Drought, loonie major ag issues this summer

Predicting the future is wrought with pitfalls because you don’t know what you don’t know. However, a couple of major developments will have wide-ranging impacts across the agriculture sector.

Let’s deal first with the increased value of the Canadian dollar.

At 80 cents, it isn’t high by historical standards, but it has strengthened dramatically in recent months. Of course, that has the effect of devaluing our exports and thereby our prices for grain, cattle and hogs.

The impact is often overwhelmed by the many other factors at play in the marketplace, and that’s the case now. Weather reports, crop production estimates and even trade irritants are getting a much higher billing by all the market analysts.

The other side of the coin, if you pardon the pun, is the cost of imports. The rise in the Canadian dollar will make U.S. manufactured farm equipment less expensive. The price of new equipment influences the value of used equipment, so the effect is wide ranging.

At least one large Canadian farmer I’ve talked with anticipated a rise in the Canadian dollar and adjusted equipment acquisition accordingly. When the dollar was at 65 to 70 cents, this producer switched from owning big pieces of equipment to leasing instead.

A large farm can easily have millions of dollars invested in equipment. If the Canadian dollar appreciates by 15 percent and the value of your late model equipment drops by a corresponding amount, it can be a good idea to be leasing rather than owning.

The other major development and the one everyone is talking about is the widespread drought in combination with a prolonged heat wave.

Prairie crops will range from very bad to very good, but even in the regions with good crops, the heat has probably taken a toll. Crops everywhere may not be as good as they look.

Fewer grain bins and bags will be sold. Unless the weather turns around, grain driers and aeration fans won’t be in big demand. As well, there’s less need for grain carts when fields aren’t going to be wet and soft.

Unlike last year’s harvest that continued into the spring, this year’s crop might be off early. Unfortunately, there could be more than the usual number of combine and field fires to deal with.

Protein should be above the historical norm in cereal crops. Disease levels in all crops should be way down compared to last year.

It will be interesting to see how soybeans fare in a year with a very different weather pattern. If soybeans do relatively well compared to other crops, the Saskatchewan acreage has the potential to explode next year.

Hay is short in many southern regions. Producers who stocked up during the wet years will be glad to have some carryover.

With pastures drying up, expect a lot of calves going to market earlier than normal. It’s logical to expect feedgrain prices to continue edging upward because of reduced supply, and if that happens, feedlots will be trimming their calf bids accordingly.

Weather patterns eventually change and currency values are difficult to forecast, but the impact from what we’ve experienced this year will be wide-ranging.

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