Archive for the ‘ag policy’ Category

American Dairymen Have the Blues

September 17, 2009

The US dairy industry is really struggling to survive. Milk prices are depreciated which is causing significant financial hardship. In Canada, this seems to a bit of a foreign concept considering that Canadian dairies are supply managed. The current situation will definitely provide argument from the US to file to WTO and will entice Canadian dairyman to fight even harder to keep their sacred quota. It is no doubt that Canada’s quota system will be coming up on many occasions as the US negotiates any sort of agricultural trade. I think that it is going to become ever more difficult for the Canadian dairy industry to justify internationally the supply managed concept. In Canada, if I was a dairy farmer I would fight with every last breathe to hold on to the quota system so that I could avoid the situation the US is in.

Whether it is the economy, demand supply or other factors, the US dairy industry needs to stabilize because milk products are so integral to the foundation of human health. Please support your local dairy and drink milk eat cheese.

On a humorous note, here is a video by Will Gilmer of Alabama, who tells us why his dairy has the blues during this hard financial time for the industry.

New Cattle Price Insurance Program Offers Alberta Producers Much-Needed Protection

September 10, 2009

The following is the official press release from AFSC on the Cattle Price Insurance Program CPIP. This truly is a revolutionary program that will allow Albertan cattle feeders to hedge some risk. I have not fully investigated the nuts and bolts of the program but I think on the surface it is a great step in the right direction.

Alberta-Only Program Launched

As Alberta beef producers prepare to move cattle off pasture and onto feed for the winter, many in the industry are glad to see the launch of Alberta’s long-awaited Cattle Price Insurance Program (CPIP) for fed cattle – saying it provides much-needed price protection that could offer welcome relief amid rising feed costs, weak cattle prices and a strong Canadian dollar.

“CPIP gives us a tool we can use today to put a bottom price on our cattle and manage our risk going forward,” says beef industry specialist Anne Dunford, who works with producers across Alberta to market their finished cattle. Dunford is general manager of Gateway Livestock Exchange in Taber, and was the senior cattle market analyst at Canfax for more than two decades.

‘Huge Volatility and Risks’

“Anytime we have a new tool to help manage price risk, it’s a good thing, especially in today’s environment of huge volatility and more risks than I think our industry has ever had to deal with over the last several years,” says Dunford. In the last few years, she says Alberta fed cattle prices have been severely impacted by factors like the global financial collapse, an oversupply of beef and pork that resulted from the H1N1 outbreak, mandatory Country of Origin Labelling (COOL), and extreme exchange rate volatility “which is taking the limelight today.”

Dunford says CPIP fills an important gap in the risk management tools available to producers because it’s made-in-Alberta risk management that gives them a minimum Alberta price for their fed cattle – protecting them from basis risk, which is the difference between U.S. and Canadian cattle prices.

Basis Risk Protection

“Most risk management tools are based on U.S. futures markets and directly reflect American cattle prices. So when there’s a border or trade issue that sends Canadian cattle prices tumbling sharply below American prices – like we saw with BSE and COOL – these U.S. futures market instruments leave Alberta producers exposed to severe losses caused by basis risk,” explains Jennifer Wood, CPIP Coordinator with Agriculture Financial Services Corporation (AFSC), the provincial Crown Corporation administering CPIP.

“Anyone who feeds cattle in Canada understands how extreme and unpredictable basis risk can be,” says Dunford, adding American producers don’t face the same kind of basis risk that Canadians do. “CPIP helps give us a leg back up to equality.”

“By insuring an Alberta price for their fed cattle, CPIP protects Alberta beef producers from basis risk. That’s why the program was created,” says Wood. CPIP began taking shape five years ago – not long after BSE closed the border to Canadian cattle – when Alberta Beef Producers sponsored initial research exploring the idea. Since then, Alberta Feeder Associations, Alberta Agriculture and Rural Development, and AFSC have joined in the development of the program. While the first CPIP products target finished cattle, work is underway on a yearling product that will extend coverage to feeder cattle “hopefully next year,” says Wood.

Alberta Minimum Price for Fed Cattle

CPIP offers Alberta cattle feeders two products: Basis-only Insurance to protect against a widening basis; and full Price Insurance, which covers all three components of price risk – the futures price risk, currency exchange risk, and basis. “It gives Alberta cattle producers a minimum price for fed cattle, so they know in advance the minimum they’ll receive once those animals reach market weight,” explains Wood.

