to do with it and this is the latest example of how Chinese authorities freely use arbitrary and irrational import regulations to regulate import volumes. The Chinese regulatory environment is just free enough that the government cannot place embargoes or quotas on imports (which would also be illegal under the WTO). So they use an assortment of phony pretexts. (08/22/2016)

FARM & OFF-FARM INCOME

It would be a sign of serious malaise in the Canadian farm economy if it were literally true, as Statistics Canada reported last week, that off-farm income accounted for 49.2% of the total income of farm operators in 2014 and 48.2% in 2013. It would mean that farming as a vocation and a business alone is not able to provide a living wage for farmers and that they need to have work outside the farm to make ends meet. It is a gross misinterpretation arising from StatsCan's archaic, outdated definition of what a farm is. Included in the tally are the large majority of farms that are too small to be intended or expected to support family. Most farms in Canada are basically part-time sidelines to some other form of primary livelihood. Farms with under $100,000 in annual gross receipts should be in some other classification than commercial farms. Also much off-farm employment and income is by family members who don't do much around the farm. The five-year farm census was carried out earlier this year and results will start to be available around mid-2017. They will include extensive data by size of farm, which will show that the bigger the farm the more of its owners' income comes from farming. Most farm types in last week's report had lower total income in 2014 than 2013, but the drop was not large and farmers on average across all farm sizes had substantially higher family incomes (from farm and non-farm sources) than the general population. Total income of the average farm operator was $95,331, a 30% gain over $73,445 in 2010. In Alberta it was $108,743 in 2014, Saskatchewan $105,292, Manitoba $94,538 and Ontario $89,124. In 2014 the median income of all census families was $78,870. (08/22/2016)

2015-16 CROP YEAR WRAP

The Canadian Grain Commission's final grain report for the 2015-16 crop year quantified a very good marketing season from all points of view. It was the third consecutive year of off-farm sales of western crops above 50 million tonnes. Including lentils, soybeans and special crops deliveries into the western grain handling system were 52.02 million tonnes, setting a new record, compared to 51.90 in 2014-15 and 50.62 million in 2013-14. (Actually they were slightly higher in all years because not all movement is reported to the Grain Commission). Exports of all crops under Commission jurisdiction also set a record of 40.39 million tonnes (although exports of the seven major western grains were second-highest). Total shipments were slightly above the previous high in 2013-14 of 40.12 million and 2% higher than 39.61 million in 2014-15. Shipments recorded by the Grain Commission of wheat, durum, oats, barley, canola, flax and peas (the traditional seven major crops) reached 35.55 million tonnes, less than 4% short of the record 37.11 million exported during 2014-15. Canola exports were a record by far at 10.19 million tonnes vs 8.90 million in 2014-15. Records were set for canola disappearance at 18.76 million tonnes, 15% above 16.30 in 2014-15. Use in the crop year was also 9% more than 2015 production as reported by Statistics Canada (which could be revised later). The five-year average for canola use is 15.05 million. Soybean and corn exports rose sharply, to 3.08 and 1.01 million tonnes respectively from 2.41 million and 271,000 tonnes in the prior year. Corn exports had dropped sharply in 2014-15 from a more usual 1.76 million in 2013-14. Domestic use of all crops was also the highest ever at 16.40 million tonnes compared to 15.63 and 13.78 million, because of booming canola crush. Year-end commercial stocks continued a declining trend that began with the termination of the Canadian Wheat Board monopoly four years ago. Commercial wheat stocks, including durum, were 2.35 million tonnes, a third less than a year earlier and the five-year average, which was 3.90 million. Low year-end inventory means that space is available for deliveries during the coming harvest, and also that grain companies continue to improve their inventory management practices. (08/08/2016)

RAILWAYS PERFORM OK IN 2015-16

The two major railways kept up more satisfactorily with demand for grain cars during the 2015-16 crop year than in any other recent season, considering that such demand was nearly record-high. Rail car unloads at ports were just 1.7% under the 2014-15 record. Total unloads were about 380,000 cars, 10% above the five-year average. For the crop year as a whole shippers ordered roughly 410,000 cars for movement to all destinations, of which the CNR supplied 98% and the CPR 97%. When routine over-ordering and cancellations are considered shippers received substantially all the cars they wanted. They also got them in a more timely way: for the crop year the CNR spotted 92% and the CPR 85% of cars in the week for which they were required. These ratios have been closer to 75% in previous recent years. For the 2015-16 crop year, 89% of car orders were filled in the week for which ordered, 8% were one week late and 1% two weeks late. Loaded cars were picked up within 24 hours of release by shippers 77% of the time by the CNR and 27% by the CPR, and within 48 hours by 94% and 49%. CPR pick-up service continued drastically inferior, with cars taken away later than 48 hours after loading 51% of the time, though still better overall than in the previous two years. (08/08/2016)




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