November 2008 Archives
I heard a lot of interesting and useful things today at Agri-Trend’s Farm Forum in Saskatoon. I can’t possibly mention them all right now, but you’ll read more about them over the next few months in Grainews. Meanwhile here are some highlights:
1. Curt Vossen, CEO of Richardson, spoke after supper. His closing comment will interest you. Fertilizer prices are down precipitously, but fertilizer production is scaling back as retail sales storages fill up. Once production slows, it might not ramp up again in time to improve the supply situation by April or May, he says. “With prices coming down, it’s getting to a point where I’d look to fix supply,” he says.
2. Watch the Baltic Dry Index. Gary Pike, CEO of PMG, recommends you go to Google and enter “Baltic Index” in the search box. Find a site that tracks the index, and check it daily. I found this Baltic Dry Index chart at InvestmentTools.com. (Click on it to enlarge.) Blue is the daily index, red is the 20-day average and green is the 200-day average. The Baltic Index shows what is happening to ocean freight rates, and the index has tanked 90 per cent or more from its peak of just a few months ago. The rapid drop in the Baltic Index indicates a total lack of significant trade, Pike says. “When the index moves up, that’s a sign that credit and liquidity are improving, and trade is coming back.” For those companies managing to move some grain and find markets these days, low freight rates are a big bonus. Marlene Boersch, managing partner with Mercantile Consulting Ventures, says the ocean freight rate for a shipment of peas from Vancouver to Mumbai, India, dropped from $145 per tonne in July to $35 in November.
3. Ah yes, the credit crunch. Marlene Boersch says grain exports are slow because “buyers’ attitudes” are down, and they’re down for three reasons. One, buyers are having trouble getting letters of credit. Without credit, they can’t buy shipments. (Hence the low Baltic Dry Index, as noted above.) Two, buyers don’t think there will be sufficient domestic demand to buy up what they bring in. And three, they fear buying above tomorrow’s prices. They got burned bad on that this summer, buying too high and being forced to sell low. The result, she says, is that until buyer’s attitudes improve, we’re in a transition period of “spot buying only.”
4. Lots of ideas were thrown around on how to best apply phosphorus fertilizer. Geza Racz, soil fertility specialist and now senior Agri-Coach with Agri-Trend, takes it back to the basics. “Phosphorus advice is simple. Apply as much as the crop needs, and put some of it with the seed,” he says. When asked what type to buy (dry, liquid, MAP, Alpine, etc.) he says, “Phosphate is phosphate. Buy based on cost per pound of P2O5.”
5. My last highlight is one of my own observations. Farmers are bombarded with so many new fangled ways of doing things “better” or “saving money” or “improving efficiency.” And most farmers are willing to try new techniques once in a while. Yet when I asked farmers at the show if they ran test strips to see if these techniques worked, they said they did not. Granted, this wasn’t a scientific survey, and I only asked about five farmers. But still, I was surprised they weren’t doing their own tests to see if these investments paid off. I know why they don’t test strip. It’s a pain in the butt to bugger around with test strips when you just want to get the crop in the ground. But at the same time, if you’re spending all that money on a new input product or a new technique (say top-dressing micros), it would make sense to know that it works better than your usual system before you make it part of your regular program. I’d love to get readers’ opinions on this, so feel free to email me or better yet, click the comment button above and share your thoughts here and now.
I'm in Saskatoon today for Agri-Trend's Farm Forum. It has a great line up speakers, and I look forward to two bearpit sessions with agronomists taking questions from farmers on fertility and pest management issues. Lots of good articles ideas and useful tips will come of those sessions. I'll have more from this conference on my blog and lots more in Grainews in the months to come.
Read below for the "giants" reference...
Nufarm had a 10th anniversary media event in Winnipeg this week. The crop protection company invited Andrea Mandel-Campbell to speak about “Why marketing matters.” Mandel-Campbell wrote the book called “Why Mexicans don’t drink Molson,” arguing that Canadians are not big on self-promotion or on “branding” our trade goods. We’re content to be commodity suppliers — price takers, she says, which does not qualify Canada as a true “trading nation.”