Lyle Miller, part owner and manager of Highway 21 Feeders, a 20,000-head custom feedlot near Acme, says the Basis-only product appeals to him. “We use a lot of futures and options which leaves our basis open. Until now, the only way to cover basis was to contract with a packer. And at times what packers want to pay can be less than what people think their cattle are worth. That’s where CPIP could offer us some value.”

But many cattle producers aren’t comfortable using futures markets, says Miller. “So the full meal deal Price Insurance will be more attractive for them because it covers all of their price risk with one simple tool. It’s an alternative to contracting with a packer or just staying in the cash market and crossing their fingers and praying. And with CPIP, they won’t take huge losses from the big price swings we’ve been seeing.”

“Producers tell us they’d rather use insurance to manage risk than deal with the uncertainty of futures markets, which require a fair bit of expertise and can be almost a full-time job,” says Wood. “With CPIP, they just pick a coverage level, policy length, and pay a premium up front to insure a price for their cattle. It’s similar to a put option on the futures market, but it’s sold as insurance. There are no bid-ask spreads, margin calls, or minimum number of pounds to insure. Even the smallest cattle finishing operation can participate.”

Secure Online Program Delivery

CPIP premiums and coverage levels are calculated and sold each Tuesday, Wednesday, and Thursday afternoon, says Wood. “They’re tied to what’s happening in the futures markets, so they change daily. That’s why CPIP is being delivered entirely online – so producers can monitor premiums from their own computers, and react quickly when they want to purchase coverage or file a claim. Considerable time and effort has gone into building a fully secure and user-friendly system.”
The following if the press release from AFSC on the official release of the Cattle Price Insurance Program CPIP. This truly is a revolutionary facility to

Producer-Funded Premiums

CPIP premiums are completely producer-funded and based on a forecast of where Alberta fed cattle prices will be when the policy expires, says Wood. Those Alberta forward prices reflect Chicago Mercantile Exchange live cattle futures prices, Canada-U.S. exchange rates, and a forecast of the Canada-U.S. basis. She says coverage levels range from 75 to 95 per cent of the Alberta forward price. Producers can choose policies from 12 to 36 weeks long. “The policy length should match the time it will take their cattle to reach market weight,” says Wood.

Claims can only be made during the last four weeks of the policy, but producers aren’t required to sell their cattle to make a claim – giving them flexibility if the animals haven’t gained at the expected rate, adds Wood. Policies are settled using a weekly Alberta average fed cattle price index based on steer and heifer sales each week. “If the settlement index is lower than the insured price, a claim cheque will be mailed out when the policy expires. Or if the spread between the Nebraska cash price and the Alberta average fed cattle price is wider than their insured basis, they’ll be paid.”

Premium Rates Change Quickly

To get started, Wood says producers must visit their local AFSC office to obtain a username and password giving them secure online access. CPIP transactions can be conducted online, through an AFSC office or the AFSC Call Centre at 1-888-786-7475, she adds. “We’re advising producers to check premium rates and coverage levels frequently because sometimes they’ll look expensive, but a few weeks later, once the markets calm down, that can all change.”

Brent Heidecker, co-owner of Coro View Farms near Coronation, says he plans to log on to the CPIP website daily to watch premiums and coverage levels. Heidecker already uses futures and options to manage risk on his 5,000-head feedlot. He says some of the sample premiums he saw earlier this year while CPIP was still being developed were quite attractive. “CPIP will be a good tool to cover our basis risk and an effective way to protect us against some pretty catastrophic risk” such as trade disruptions or border closures, he says.

Ross Purdy, senior manager of agriculture and agri-business for the Bank of Montreal in Alberta, says his bank will also be keeping a close eye on CPIP. He says producers who use the program will probably find it easier to access credit when they need it most. “As we all know, prices in agriculture are subject to rapid changes and fluctuations. So if we have two producers – one that has price insurance, and the other not – we will probably have a higher comfort level lending money to the one with insurance,” says Purdy.

More information on CPIP is available at http://www.afsc.ca/.

