Mar 31st USDA Report, $1.05 Loonie and Our Canadian Agricultural Safety Net

2006_0406Ottawa0051Next week at this time we will know him how much corn and soybeans the USDA says US farmers will plant.  As starting guns go, this is it for the 2010 production season.  With my land drying up around southwestern Ontario it won’t be long before I’m digging up corn to see if it’s at the proper depth and population.  I say 90,000,000 acres of corn in the US.  Believe me, this year that’s not going out on a limb!

So let’s leave the USDA prospective plantings numbers until March 31.  Our markets have been continuing in a bearish sideways pattern especially for corn.  Soybeans have shown signs of life but the Canadian dollar has been spoiling the party. You can bet that the March 31 report will send markets one way or the other.

I spoke to a producer group at the Paul Toohey and Son grain elevator near Lucan Ontario last week.  Karen Filson who helps manage the elevator was kind enough to take me on a tour of the facility.  There is certainly no shortage of innovation and drive in the farm community around Lucan Ontario.  However, I didn’t have the most bullish message to give them.  Something tells me though, they, like a lot of other Canadian producers, will be thriving come fall.

My commodity presentations are not full of graphs and numbers.  Instead they are full of pictures and graphics, which I produce myself.  I don’t talk about specific numbers as much as I talk about intuitive feelings about grain pricing.  I do that because it really bothers me when I see grain analysts put up slides that not only the audience can’t read but also they cannot read themselves.  I’ve seen that a million times and it never made sense to me.  That’s not to say that I know what I’m doing, it’s just an admission that I have a understanding of how producers feel and capturing the feel for the market during these presentations is almost more important than getting an exact predictions about where the market is going to go.  In my mind, nobody knows that anyway.

One such prediction from a respected Canadian grain analyst came out two weeks ago at the Western Fair Farm Show in London Ontario.   He said he expected the Canadian dollar to hold at a level of $1.05 US for several years.  There was a bit of a grown in the audience because I knew exactly what he meant.  Others knew too as lower cash grain prices would be the order of the day under such a scenario.  I understood that prediction, yes it is something I would never say myself, but the economics behind that prediction in my mind are very solid.  I just don’t think it’s going to happen.

It is one thing to have solid agricultural economics behind any commodity marketing assumptions.  It is another thing to actually see tangible evidence that prices went where you thought they might go.  That’s what I think is likely as we look ahead.  In terms of Canadian cash grain prices I think there’s a strong argument for a $1.05 US loonie but I do not think you will happen on a sustained basis over a period of years.  And if it does, so what?  We were there two years ago and most of us are here still today to farm another year.

Still, it is what it is.  The high Canadian dollar challenges all of us.  We know the implications farming in a “par world”.   It brings me back to the same old debates that we used to have before the ethanol gold rush.  That is that in Canada we need an agricultural safety net that works.  In Ontario the risk management program is coming to an end and of course at the federal level we have nothing.  I count Agristability in that equation.  So with this high dollar and with this bearish grain market it’s almost like the stage is set for a showdown again between farmers and governments over safety net realities.

We know it doesn’t make any difference whether the federal government is Liberal or Conservative.  We’ve seen both and it doesn’t make a difference.  The challenge now of course in Ontario is for the new producer group, the Grain Farmers of Ontario to successfully forge a strategy to get that done.  It’s up to the rest of us to do what we have to do as well.  Four years after the farm rallies I can hardly believe I’m still writing about this.

But I am.  In Canadian agriculture, we have three countries, Western Canada, Ontario and Quebec.  In Quebec, they have the Quebec nation, which does its own thing well.  In Ontario, we look “across the river” as my Ottawa valley friends say and look to what could be.  In Western Canada, it’s yet, another world.  The problem is one agricultural policy does not fit all.  Under everybody’s breath this spring, we know the market might be going the wrong way.  We know we need that agricultural safety net that slipped out of our grasp four year ago.

The Grain Farmers of Ontario are surely working toward getting one.  Other commodity groups in other provinces plus CFA, OFA and UPA are too.  It’s a long and winding road, but just as US health care finally passed last week, its time to put this Canadian safety net quarrel to rest.  In 2010/11 we need it now.  The challenge is to get a government with vision to get it done.