Roller coaster markets and soaring input costs have many Western Canadian farmers in a complete state of confusion this fall. Are markets going to stabilize or rebound? Will input prices — particularly the price of fertilizer and fuel — drop by spring?
It is a tough call and there doesn’t seem to be any clear signals about which way things will go. Wheat and canola prices have dropped by at least 50 per cent in the past six months. While $9 canola and $6 wheat is still pretty respectable, especially compared to prices just two or three years ago, are those prices good enough to justify phosphorous fertilizer at $1,000 tonne or nitrogen fertilizer around $1,400 per tonne?
The price of crude oil has dropped significantly, but how long will it stay down? And a lot of the fertilizer that was produced with high cost fuel is still in the pipeline. Not likely anyone is going to give that away.
Crude oil prices are down this fall. The retail price of gasoline had dropped to between $1.10 and $1 per litre in many Canadian centres, but diesel fuel, according to a late-October fuel survey, is still in $1.14 to $1.35 per litre range, and that’s if you can find it. There is increasing comment about an on-going North American diesel fuel shortage.
One other logistical concern, as farmers delay on making input decisions this fall, is can fertilizer dealers physically get that much product out the door to meet the demands and deadlines of seeding season?
In light of the situation, the question presented to the November farmer panel is, “Have current markets for crops and the high costs of inputs changed your thinking or your management strategy this fall and how will you approach cropping in 2009?” Here is what producers had to say.
Shawn McCutcheon Carman, Man.
McCutcheon, so far, hasn’t made any drastic changes to his crop production and marketing strategy for 2009, but a few options are rolling through his mind. He is considering reducing crop inputs generally, and/ or focusing inputs on those crops which are likely to be the most profitable. He has even though about putting some land into summerfallow.
“It is a different dynamic this year,” says McCutcheon, who along with his wife, Bonnie and son Warren, crop about 2,500 acres “Other years we have had crummy crop prices and we have seen high input prices, but usually we don’t have the two together.”
McCutcheon follows a six-way crop rotation that includes grain corn, edible beans such as pinto and navy beans, soybeans, wheat, oats and canola. Most years they don’t make decisions about crop input purchases until the December 31 year end.
“We’re still following that same plan, so we will have to be making some decisions in the next few weeks,” he says. “I don’t see us making any major changes on the cropping side. Our farm has soil that ranges from light sandy to fairly heavy, so we have go grow a crop mix that’s suited to these soil types. Even if there was one crop that stood out, I don’t see us growing wall-to-wall anything.”
Depending on where prices and markets are at year end, he says one option is to look at reducing crop fertility for one year and still maintain yields.
“We are fortunate to have fairly good soil,” he says. “I think our plan would be to maintain nitrogen levels, but see if we could cut back on other nutrients such as phosphorous, potash and sulphur. Not as a long-term strategy, but for one year.
“Our other option, which is way out there, is the possibility of summerfallow. We have never planned for summerfallow in the past 35 years, but I am sure that is something a lot of producers will be considering this year. Depending on how things pencil out, it could be an option that comes into the mix.
“We are pretty limited to what we can change. You don’t want to cut back on herbicides and end up with a mess of weeds that will be there for years.”
Norm Shoemaker Grand Coulee, Sask.
Other than a bit of fine-tuning on nutrients, Shoemaker isn’t planning any major changes to the 2009 cropping season at this stage. The south-central Saskatchewan producer is confident that world demand for grains and other commodities will remain fairly strong, keeping prices fairly strong.
“This is a tough question for a Monday morning,” says Shoemaker. “But I think from a demand perspective we are going to see commodity prices remain fairly strong, and I don’t see much room for input prices to go down. I think once we get through the 2009 crop season, market corrections should be over, and we should be back to a more normal market place.”
Shoemaker and his wife Laura, crop about 18,000 acres at Grand Coulee, just west of Regina. They manage Wigmore Farms and Wigmore Crop Production Products, respectively.
“Because we have a crop input company, I probably have a slightly different view of things than most producers,” he says. “My wife looks after the crop input section and I run the farm, so there is no price break for me. I have to make my plans based on inputs at market value.”
Shoemaker says he has been reviewing crop budgets and rotation plans for 2009. “I am certainly looking at different nutrients plans and sorting out which nutrients are the most important on our land. We’re getting back to the basics. What nutrients do we need to catch an average crop, rather than building nutrients in the soil?
“We had good moisture this fall, so looking at moisture and water-use efficiency of differing crops, we may be able to trim back some nutrients.”
Shoemaker’s crop rotation includes durum, peas, lentils, chickpeas, canola, malt barley and winter wheat.
“I think the demand for most commodities will be fairly good, so I don’t want to adjust the program and risk reducing yields,” he says. “India still needs pulses. Morocco is dry, and they are a leading competitor for Canada in durum production. Australia is still experiencing a drought. There is no clear picture yet whether there will be a total wreck someplace, but world demand for our crops is still a factor.”
He may reduce canola acres in 2009. It demands fairly high inputs, and the price for canola is down, and production could be up.
Brian Corns Grassy Lake, Alta.
After more than 20 years of pre-buying crop inputs in the fall, Brian Corns is waiting a few months to see what input and commodity prices do before making any decisions later this coming winter.
“In particular, I want to see where fertilizer and fuel prices settle out,” says Corns, who is part of the Corns Brother Farms Ltd., at Grassy Lake, east of Lethbridge. Along with commercial grains, they produce pedigree seed and run a cow-calf operation.
“This is the first time in my experience — in 35 years of farming — where our approach is reversed,” he says. “Generally the plan has been to lock in input prices and then look at locking in commodity prices,” he says. “And this year it is just the opposite.
“The marketplace is in a spin and the whole world with it. I think this is the most amount of unknowns that we’ve ever run into.” Corns says they will wait until mid-winter to decide on crop input decisions and also to finalize crop rotations. He’s also keeping an eye on the value of the Canadian dollar (in relation to the U. S. dollar) as far as making decisions about buying inputs from the U. S. and in marketing commodities south of the border.
Their farm has developed U. S. markets for oats, rye and triticale.
“One upside to the whole situation is that we’ve had exceptional rainfall since the mid-point of the growing season, so we have good soil moisture heading into the 2009 crop year,” says Corns. “From the crops standpoint, the trick is to decide what to grow so we can take the most advantage of this moisture.
“On the livestock side, the good soil moisture provides us an option as well. The moisture will get forage production off to the races. If beef markets improve, we will be able to sell cattle, and if not, then we should have a good feed supply for cattle if we decide to hold back.”
Lee Hart is field editor of Grainews, based in Calgary. Contact him at 403-592-1964 or by email at [email protected]