TIME Article Proves People Are Not Interested in Facts

September 2, 2009

I had a subscription to TIME magazine and I will be cancelling it based on the unfounded rhetoric the magazine has recently published. Writer Brian Walsh penned the cover story entitled, “The Real Cost of Cheap Food.” To say that this one sided article has raised the ire of the agricultural industry would be an understatement. The story is the same old tired rhetoric that corporate America is the one to blame for the number of farms decreasing and that agriculture is responsible for obesity. And guess what, the article also mentions that organic is here to save the day.

In the following interview with the Mr. Walsh on Agritalk, his backstroke is quite evident and bounces all over the place trying to cover his lack of journalistic integrity. In the interview Mr. Walsh admits that he did not get the other side of the story and that TIME chose to run this one-sided story. In the interview (linked above), Mr. Walsh claims in the story that organic production could feed the world if given a chance. Mr. Walsh also claims in the interview organic production is better for you, tastes better and is easier on the land in his opinion”. when the Agritalk host asks him about animal antibiotics, he states his opinion and those of others but dismisses, the opinions of veterinarians in the business. TIME is supposed to be a news magazine not PEOPLE. The story lacks fact and does cause one to draw the conclusion that fact has taken a second seat to sensationalism in all media.
I encourage you to write TIME magazine and express your displeasure with this absolute attack on our industry. It is important that you speak up and not let people outside of agriculture speak for you and about you. Let your voice be heard!!!!

Please read Raoul Baxter’s post on MeatingPlace, discussing the inaccuracies of the TIME piece just in case you think I’m the crazy one.

SiemensSays.com – Jim Long President of Genesus Genetics – Our Observations

August 19, 2009

The following article was originally from SiemensSays.com. I think it is a very insightful analysis into the recent announcements in the pork industry.

  • Loan guarantees will help some producers. But, what is the criteria for a viable hog operation? The Canadian industry is currently losing $30 million a week. The situation is deteriorating daily.
  • The Hog Farm Transition Program of $75 million will help if it effectively pays people to get out of the business. This would cut production. No details yet, but it appears it’s like the U.S. dairy buyout where producers will bid to leave the industry for three years. If it only pays existing producers, not ones that already quit, it can significantly cut production. For example: ‘At $500 per sow bid the $75 million would cut 150,000 sows out of production.’ If it pays people already out of business, the plan will do little to cut supply.
  • The Government says detailed information will become available over the next few weeks. The industry is in crisis; they have been working on this for months – it’s too bad the Government is not ready. Not sure what the point is to gradually reduce supply as the Government proposes; gradually will lead to further attrition in the potential survivors. We need them out fast! Get it over and move on.
  • Not a stellar day for the Canadian Pork Council. The cattle industry got billions for Mad Cow. The Canadian Pork Council came up short on their $800 million want list for compensation for H1N1 effects and the economic crisis.
  • At the press conference, Minister of Agriculture Ritz assured he had talked to the U.S. Secretary of Agriculture Vilsack. All was good with the plan. Loan guarantees are allowed.
  • Not to think that only Canada supports producers, Agriculture Secretary Vilsack, announced last week that USDA rural development and the Farm Service Agency – FSA, were to help use all available means to help producers hit by worsening economic conditions. $1.7 billion from the American Reinvestment Program and Recovery Act has been made available. FSA has been instructed to increase efforts to provide loan assistance to livestock producers. The agency sent a letter to direct borrowers outlining the options and tools available to help ease financial stress. The letter encourages borrowers to contact their local county offices. Options available include rescheduling, reammortization, deferral, and in extreme cases reducing debt.
  • Bottom line – Canada and USA are liquidating. Both countries governments are stepping in to help out. We doubt that it’s enough to stem the tide of liquidation. We do not expect Canadian liquidation alone will cut supply to profitable levels without the US doing likewise. Both countries need and are getting liquidation.

