The first weeks of January are a good time to reflect on what happened in the past year. Writing a column, posting to RealAgriculture.comand writing a newsletter were not difficult in 2008 due to all that has transpired lately in the industry. Agriculture has gone mainstream in the past year and there has been good and bad to come from it. Agriculture used to be very static and predictable; 2008 was neither. It was just bizarre.
Commodity markets rise then fall
What goes up must come down and it did. In nine short months agricultural stocks have boomed and busted. Ending stocks moved from all time lows to having comfortable cushions. Due to the volatility of the market, input costs have had difficulty adjusting on the way up and down. I recently spoke to a group of cattle feeders and told them it is impossible to manage this amount of volatility in the commodity market, and your only hope is buying and selling in increments. The fallout now is that everyone is divided on where the market goes next, which has caused gaps in supply and possible selling floods in the future. One of the major fallouts is that equipment dealers and infrastructure suppliers are concerned whether farmers will decide to not take delivery of purchases that were made back when canola and wheat were 80 per cent higher.
The global economy collapses
One contributor to the collapse of commodity prices has been the disintegration of the global economy and credit market. If a country cannot buy grain, it is difficult to sell it to them. With banks needing significant bailouts in the U. S. and with U. S. automakers trying to survive the next 10 minutes, consumers worry what the future holds for their families. Instantly there has been a tightening of credit for all industries, including agriculture, resulting in slower sales and infrastructure creation. Who would have thought CitiBank and Merrill Lynch would have cash flow issues? As the global economy struggles, the effect this will have on consumer purchasing is still yet to be discovered. Early indications are that people are becoming more frugal, which was proven with the last quarter growth in McDonald’s and Wal-Mart earnings.
Should the CWB remain a single desk?
Even farm families are divided on this issue, and it can make for a very isolating discussion at the supper table. Groups have been formed and lines have been drawn on whether or not Western Canada should have a single desk. With the recent trials and tribulations the Conservatives have faced in Ottawa, the Wheat Board may not be a huge priority over the next 12 months. The debate is guaranteed to rage on for as long as there is a single desk.
Country of origin labels in the U. S.
Even though COOL has been in discussion for several years, this fall was when the real effects started to arrive into the marketplace. Fewer Canadian cattle are being slaughtered in the United States and animals that do make it south are under a much wider basis than U. S. cattle.
In Canada we have retaliated with our own “Made in Canada” labeling in Canadian produce vegetables, but to the Canadian beef and pork producer, the industry is in real dire straits.
Further consolidation of the industry
In 2007, the big consolidation was Agricore United and Saskatchewan Wheat Pool. We were not disappointed this year when Tyson Foods decided to sell its Lakeside Plant in Brooks to Nilsson Bros of Clyde, Alta. The sale sent shockwaves throughout the cow-calf and feeding industry as speculation ran like crazy as to what Nilsson’s would do with its Calgary facility. Every time that you think consolidation is not possible, the industry seems to find more dancing partners. And there is not only consolidation at the corporate level, but the farm level as well.
Diseases wreck havoc
Between clubroot, ergot, fusarium and BSE, we have had enough of disease pressure on our income statements. When your business is to grow living organisms, biology has a habit of reminding you that it is complex and dynamic. Ergot has been a terrible problem across the Prairies, which is causing issues in the feed market. Clubroot continues to cause losses around the Edmonton area and a suspected case was identified in the Lethbridge region. Unfortunately CFIA identified the 15th case of BSE in Canada this past year. As a result, our beef system is under intense scrutiny by advocacy groups like R-Calf in the U. S. Finally, fusarium laid a great impact across the west, which also has a negative impact on the feeding system.
We are definitely living in a time where volatility is the norm. At the end of every year, you hear many people say there is no way the next year will bring as many surprises and interesting turmoil. The reality is that 2009 will probably bring its own challenges and controversies that will leave us puzzled and grasping for more sanity in this great industry of agriculture.
Shaun Haney publishes the Haney Farms Quarterly and his blog, which can be found at www.realagriculture.com.Haney Farms is located in Picture Butte, Alta., and is involved in the grain, seed and beef business. You can contact Shaun at 1-877-738-4517 or [email protected] haneyfarms.com.