Her provocative talk is meant to light a fire under Canadian would-be entrepreneurs. Her point about Molson specifically is that Canada has abundant supply of the two ingredients needed to be a big player in the beer market: malt barley and fresh water. And yet Mexico — not known for barley or fresh water — has the much stronger international beer brand, Corona. Molson isn’t big in Mexico because it never tried to market outside Canada, she says. And this reluctant attitude to branding is not confined to beer. The same is true in mining, forestry and agriculture, she says.
Canada is the top exporter of canola, mustard, lentils and maple syrup, yet there is no big Canadian brand in any one of these products — certainly no brand with any international presence. “The farther you’re removed from the commodity, the better you’ll fare in a downturn,” Mandel-Campbell says.
I asked what advice she would have for farmers and farm industry leaders who wanted to “brand” themselves and their product. She recommended these first steps:
1. Farmers don’t tend to think of themselves as salespeople. “This fundamental mindset change has to come first,” she says.
2. Start with the basics. Talk to the people directly above you in the value chain. Ask what they want and what you can do to provide it. That starts to build your “brand” in their eyes. (A brand doesn’t have to be a logo, she says.)
Darryl Matthews, of Nufarm, added at the end that you don’t have to be a giant to develop a brand. In fact, it’s usually the contrary. “You brand to take on the giant,” he says.
The C.D. Howe Institute released a report this week that shows a big gulf between prices the Canadian Wheat Board paid farmers who signed daily price contracts (DPC) and the prices in Montana for the same type and quality of wheat (CWRS in Canada and Dark Northern Spring in the U.S.). The report’s authors, Sylvain Charlebois, an economics prof at the University of Regina, and Richard Pedde, do not use this information to prove the CWB must go. Instead, they want the board to explain why these prices are so different and to be accountable for the poor performance that caused this price gap.
The whole report is attached below. Here is an excerpt:
Comparing southern Alberta and Saskatchewan price results with those from an average of locations in northern and central Montana reveals that from 2005 through 2008 Canadian growers received a significantly lower price per tonne in comparison to Montana-based producers, for the same type of high-quality wheat. We use reported U.S. prices, which are the prices U.S. farmers receive after deductions for freight and handling.
We calculate a comparable price, what Canadian farmers receive, by applying the equivalent deductions to the reported DPC price.
Early in the life of the DPC program, the CWB price was lower than Montana prices by, on average, $9.23 per tonne; but later the differential widened dramatically. The price differential expanded to over $12 per tonne in the first half of the 2006-07 crop year and then to an average of almost $40 per tonne at a time when the CWB had told producers that it expected only a $5 per tonne price differential relative to U.S. prices.
C.D. Howe Institute CWB brief.pdfDan Burton, a farmer and sawmill operator from Sundre, Alta., wrote a letter in response to my November page 2 column called “10,000 hours? No problem.” He shares his own experience in keeping simple older engines going for years and years and hours and hours. He puts about 5,000 hours a year on his tractors, doing double duty with the farm and the mill, and he says a tractor with 6,000 hours “is like new for us.”
Here is his letter:
I would like to comment on the subject of high hours on tractors and other machines. We run a large sawmill in Alberta and run a fleet of Volvo wheel loaders (with Deutz engines) and Cat track log loaders (with old Cat 3306 engines). We usually get around 20,000 hours out of our engines before replacing them with a factory-rebuilt engine. This is on machines that are not computerized and have an ordinary-type injection system.
New machines have unit injectors and up to three computers all tied together with a complex wiring system that have the potential to empty your bank account in a hurry when they start giving trouble. The o-ring seals on the injectors can start leaking, causing huge amounts of oil to be burnt or diesel fuel in the cooling system or diesel fuel in the oil. These are all hard to diagnose, usually requiring a dealer’s expertise and special tooling. We have found that you can run into these kinds of problems around 6,000 or 7,000 hours, and total engine wear out or failure at around 15,000 to 18,000 hours. The dealers for construction equipment now charge $160 per hour from the time they leave home until they are back again, plus hotel rooms and meals. This can really add up. The only advantage to these new machines is that they burn a lot less fuel and run cleaner. They also have 500-hour oil change intervals versus 250 hours on the old ones, which can save a lot of dollars over the years.