This Is Bad
Our industry is losing $40 to $50 per head currently. USA – Canada aggregate weekly hog marketing are 2.6 million and making a weekly loss of $100 to $130 million. It’s dismal. It’s been almost two years of constant losses. This past week we travelled the U.S. Midwest. Our observations:

  • Producers are shell shocked. The question, “When will this end?!” is asked repeatedly.
  • Sow liquidation has picked up. Reports are the sow plants are taking all they want; before, they had capacity. Sow prices have dropped in the range of almost $100 per head. That’s a reflection of supply.
  • We saw lots of corn and soybeans on our tour. Indiana, Illinois, Michigan, Iowa, Missouri, and Nebraska crops look great (except where it hailed). Every ditch for 2400 miles was green as could be. This is the middle of August! Rain and now warm weather. We are no crop experts, but everywhere we went the crop was described as excellent by the locals. U.S.D.A. last week predicted 12.7 billion bushels of corn. We might have lots of other problems right now in our industry, but feed availability is not one of them.
  • Lean Hog Futures have hit multi-year lows. There are no hedge opportunities for profit. We expect the non Ag funds will begin to look at the historical lows and this coupled with sow liquidation will start driving up spring 2010 futures. We believe the U.S. is liquidating (combination of gilt retention and sow slaughter) 10-15,000 sows per week.
  • We received several emails last week encouraging us not to talk about liquidation. Like people out of money and out of faith will stay in the business because we give some optimism. When you are out of capital (cash) and courage, it’s over. No words or optimism will keep you in business. Cash is king.

Summary
Some Government Aid, but in an industry losing $100-$130 million a week, it will do little to stem the tide. In the last two weeks the collapse of cash and futures has broken the spirit and future of many. We are liquidating. We expect deferred lean hog futures will gather steam soon. There is no way next spring and summer hog supply will not be seriously cut. One packer told us last week that we need to start talking 90¢ hogs again. H1N1 destroyed this summer’s market, but it will be over by then. Does anyone in their right mind believe small pigs will be $4.00 each a few months from now? We expect $60.00 in January. The retail price of pork is higher than a year ago as supply demand adjusts. Our prices will recover. The retail price of pork, higher than last year, tells us we are producing a product people want. We are not making wagon wheels. There is, believe it or not, a future for many.

ILC 2009: Dr. Alastair Cribb – Making Decisions Based on Science Versus Emotion

August 9, 2009

At the International Livestock Congress I talked to Dr. Alastair Cribb, Dean. Faculty of Veterinary Medicine University of Calgary about the balance between making decisions based on science versus emotion.  Sometimes this can be a very grey area and will continue to be in the future as both scientific advancement and emotions increase.  

See more ILC 2009 content

ILC 2009: Dennis Laycraft VP at CCA – The Future Realities of MCOOL

July 30, 2009

At the International Livestock Congress, I spoke to Dennis Laycraft, Executive Vice President with the Canadian Cattlemans Association about the future realities of MCOOL. Many livestock producers on both sides of the border are very curious at to what will be the impact of this legislation. I have heard several Americans call MCOOL not food safety legislation but a marketing tool instead. This would be in drastic contrast to what RCALF has been arguing about. See Dennis chat about the history of MCOOL

More ILC 2009 Content

ILC 2009: Dennis Laycraft – VP at CCA – The History of MCOOL

July 23, 2009

MCOOL has become a reality for the US, Canadian and beef industry.  Sometimes it is beneficial to better understand an issue or situation by stepping back and examining how we got here.  I asked Dennis Laycraft of the Canadian Cattleman’s Association at the International Livestock Congress to provide me with a history of the MCOOL legislation and what could of been done differently.  

More ILC 2009 content

Cosmetic Pesticides Banned in Ontario

June 30, 2009

This spring, I met with Lillian Schaer of FoodandFarmingCanada.com , to discuss some of the issues related to the urban pesticides ban in Ontario. I was first exposed to this issue during an interview that I did with Jay Bradshaw, President of Syngenta Canada. The following is an update on the situation.

The following was Submitted by AGCare, Agricultural Groups Concerned about Resources and the Environment, www.agcare.org.

Ontario’s new cosmetic pesticide ban came into effect on April 22 of this year.
Under the new law, pesticides cannot be used for cosmetic reasons on lawns, vegetable and ornamental gardens, patios, driveways, cemeteries, and in parks and school yards.

The provincial government has allowed no exceptions for pest infestations (insects, fungi or weeds) in these areas, stating that lower risk pesticides, biopesticides and alternatives to pesticides exist that can be used.

