PEI Agriculture: Small, But Oh So Dynamic

2014_PEI_map_highlight_crops_with_potato     It is Canada’s smallest province, but in many ways among provinces it has the biggest heart.  Last Wednesday night amid high winds and blowing snow, my plane landed in Charlottetown PEI.  I had been invited to speak to the United Potato Growers of Canada, specifically on “rotational crops”.  With the potato being king in PEI, corn, wheat and soybeans get relegated to setting the plate for potatoes.  It’s a different adaptation for me, but this represented my second trip in 3 years to this wonderful place.

I had heard that foxes had become a problem in PEI.  That became even more real to me as I drove to the hotel in downtown Charlottetown.  Amid the blowing snow and cold, a fox trotted down one of the side street.  He looked like the sidewalk belonged to him.  I asked the locals, they told me they are all over the place.  In fact, apparently, some townsfolk feed them.  That’s one reason they act so tame in city limits.

On traveling to PEI, I bone up on Atlantic market price structure.  Every region of North America had its own specific supply and demand characteristics.  When we need corn in Ontario, we get it locally, unless American corn is cheaper landed in Ontario.  In PEI, they produce about 85000 acres of potatoes, 65000 acres of barley and about 55000 acres of soybeans.  There is some corn grown, mostly for silage, but every year there is grain corn.  Fickle Atlantic weather often dictates whether a crop reaches the finish line.  Corn heat units in Ontario and PEI might look the same in some areas, but weather is different and the crop mix is what it is.

Basically basis works like this.  It’s $30/MT to ship crop to Halifax and $60/MT to ship grain to Montreal.  Barley is utilized within the Maritimes.  Soybeans are really never taken off dry.  For instance this past year, half the provincial soybeans crop was under snow.  However, the snow melted and the last soybeans were harvested on New Year’s Day.   They were all taken off at very high moisture north of 20%.  It’s a far cry from SW Ontario, but that’s the nature of the grain business.  Everybody has a different situation, especially in Canada.

When grain is shipped east, it’s generally good for PEI farmers, as utilization has been found or shipment out of Halifax port.  If grain is shipped west toward Quebec, you are generally eating basis, cutting into your price to get rid of the grain.  We are not talking huge volumes here, but for Atlantic Canada grains, it’s a very important distinction.

There are fresh potatoes, processed potatoes and everything in between.  Interestingly enough the consumption of fresh potatoes has fallen 48% over the years.  Simply put, we all like eating French fries and hash browns, but people aren’t taking don’t take as many bags of potatoes home anymore to fix them for supper.  However, on the go, they still hit the spot.

The marketing of a food commodity is very different than hedging corn or soybeans.  I listened intently to the American President and CEO Jerry Wright talk about the different potato markets in the US and how some make money and some don’t.  In fact, he made mention of 5 Guys Hamburgers how they buy Grade 2 potatoes from Idaho, mainly on price, but also because they are from Idaho.  For whatever reason in the US, Idaho potatoes have the royal jelly.

In some of these potato markets in the US, the pricing area between fresh market and the processing markets gets blurred.  Potatoes are grown on contract, but invariably over production can happen from time to time.  Some processors and end user trade off from market to market.  This has the effect of ruining price premiums among some of the markets.  So Mr. Wright cautioned PEI farmers not to do that, grow your contracted acreage and don’t even think about spilling into each other’s market.

Earlier I had heard from PEI potato growers who told me one particular potato the Russet, was favoured by McDonalds, so growers were reticent to embrace GMO potatoes.  Their customers don’t want it! I LOL, when I heard that.  Imagine that happening in the grain business!  MIR 162 was introduced and it didn’t matter that China initially rejected it.  Millions of dollars later in lawsuits, maybe somebody can learn a lesson from the potato growers.

With potatoes being closer to the consumer’s plate than grain, environmental groups can easily cause a few issues.  While we struggle with a neonic ban in Ontario, PEI farmers deal with radical fringe environmental groups who film common farm spraying practices, but when it ends up on the Internet, the truth gets skewed.  So this is 2015.

I hope to get back to PEI one day.  Sure they got a lot of snow now, but I’ve been told there is something about a sea breeze in summer that makes it all worth it.  There agricultural industry is small, but oh so dynamic.  Canadian agriculture is richer because of it.