Risk Management Never Grows Old Amid Ontario’s Soggy Fields

It is a long way to payday, but as we sit on May 4th, 2017 seems to be shaping up as one of those years.  I have been stopped planting for almost a week now and it is raining as I write this.  In fact, there is quite a major rainstorm projected for all of southern Ontario, which will definitely put a crimp in planting progress.  Memories of 2011 are dancing in my mind when I actually planted corn in June.

That year turned out to be pretty good, but you never really want to go there.  One thing that we know growing row crops in Ontario and Québec is that there is a limit to our production season.  It is true in my area near Dresden Ontario we have one of the longest growing seasons in Canada.  However, as we reach into the more northern and eastern parts of Ontario as well as Québec there is a limit to how far we can push the season.  Frost comes both late in the spring and early in the fall as we move north.  It means in Ontario we have to get the corn planted early to maximize our chances of good production.

I think at times like this when our spring production season is being compromised by too much water and bad weather, we forget that.  In Canada, we have a tremendous crop production system, but we are always bumping up against the limitations of our climate.  Even though Canada is probably benefiting along with Russia from a changing climate, our growing season is still short compared to places south of us.  Any delays in the spring have a much better chance of catching up with you later.

That is one reason there is quite a limitation to row crop production on the Canadian prairies.  I have many acquaintances in Manitoba, Saskatchewan and Alberta.  A few years ago I was scheduled to speak at a meeting in Edmonton in January.  About six months before the meeting I was contacted by the individual representing the organization who invited me.  He told me that he was growing grazing corn north of Edmonton for his cattle.  I asked him when did he expect frost.  He responded by laughing and saying, “right about now”! It was August 25th.  So our seasons are very short, especially in Western Canada.

For farmers, this is the world we live in.  However, it’s easy to forget when things go good.  For instance, over my career I’ve had some bad years because bad weather imposed its will on my crops and me.  Four years come to mind, 1988, 1991, 2001 and 2002.  All of those years were drought years.  Of course, I’ve had bad years because of wet weather.  It’s all part of the risk management profile I operate in.  Within that, there are a myriad of things I do to mitigate risk aside from the many marketing tools I use on my crop prices.

One of my most important risk management strategies is tile drainage.  I simply cannot grow crops underwater.  I’ve learned that the hard way.  So it seems every year I installed drainage tile.  When I do it, it seems to cost a fortune.  However, according to the Ontario Ministry of Agriculture the annual return in crop yields from systematic drainage in southern Ontario is approximately 29 to 36%.  That’s a huge return and as I hear those raindrops falling at the wrong time year, it gives me solace. That drainage tile is part of my bigger risk management strategy.  As the rain comes down, that tile is taking away the problem as quick as it comes.

That risk management strategy works well for me, but is not so straightforward for everybody else.  In Ontario, we have the drainage act and in my area a very developed drainage infrastructure.  In other areas of Canada it’s not quite like that.  Drainage outlets are not etched in provincial law everywhere.  So expansion of tile drainage into Manitoba and parts of Western Canada can be a bit more tenuous.  There are even situations in some parts of Ontario and Québec where it is the same.  Needless to say, tile drainage remains the quintessential risk management tool for the health of our farm businesses in this area.

Of course, it doesn’t end there for me.  Aside from that risk management strategy and hedging our grain consistently, there can be so much more.  If you’ve read this column for the last 30 years, you will know that I have been a big advocate for a federal risk management program to stabilize farm revenues.  You will know in 2006 I led big protests on Parliament Hill going after such a policy.  Regrettably, in 2017 none of that has happened at the federal level.  At least in Ontario there is some semblance of recognition for farm revenue risk management.  However, politically in Canada, there has been a retreat from that.  Even more regrettably, many farmers themselves ensconced in the good times of the last 10 years don’t get it themselves.

That just means the world is changing.  Even risk management strategies need to change too.  Tile drainage is a great one, but there are many others.  The challenge on the farm is to embrace them all.  Its still raining outside and its early May.  I’ll take all the help I can get.