On the subject of farm tractors, we bought our first Case IH 9150 4WD a number of years ago to move logs. At 20,000 hours, the powershift transmission failed so we pulled it in for an overhaul. At the same time we rolled in a set of bearings and replaced the head gasket. This machine had 40,000 hours and was still running good when we traded it off. I think we got $12,000 for it on a trade for a Case IH 9250.
The 9250 had 6,000 hours on it and was still like new. We now have 22,000 hours on it, and it runs as good as when we got it. Those Cummins engines just won’t quit. That’s cheap power. When something major happens to it, it’s cheaper to buy another low-hour machine and just keep running it as long as you can.
Our construction machines will get rebuilt three or four times until the frames and loaders get too tired — usually around 70,000 hours. As long as you keep a good air ride seat in the machine and the radio works, the operator will stay happy.
I wrote an article for the November Grainews on the link between solar radiation and wheat yield. It seems that winter wheat or spring wheat seeded early yields more, in part, because leaf mass is well established during the times of peak solar radiation — June and early July. The plant takes up this solar energy and converts it to grain yield.
I want to share the article again because the graph that shows solar radiation levels north of Brandon, Man., did not show up very well in print. Here is the graph again and the whole article, below. Click on the image to see a bigger version.
Here is the information that goes with the graph:
Your wheat crop will yield more if it fills during the period of highest solar radiation, suggests a New Zealand study. This graph shows solar radiation levels for Forrest, Manitoba in 2007 (yellow) and 2008 (blue). An early-seeded wheat crop is more likely to fill its heads in June and July, which are the months with the highest solar radiation, based on long-term averages. That should help an early-seeded crop yield more than a later-seeded crop. Thanks to Andy Nadler, meteorologist for Manitoba Agriculture, for putting this chart together.
Here is the original article:
A New Zealand farmer in 2002-03 achieved a world record wheat yield of 15.048 tonnes per hectare, or 225 bushels per acre. A report from the New Zealand Institute for Crop and Food Research highlighted this achievement and explained how it happened.
The winter wheat was irrigated heavily and got lots of fertilizer. Specifically, the two high-yielding crops got around 200 pounds of nitrogen per acre. And they were irrigated six times with 1.5 inches of water each time, plus had 20 inches of natural rainfall from seeding to maturity. This is not a realistic combination for most growers in Western Canada.
The most significant message for Canadian wheat growers is the link between solar radiation and yield. The report’s author Tabitha Armour wrote that the recipe for a world record begins with the right variety seeded at the right time so grain fill occurs during the solar radiation peak.
The sun’s energy drives photosynthesis, and photosynthesis contributes around 75 per cent of grain yield in a high-yielding crop, Armour writes. So the more solar radiation the plant absorbs from head emergence to maturity, the higher its yield.
Interestingly, the New Zealand study also noted that sunny days and cooler temperatures are the ideal combination. “The duration of grain fill is determined by temperature, with cooler temperatures extending the grain fill period,” Armour writes. This supports Needham’s point that early seeding is best.
When does solar radiation peak?
Andy Nadler, agricultural meteorologist with Manitoba Agriculture in Carman, dug up solar radiation data for me. As you can expect, June and July are the peak months. Environment Canada’s 30-year mean values for the month of April in Winnipeg are 17.74 megajoules per square metre. This rises to 20.90 in May, 22.74 in June, 22.99 in July, then drops to 19.00 in August and 13.32 in September. This data should be similar for farms across the west on the same latitude, Nadler says.
Based on solar radiation averages, you want your wheat heading out in June and filling through June and July if your goal is to hit the peak radation periods.
Of course not every year is the same. When you look at year-by-year comparisons, you’ll notice wide variability. Nadler put together a graph comparing solar radiation levels at Forrest, north of Brandon, Man., for 2007 and 2008. The highest levels for both years were in the May to July period. This is not surprising, Nadler notes, because June has more daylight hours than any other month, with July and May right behind. But you can see how each year had distinct differences. In 2008, early May had more solar radiation than early July.
To further the point about variability, Armour from New Zealand noted that the record-breaking harvest benefited from higher-than-normal solar radiation. Mean daily solar radiation during the grain-fill period was 26.2 megajoules per square metre. The 10-year average leading up to that year was 23.