The ban does provide exceptions for various uses, including agriculture. The use of pesticides is necessary for agriculture from an economic and operational perspective, according to the government. Ontario farmers already have stringent rules on the use, handling, storage and application of pesticides, through the Grower Pesticide Safety Course, which requires all growers to take a course every five years before being able to buy crop protection products. Interestingly enough, however, these trained farmers may not apply those same products to their own vegetable gardens and lawns.

Farmers are concerned that the Ontario government will move to limit crop protection products in agriculture as well, a move that will dramatically impact their ability to produce food.
More than 250 pesticide products are banned for sale and over 95 pesticide ingredients are banned for cosmetic uses under the new law. The provincial ban overrides any municipal pesticide bylaws already in place.

For more information on pesticide use in agriculture and Ontario’s Pesticide Education Program for farmers, please contact AGCare at 519-837-1326 or jfraser@agcare.org .

Hog Support is a Struggle in Manitoba

June 16, 2009

Talking to hog producers in Manitoba, there is a real head scratching issue taking place. Hog producers are strongly criticizing the provincial government for not stepping up to compensate hog farmers for this terrible economic environment. The province think that it is a Federal government issue but others disagree. My friend journalism friend Harry Siemens has a great audio monologue about how H1N1 has really affected producers in the short term but also has long term consumer affects. In Harry’s opinion the provincial government must step up and create a strong stability program to help hog farmers leave the business while enticing others to commit long term. Please check out Harry’s commentary.

Biotech Wheat Coalition is Formed to Push the Need For Biotech Wheat

May 20, 2009
Canadian, Australian and American wheat organizations have formed the Biotech Wheat Coalition “in support for more efficient, sustainable and profitable production of wheat around the world”. See the Joint Statment Here

As RealAgriculture.com has discussed before the need for biotech wheat is rising and the usual roadblocks are presenting themselves as discussed by the Canadian Wheat Board in a Reuters Story on May 15th.
  • Wheat Board wants assurance of market acceptance
  • GM wheat seen unpopular with many overseas customers
  • Must be assurances that the GM wheat could be segregated from the non-GM wheat.

Biotech is the avenue for pull type traits to become a reality in wheat. I take issue with Mr. Klassen’s comments in the Reuters piece as he explains that producers have made production adjustments on their farm production practices and conventional breeding has proven to provide some of the same benefits to farmers as biotech wheat would. How does this apply to things like fusarium prevention, improved food taste, nitrogen use efficiency and drought tolerance?

In reaction to the wheat boards usual joust that we have no way of segregating the conventional varieties and biotech varieties, I say that maybe we should start building a grain handling system that promotes new markets and identity preserved variety systems instead of forcing farmers to produce a homogeneous product against lower cost rivals in South America. Somehow in Canada farmers produce non-GM and GM canola and accomplish segregation. Why could this not work in wheat as well? Please remember that trait development is no longer just about production traits but pull type traits that will directly benefit consumers, which in my opinion will lead to the global acceptance of GMO’s.

As stated in the Canadian Press Release—The application of biotechnology in wheat research could lead to the development of several traits to improve wheat yields and wheat quality.  Traits to improve yields could include those that deal with environmental factors (e.g. drought, cold tolerance), combat weed or insect infestations (e.g. midge, sawfly), improve disease resistance (e.g. fusarium, rust) or improve the wheat plant’s utilization of nutrients.   Traits to improve the quality attributes of wheat could include those that are designed to accommodate consumers with food allergies, reduce obesity, or improve the nutritional profile of wheat-based foods.

If anything, it is at least time that we reinvigorate the discussion around biotech wheat and not fall into the same roadblocks and instead begin working towards solutions for those roadblocks.  Lets talk to our overseas buyers and discuss the benefits biotech wheat could provide.  For example, ask 10 bakers if they would like a grain that would extend the life of a loaf of bread by 2 days.  What would the net impact be on a hog farm that could buy fusarium free wheat to feed to their hogs.  Or maybe ask a pasta maker, would he like a durum that would produce ultra low cadmium levels or improve the production process by a significant amount.  

One thing proven this past week is that this nonsense that farmers do not accept GM crops but instead they are pushed on them by large multi nationals is ridiculous based on the resounding collective voice heard throughout the world by wheat growers in forming this biotech wheat coalition.