Storming Babylon: Blazing a Trail to Alberta’s Peace River Country

A week from today I’ll be preparing to leave Grande Prairie Alberta and tip toe my way through western Canada on my way back to southwestern Ontario.  I’m sure inviting an “Ontario guy” to the heart of conservative Alberta is looked at as a risky move.  When two solitudes come together hopefully there will be some common ground.  The last time I spoke in another province was in Montreal Quebec.  I was younger then, young enough to try getting away with an English presentation to a mostly unilingual French audience.  I don’t think I’d try that today.

Clearly, there are some very big issues in the west, which mirror what’s relevant in Ontario and Quebec.  However, probably the biggest difference is the Canadian Wheat Board.  Having sold wheat recently for $6/$7 bushel, I don’t think there is anybody in Alberta who wants to hear about that.  With the Canadian Wheat Board dribbling out small increments over a period of time leading up to December 2008, the great Bull Run in wheat seems to have passed them by.

It surely is causing much consternation in Alberta canola country.  In 2007 clubroot fungus in canola is pushing yields in infected fields down 30-40%.  There are thoughts that it is being spread partly through movement of oil field equipment.  The way to fight it is rotate with wheat or some other crop.  Makes sense if you can take advantage of high wheat prices but in the west, that’s not the case like it is in Ontario.  You have to go through the Canadian Wheat Board.  As 2008 looms, I’m told western farmers aren’t going to take it anymore.  We’ll see.

For me going to Alberta is another opportunity to see ground zero of where the Canadian economy is boiling.  It is oil, which helped put our Canadian economy on a level, which the rest of the world envies. Places like Grande Prairie, Edmonton, Lethbridge and High River exude all the trappings of a Canadian economy gone made.  As I was told this past summer while vacationing at the Calgary Stampede, “if you’ve got a pulse, you’ve got a job in northern Alberta.   It has many of my economist cousins scratching their head to figure it all out.

I get a kick out of the high priced economists who are currently predicting the Bank of Canada will be reducing interest rates at its first opportunity.  Even the loonie has calmed down a bit with the spectre of an interest rate cut.  It seems to make good sense; the Canadian economy is bound to slow down so let’s cut rates.  Let me remind you that many of these same economists were saying the loonie was headed to 78 cents US after it briefly broke under 85 cents US last January.  When it hit $1.1009 last November 7th, I wonder where they were.

Hopefully they were getting some of their teeth pulled by some green horn dentist.  In fact extracting any type of retraction from a group of economists about the value of our loonie in January 2007 is like telling a gaggle of gooses to go feed the pigs.  There are always other economic priorities, which come along to alter the path to the pig trough.

That doesn’t mean our dismal scientists are a bunch of bad people.  It means like so many Canadians they didn’t see the US greenback drop down to record levels.  In fact the US dollar index, which is a measure of the US greenback against a basket of currencies is at its lowest level in modern history.  The loonie responded accordingly.  Nobody, and I mean nobody in Canada or Canadian farm country had a $1.10 loonie in their business plan.

Of course we know the rest of the story.  Farmers, manufacturers, exporters and others are losing their shirts based on the super charged loonie.  In Alberta the big hit is being taken in the cattle market.  High feed costs and the value of the loonie have shut down some of the big feedlots.  Everybody else in Alberta beef country is running for cover.  With the oil patch having an insatiable thirst for labour, I’m sure its supporting many of an Albertan farm.

The pressure is clearly on the Bank of Canada to do something to make things better.  Interest rates are always the hammer, so we’ll see what happens.  I’ll be particularly interested to learn from the Alberta Fieldmen what they think of the Bank of Canada and the many minions who control the levers of the Canadian economy.  Hopefully, I won’t be too eastern centric.

Keep in mind my Canada includes Alberta.  Someday soon oil prices will cut a fierce retreat and so will our loonie.  Alberta oil won’t seem so exotic and the American greenback will catch some wind.  Some of you might be thinking that would be good for all of us.  I concur.  It’s all a balancing act not for the feint of heart.  Alberta has probably seen it all before.  However, they’ve never heard the Agridome man before.  Hopefully I’ll take back from them as much as I leave there.  As my fellow DTN columnist Jerry Gulke says, “you’ve got to love this country!”