As noted earlier, temperature is also a factor. Mean daily temperature was 16.5 C during the record-breaking grain fill. The 10-year average was 15.7 C for the period. “Interestingly, if our coolest mean temperature of 14.5 C coincided with the high solar radiation, the combination could theoretically lead to a grain yield of 18.9 tonnes per hectare at 14 per cent moisture content,” Armour wrote.
Grainews writer Scott Garvey will be in Winnipeg next Thursday, November 27, to launch his book, “The Tractor in the Haystack.” The launch and book signing starts at 7:00 pm at the McNally Robinson store at Polo Park Shopping Centre.
The book is a collection of stories from old-tractor hunters around the world. “Each segment focuses on a hunt for a particular old tractor. Some are intentional hunts for a particular machine while others are accidental finds,” Scott says. “I managed to get stories from Canada, the U.S., England, New Zealand and Italy.”
The book has photos of these tractors as they were pulled out of collapsed sheds, overgrown brush or some other place, Scott says.
Here is the promo McNally Robinson posted: “This book tells dozens of stories of such discoveries, of the treasured old tractor parked in a shed since 1927, of the pristine model unearthed at an estate sale, of the broken-down old beauty stashed in a barn where generations of children have made their secret hideaways.”
If you can’t make the Winnipeg launch, ask for the book at your favourite bookstore or order it online. It would make a great Christmas gift for tractor lovers.
U.S. sales forecasts are considerably more buoyant, with sales predicted to rise 4.4 per cent for 4WD tractors, 3.3 per cent for 2WD tractors over 100 hp, and 9.3 per cent for combines.
Why the difference? Because 60 per cent of U.S. manufacturers polled expect seeded acres and exports to rise in the U.S. for 2009 versus 2008. Yet in Canada, only 34 per cent expect seeded acres to go up and 43 per cent expect a rise in exports.
Manufacturers were also asked for their thoughts on credit availability and interest rates for 2009. Canadian manufacturers had slightly better outlooks for buyers. As for credit availability, 79 per cent forecast no change, while 13 per cent forecast modest decreases. For interest rates, 58 per cent expect them to stay the same, while 33 per cent expect modest increases.
In the U.S., 50 per cent expect credit availability to stay the same, while 34 per cent expect it to decline. And 52 per cent expect interest rates to stay the same, while 35 per cent expect them to rise slightly.
I’ve attached the whole report here:AEM machinery sales outlook for 2009.doc
Primo has a new GrainWise line of pasta that contains 100 per cent whole grain durum. This durum will come from Western Canadian wheat growers exclusively, which will be highlighted on the packaging. Safeway and other stores that carry Primo pasta will have GrainWise signage in a few weeks, and you'll see the new GrainWise packaging in two or three months.
GrainWise 100 per cent whole grain pastas will be different from whole wheat pastas already on the market, says Primo COO John Porco. That's because "whole wheat" is usually reconstructed from the separate components: white flour, bran and germ. "Whole grain" pasta is made from the whole durum endosperm only. It will be darker than the standard "white pasta," Porco says, but not as dark brown as whole wheat pastas.
Primo is the only major pasta maker in Canada that has its own mill. For this reason, it buys directly from the Canadian Wheat Board. I asked Porco whether Primo's relationship with Western Canadian farmers will change if the CWB disbands. His answer: "Our relationship with the CWB is very good. They deliver a great quality product and on time. I don't know how it would get any better under a different system."
I read labels on bread, and I do — from time to time — buy loaves with "whole wheat flour" as the first ingredient. I do this because somewhere along the line I read that eating whole wheat flour is good for me. I am receptive to a healthy food message, and I believe many other Canadians are, too. Which is why the campaign "Grains: They're essential" is worth running. It should increase domestic consumption of your wheat (and oats.)
Lead supporters for the campaign are the Canadian Pasta Manufacturers Association, the Bakers' Association of Canada, and the Canadian Wheat Board, along with some corporations.
You can check out the Grains: They're essential website for yourself. Poking around the site, I found out why whole wheat bread is better for you than plain white bread. As the website says, "Whole grain products mean that the food includes all three parts of the grain kernel. The three parts are the endosperm — this is the main source of energy; the bran — this includes vitamins, minerals and is where you will find the fibre; and the germ — there is more vitamins and minerals in this part."
