Record harvest, lower prices for many Canadian crops

Photo: Perry McKenna/Flickr Some rights reserved.

Photo: Perry McKenna, Creative Commons, some rights reserved.

Year-end harvest assessments are rolling in on key details, like yield, price, outlook. And since agriculture is a global commodity, here's a peek at the Canadian picture: great harvest, but not great prices.

You might think bumper crops would be unmitigated good news, but abundance presents issues too, including depressed prices, storage problems and (in some areas) insufficient rail cars to transport crops to buyers.

According to this from the Chatham Daily news last week:

Farmers rewrote the record books for a series of major crops, including record harvests of wheat, canola, soybeans and corn, Statistics Canada reported Wednesday.

In Ontario — the London region is one of the country’s richest farm belts — farmers grew the largest grain corn crop in the province’s history.

The catch?

American farmers did the same, triggering a 30% to 40% drop in corn prices from a year ago.

It’s a reversal of what happened in 2012, when net farm income across Canada jumped nearly 32% — boosted by high crop prices driven largely by a drought in the U.S. Midwest — on the heels of a record 56.3% spike the year before.

Indeed, some analysis say the party may be over for corn as a high-profit crop, including Dan Basse, president of Chicago-based AgResource Co., who spoke on that topic in a Nov 21 article in AgWeb, "Prepare for $2.75 corn"

Corn producers have become accustomed to making $200 to $400 per acre above breakeven. Going forward, Basse says, average income over cost levels will land somewhere between a $30 profit and a $30 loss.

"What’s happened is that everyone in the ag industry has had his hand in the farmer’s pocket," says Basse.

Fertilizer costs, land rents, machinery and equipment costs have all combined to raise the breakeven on corn to somewhere between $4.35 and $4.85 per bushel, he says.

"The key point is that the cost side is where the farmer is being squeezed," he adds.

If you like stats, this Index Mundi site lets you check things like overall crop production or export figures by crop, country and by year.

I won't pretend to understand the entire picture of agricultural issues in Canada. And I am about to jump around from crop to crop. But a noteworthy change affecting this story – on a national level at least – is something called the Canadian Wheat Board. Since 1935 wheat growers in Canada's central/western provinces had to sell to that body. But in 2012 the ruling conservative government scuttled that arrangement.

The Globe and Mail explains some of those shifts and how farmers feel about them in this September article: "Buy, grow, sell high: Canada's wheat farmers turn into commodity traders."

The Winnipeg-based board evoked strong emotions on the Prairies from its beginning as a wheat and barley marketer meant to help producers through the Great Depression, up to the 1990s when a small group of Western farmers, angry with the prescribed sales system, illegally sold wheat in the United States. This frustration helped spur the policies of the Reform Party, the western political movement that gave birth to the current Conservative Party.

Despite lingering concerns, federal Agriculture Minister Gerry Ritz – once a Reformer himself – has already pronounced the termination of the single desk a success.

Weather, input costs and market fluctuations are just some of the essential – but uncontrollable – factors farmers face. And that's not even including the politics of things like the Farm Bill (still stuck in congress) or energy policy and ethanol.

Farming may seem simple on the ground. But carried into the bigger economy, things get very, very complex.

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