Canadian Farmers Need a Financial Boost

It has been a miserably cold week in Southwestern Ontario. However, it could be worse, you could have been long in the oil market with a boat load of oil to unload. This past week, we saw something very few of us thought we’d see. The nearby May oil contract went negative, something almost unheard of when speculative traders couldn’t find storage for oil, when none was available. Amid the cacophony of cringed analysis, someone asked, “could the price of grain go negative too?”

Well, that’s pretty pessimistic and none of us really wants to be there, but this Covid19 episode doesn’t give up. It is like the flock of black swans that just keeps on giving. My DTN colleague Elaine Kub wrote in her column, “Yes, Commodities Can Be Worth Less Than Nothing”, in the first 30 minutes after the May crude oil contract turned negative, 6,750 contracts were traded at prices between -$1.43 and -$40.32. That must have been painful medicine. Whatever happened to the predictions of peak oil?

The oil market has its share of problems with the Saudis first deciding to flood the world with oil after a spat with Russia, then turning the other cheek and getting agreements on cutbacks. Of course, a world locked down with few driving has set back demand. Needless to say, the nearby oil contract was trading at $17 today, so it was a momentary glitch into negative territory. However, the optics of negative oil had the media buzzing.

On the Covid19 front, our meat processing continues to be impacted by shutdowns caused by sick and dying workers. Tyson Foods announced this week closures of pork plants in Waterloo Iowa, Logansport Indiana and Pasco Washington. There are many others impacting both pork, beef and poultry processing across the United States. US pork producers estimate losses of $5 billion this year and cattle industry losses set at between 13 and 14 billion. This was taken from my DTN colleague Chris Clayton in his recent article “Packing Plants Need Federal Action”. 25% of US pork processing is down.

In Canada, it’s not much better. Last week the Canadian Pork Council asks government among other things, for $400-$500 million in direct payments to producers as the industry is anticipating losses totalling $675 million or about $30 a hog. In Alberta, the Cargill High River Beef processing plant is closed and the JBS Brooks plant was reported to be closed as well, but apparently have one shift still working. There are similar slowdowns in Ontario and Quebec as Covid19 infects workers.

Aside from that, I’m told from others, at least grains haven’t been hit that bad. However, the corn market looks like a bomb struck. The last time we were this low on corn futures prices was August of 2016. So that doesn’t sound so bad does it? I’ll digress.

Aside from all that bad news, I expect to start planting next week, as so far cold and wet fields and that calendar date held me back. I’ve taken more than one call this week about guys cutting back on corn. I’m going ahead and planting a little more than last year. Of course, what everybody is hoping for is a much better start than last year. Nobody wants to be planting soybeans on Canada Day again.

It is what it is, the road ahead is daunting for sure, but we have to find some rays of sunshine in all this blackness. July corn finished today at $3.26 and July soybeans finished at $8.46, so that’s nothing to write home about, The Canadian dollar is hovering near 71 cents, which continues to add stimulus to Ontario and Quebec cash grain prices.

On the Canadian agricultural policy front it is incredibly difficult to gain any traction within this Covid19 political environment. Canadian farmers need a boost, similar to what dairy producers got earlier in compensation for CETA and CPTPP. We know Canadian livestock producers are hurting and grain producers are too. When we look south of the border, the American government is pushing cash toward their farmers, we need that in Canada too.

It an especially daunting ask, when our Business Risk Management Agricultural Safety Net programs have been emasculated through the Harper and Trudeau years. However, these are extraordinary times. Canadian farmers and their supply chain workers are risking their lives to supply Canada with food, and they are doing it as their revenue streams are declining aggressively. A boost is needed. As we continue to flatten the curve, I’m looking forward to better things ahead. It’s been a brutal last few weeks.