In 10 years as a farm writer, I've never written a single article about box drills. Or should I call them press drills? I don't even know the right lingo. I'm talking about the drills with a long seed and fertilizer boxes along the top that deliver product to openers by gravity, not air.
When I was growing up, we had a Melroe press drill on our farm, and then a Haybuster zero till drill for a short time, before switching to an air seeder. That was the trend in the late 1980s. Almost every farmer in Western Canada now uses an air drill of some type. So, out of curiousity, I'd like to talk to anyone who — in the name of agronomy or economics or pure stubbornness — has stuck with press drills. You can still buy new ones, so it's not dead technology.
I want to feature these hold outs in an article in Grainews. The article will explain why they still use press drills. (Consistent seeding depth is a good one.) But I also want to know what they do for stubble penetration, transport, consistent seed delivery, field speed and fill speed — the downsides to press drills. Surely anyone who still uses a press drill has good reasons for doing so. I hope you will email me or call me at 807-468-4006 to share those reasons with Grainews readers.
A TD Economics special report called "2009 prospects for Canadian agriculture," forecasts crop prices above the five-year average, the Canadian dollar at 80 to 90 cents for the year, and lower costs for fuel, fertilizer and freight rates. Derek Burleton, TD's director of economic analysis, wrote the report. I've attached the whole report below, but here are the highlights:
"By mid-2009, we expect prices to regain their footing, including those in the beleaguered hog industry. In spite of global headwinds, farmers are expected to receive an offsetting boost in the near term from a weaker Canadian dollar and some easing in cost pressures."
"Most crop markets are heading into this period of global downturn enjoying relatively well balanced supply-demand conditions. Even then, demand for food tends to be less sensitive to deteriorating global income gains than other commodity areas. Furthermore, a bigger threat to the credit crisis is on supply rather than demand, as ongoing credit problems globally could dampen sales of machinery,fertilizer and other inputs, thus impeding next year’s output."
If you read my blog from Monday, you'll know that David Kohl predicts lower crop prices if total economic growth in China and India drops below five per cent. TD expects continued strong growth for these two countries. "TD Economics forecasts the economies of China and India to expand by 8.5-9 per cent and 6-6.5 per cent, respectively, in the 2009-10 period," the report says.
On the topic of interest rates, TD expects the Bank of Canada to drop its prime lending rate another 50 basis points before the end of 2008. But that will not necessarily mean bank credit rates will drop. "The prime lending rate is the benchmark for many loans. The Bankers Acceptances (BA) rate is the cost to financial institutions of raising cash. In recent months, the prime lending rate has declined as the Bank of Canada cut rates, but the BA rate has not fallen in tandem. Canada’s largest lenders take in deposits and make loans, but the loans are greater than the deposits. The difference must be financed in international markets, which are currently demanding elevated interest rates and impairing profitability. Policy makers in the U.S., Europe and Canada have introduced significant measures to address this problem in an effort to lower interbank lending rates. These actions are likely to be successful eventually, but it won’t happen overnight."
Here’s a scene you don’t see very often, thank goodness. This is a John Deere 9860 combine, built in 2006 and owned by Fiasco Farms of Melita, Man. Victor Clark, son of Fiasco owner Alan Clark, was combining sunflowers in October when his air filter warning light came on. Victor turned off the threshing unit but left the engine running while he went to see what was wrong. He was just starting down the ladder when he saw smoke. He got the fire extinguisher and discharged it on the fire. It didn't help. (You can see the spent extinguisher on the ground in the second photo.)
I talked to Alan in November. He says they don’t know what caused the fire. They blow down the combine for dust buildup once or twice a day to prevent fires like this from happening, but whether dust buildup was the reason or whether some other malfunction ignited the fire, he doesn’t know. He did say that perhaps turning off the engine might have helped. “I wonder if maybe a fuel line burst, and with the engine running, fuel kept getting pumped onto the fire, but we don’t know for sure,” Alan says. “I’m just glad Victor got the hell out of there. It only took three minutes to go from no smoke to an out of control fire.”
Fiasco Farms’ insurance covered the cost of replacing the combine. It also covered the cost of bringing in another unit while they waited for a new one to come available.
