Corn harvest started for me this week.  The view from my cab is not what I want to see.  However, I have to admit like many corn growers across Ontario, so far it is not as bad as I thought it was.  Nonetheless, the worst of my fields lie ahead.  What makes things so bitter in this drought stressed year is all the lost opportunity.  All I lacked was rain.  Last year at this time, I was up to my neck in mud.

The only solace I got from the mud last year was prices rising because of the ethanol gold rush.  We’ve come off those higher prices but even still our agricultural economic environment feels different.  Despite the bloom coming off that ethanol rose, it would seem the world around us is ignoring that.  There is lots of money being made in agriculture right now.  You just have top look around.

One of the biggest beneficiaries of the past year has been the Potash Corporation of Saskatchewan.  All of that corn takes a lot of fertilizer and the Potash Corporation of Saskatchewan was in the right place at the right time.

The following is a direct quote from a recent Canadian Press report on the Potash Corporation of Saskatchewan.

Potash Corporation of Saskatchewan Inc. (TSX:POT), the world’s largest fertilizer company, reported higher third-quarter profits of US$243.1 million or 75 cents a share, a 63 per cent increase over $145.2 million or 46 cents a share for the same period last year.
Profits were the second-highest quarterly total in Potash Corp history and reflected solid fundamentals in the global farm economy, the Saskatoon company said before stock markets opened Thursday
Three-month sales at the company, which reports in U.S. dollars, rose to just under $1.3 billion from $953.5 million.
Potash Corp said the third-quarter profits would have surpassed the record earnings of this year’s second quarter if not for the net negative impacts of a strengthening Canadian dollar, which reduced profits by seven cents a share, and an increase in the company’s income tax rate, which cut earnings by 10 cents a share. (Fertilizer giant Potash Corp reports record Q3 profits of US$243.1 million Oct 25, 2007)

That’s pretty impressive.  It is only one example of companies working within the “ethanol gold rush” who have benefited greatly from the sweat of farmer’s labour.  In my mind now with the loonie over $1.03 US, it is time for some of that money to be given back to farmers.  Not only that, it’s also time for our government’s agricultural policy to reflect the new fiscal and agricultural economic environment Canadian farmer’s find themselves in.

In 2008 fertilizer prices rightfully should be less than they were in 2007.  Ditto for a bag of hybrid seed corn and the myriad of crop protection products farmers commonly call “chemicals”.  With the loonie buzzing around $1.02/$1.03 how can it be argued different?  We know about the great year the Potash Corporation is having but how about all the others like Cargill, Monsanto and other big agri-business players.  There is nothing wrong with profits in agriculture, but in this new post parity world, the big players need to pass on the benefits of the higher dollar.

Hopefully we’ll see that.  Canadian agriculture minister Gerry Ritz needs to be more vocal about this.  Last week his colleague finance minister Jim Flaherty exhorted Canadian retailers to lower prices.  Ritz needs to chime in too.  So far only farm fuels have showed the effect of the high loonie.  In a nutshell the high loonie has masked the run up in the price of oil to $90/barrel last week.

I read one commentary last week that our Conservative government’s agricultural policy was in “tatters.”  I’m not going to say that, however, it’s close.  The Canadian Wheat Board in Western Canada and the lack of support for provincial risk management policies in Quebec and Ontario serve as a few examples of the rot.  However, they could save themselves to some extent if they increased the capital cost allowance schedule for farm machinery and other farm improvements.  In my mind that’s a sure fire way to foster innovation and new technologies.  As I said a few weeks ago, that’s key to surviving in this brave new world.

So what’s next in this brave new world?  I’d love to say I think the loonie will be at 84 cents in 10 months.  However, that’s unlikely.  We even had our old friend Bank of Canada governor David Dodge chime in this week and say the dollar was over valued and didn’t deserve to be this high.  The loonie responded by dropping a cent and a half only to wipe out that loss two days later.  Basis for all grains shuddered for a few hours.

So expect lower farm input prices in 2008.  In fact, you should demand it.  Expect also some movement from the Conservative government to foster greater innovation at the micro-farm level like a new aggressive capital cost allowance.  Demanding that initiative wouldn’t hurt either.  In fact it wouldn’t be a bad idea to be just plane demanding.  With agri-business making lots of money all around us, farmers need to be cut in too.  A little accountability in this $1.03 world would go a long way.