I wasn’t sure what mood I’d find when I went out to Manitoba Ag Days on Tuesday.
Crop prices are far below those of the boom times of a few years ago, but they’re not disastrous. How are farmers feeling?
(See our Live Blog of Manitoba Ag Days here)
The sense I got was that farmers are feeling optimistic about the future, both in the medium term and the long term, and they see the next couple of years as a temporary low that they’ll be able to come through not too badly.
That’s a nice place to be in. If this actually is the low part of the cycle, then this is a very nice cycle indeed.
A big part of the comparative painlessness of the present period is due to the Canadian dollar, whose plunge means Canadian farmers can pay back any loans and debt they’ve got much more easily than American farmers can. Our crop prices (in Canadian dollars) seem OK if not good, at least in terms of paying off debt. It’s the opposite for an American farmer, who has seen crop prices fall much more – but his debts remain the same. Imagine being an Iowa farmer trying to pay off $15,000/acre land at sub-$4 (U.S.) per bushel corn prices. Farmers who bought land here owe their money in Canadian dollars, and since the loonie has declined 40 percent, they’re actually seeing acceptable prices in many crops today.
It’s not great if you’re wanting to buy new machinery or land. I talked to a couple of machinery dealers at the show and their lives are getting made a lot harder by the currency slump. The $500,000 machines they were selling a couple of years ago? Add $100,000 or more to the price today, with lower crop prices to pay for it. That’s a hard sell.
But it doesn’t look to me as if the Prairie farm economy has ground to a halt. People are sitting back a little, but there is still lots of interest in everything new and exciting in agriculture. Farmers might not be splashing the cash out today, but most seemed to me to be looking forward to the time a few months, a year or two years from now when they can wade back into the market and begin buying big stuff again.
It’s not as exciting in the years after a price spike has blown off, but I got the sense most farmers are still feeling pretty good. As market analyst Jim Robb noted to beef cattle producers on Wednesday afternoon, prices have fallen a lot, but cow-calf guys should still have their third best year in history in 2016. That’s not a terrible place to be in.