Thanks to Scott Day from Manitoba Agriculture, Food and Rural Initiatives for sending the photos, and to the photographer, Dwayne Jones from Tilston, Man.
The Canadian Wheat Board is a champion for Prairie-grown wheat. By champion, I mean it represents you in the battle to sell your wheat in the global market. Regardless how you feel about the CWB, if it dies, you will need a “champion” to replace it. Here’s why:
I just read the 2007-08 annual report for U.S. Wheat Associates (USW), which was inserted in the October issue of Dakota Farmer magazine. The farmer-run organization uses farmer contributions and a great deal of funding from USDA to market U.S. wheat around the world. It is a champion for U.S. wheat growers. To prove my point, I selected these excerpts from the report:
“Mexico now imports about half of its wheat via rail. Recognizing that direct connections between buyers and sellers would help preempt competition from Canada, USW sponsored a Transportation and Logistics Seminar in Mexico City last November. Large Mexican wheat buyers and importers as well as executives from Mexico’s two principle railroads met over two days with U.S. wheat producers, country elevator operators and wheat commission representatives from five states.”
“The world is talking about transgenic wheat. The seeds of progress on development of transgenic wheat have taken root around the world…. USW and (the National Association of Wheat Growers) are working together to help build support for the inevitable introduction of transgenic wheat…. We are defending the environmental and social benefits of the technology, with the best interests of producers, handlers, millers, processors and consumers in mind.”
On the topic of durum wheat, the report states: “Another emerging opportunity is Japan’s increasing interest in contracting for U.S. durum as an alternative to unreliable Canadian supplies. USW is working with state wheat commissions to ensure Japan can fulfill this growing demand.”
This is what you’re up against when trying to sell your wheat into the global market. Where does USW gets it resources? It got $2.59 from the USDA for every $1 from producers in 2007-08. “This allowed wheat growers to invest only one-quarter of a penny per bushel to fund almost $15 million in foreign market development,” the report says.
I listened to David Kohl's "Outlook for 2009" today (November 3). He was the first speaker of the year for Canadian Farm Business Management Council’s 2008-09 Agriwebinar series. Kohl is a prof at Virginia Tech and a regular speaker on the farm conference circuit. I have seen him speak at least twice. He's a good speaker, but he delivers such a rapid and steady flow of data and suggestions, that I can barely keep up to him. You will be able to watch an archived version of the webinar at www.agriwebinar.com, but last I checked it wasn't posted, yet.
Here are five highlights I took from the presentation:
1. China, India, Brazil and other emerging markets have been growing so fast over the past decade, that we had come to rely on this demand underpinning the market. But growth has slowed, particularly in China now that the Olympics are over and the government-sponsored rebuilding of Beijing is winding down. “Should growth in these countries drop below five per cent, we could see a major global recession, with grain prices and input prices dropping further.”
2. Prepare for the “liquidity lag.” In a global recession, prices that farmers get paid for their commodities fall faster and earlier than prices farmers have to shell out for their inputs. In other words, while prices for wheat and canola have already fallen, it could take months for nitrogen fertilizer and diesel fuel to fall an equivalent amount. Kohl recommends that farmers build up some cash reserves for 2009.
3. That said, Kohl has heard that urea prices in the U.S. are around $500 per ton in places, down from $1,100 not that long ago.
4. Lenders are getting tighter with credit. Good farmers who have a strong relationship with their banks will have to jump through a few more hoops, but they should be able to get the credit they need, Kohl says. Everyone else could find themselves in a cash crunch in the spring if they don’t take steps now to shore up the credit they need. You’ll need a good business plan, and you’ll have to prove good earnings and cash flow.
5. Is land a good investment? After listening to Kohl, I’m not so sure. He says land is a good wealth accumulator, but a poor cash flow provider — unless you sell it. And he says you don’t want to be forced to sell land to meet your cash flow needs. That scenario is starting to play out for some U.S. farmers, Kohl says. Land now accounts for 87 per cent of the equity on U.S. farms, with machinery, livestock and cash making up the balance. So what if these farmers get into a cash flow bind? They are forced to sell land, and if the market is in a downturn, these forced land sales often don’t fetch the prices one expects.
