Amid the Financial Calamity, The Road Ahead for Canadian Farmers

So what do you think of an 87 cent dollar?  In the words of Vice Presidential candidate, Sarah Palin, “you betcha”, that’s hard to believe.  For Canadian cash grains, it’s a welcome relief.  Is the spectre of a big positive cash grain basis in our future?  Or is the 87-cent loonie only a reminder of how commodities have fallen off the rails.
These are interesting times.  I’ve spent the last week, with my head solidly stuck in a combine.  However, my satellite radio crackles with comment after comment about the financial apocalypse surrounding me.  The question is what’s real and what’s not.
I simply find our present situation disconcerting.  I read DTN’s Marcia Zarley Taylor’s column “So This Is What Financial Panic Feels Like” where she describes the exploits of her grandparents in depression times.  You might remember me writing about my grandfather and his experience with depression bankers during the 1930’s.  Simply put, just the fact that we’re hearkening back to times of yesteryear to try and find out “what it was like” should tell us that we’re in some very uneven times.
On Friday October 10th (which is tomorrow as I write this), the USDA will come out with their crop estimates of what’s out there in the field.  It is almost anti-climatic.  In the September report USDA reported 12.072 billion bushels of corn (152.3 bu/acre) and 2.934 billion bushels of soybeans. (40 bu/acre)  In normal times, most of us would be close to the edge of our seats waiting to see if USDA cuts it back.  Yes, I’ll be interested, but its pretty clear, it won’t much matter.  Everybody still is fixated on a global financial system, which is at risk.  Our commodities may continue to follow the money down the black hole.
The question many Canadian farmers are asking is when is it over and when will crop prices rebound?  Then of course there is the question everybody should be worrying about, how are we going to plant a crop next year without any semblance of an agricultural safety net?  Yes, I know, it’s like its 2006 again and we’re planning a farm rally.
In my mind we’ve got a short-term problem and a much longer-term problem.  The short-term problem is financial calamity.  Regrettably this is close to us.  In fact you can make an argument that’s its already happening in spades and manifested itself in the destruction of agricultural demand.  For instance go back to July and it looked like agricultural demand was more than solid.  In fact we didn’t have enough to satisfy the growing demand of this hungry world.  However, when confidence in our financial markets vapourized, agricultural demand was sacked.  Now our ending stocks are growing, our costs have exploded and many of us are standing around hoping it would all go away.
The longer-term issue is how long will this agricultural demand destruction last?  In other words, after the short-term calamity clears up when will we be back to clear blue agricultural skies?  How does late 2010 strike ya?  Yes, I know that seems a world away, however, I cannot see this being over very soon.  There needs to be so many more adjustments to foster profitable agricultural production.  One is the cost of farm inputs needs to come down and come down it will.  I don’t think anybody should be paying early for 2009 farm inputs.  With world demand contracting, so too will the demand for fertilizer.  I see much cheaper prices ahead.
Many of you might be reading American comments about insurance levels, loan rates, etc.  I call it the American subsidy theme park.  Needless to say much of our success coming out of this financial calamity will be dependent on a Canadian subsidy theme park.  However, as Canadian producers know, that’s like comparing Disney Land to the local church puppet show.  Moving forward depending on Agristability, AgriInvest and an underfunded RMP program in Ontario will be like skiing up hill.
That’s the negative side and I know it’s a big side.  However, I think I often have to shock people with a little bit of reality.  No, I didn’t expect the credit crunch to be such a calamity.  However, now that its here, I’m trying to get farmers to realize just what’s happening.
A bright spot is that 87-cent loonie.  It hasn’t been that low since January 2007.  It’s a full 23 cents less than it was last November 7th.  It’s given a boost to Canadian cash markets at time when they needed it.  It has also given an institutional added boost to both the Canadian livestock sector and grain and oilseeds.  With everything seemingly against us, it’ll be nice to have that in our back pocket.
Of course, I don’t think anybody expected this including Stephen Harper, Stephane Dion, Jack Layton, Gillies Duceppe or Elizabeth May.  Next Tuesday if the polls hold, there may even be a change in government.  Of course nobody really knows what that will mean for Canadian agricultural policy.  However, in these times, maybe that’s the least of our worries.