Here’s an interesting snapshot of the prairie farmer’s mind:
This is part of a survey recently done by PRA Research Associates with 962 farmers from Manitoba, Saskatchewan and Alberta. There’s lots of interesting stuff in the survey, a summary of which you can see here.
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I found the chart above particularly interesting. Like all results of surveys, you can’t read too much into it because there could be a host of reasons why farmers feel they’ll either be more, less or as profitable this year as last year. Perhaps some expect to be more profitable because a production problem or disaster struck them last year. Some farmers faced spring flooding in 2012. Others were badly hit by the dryness that bit-in during the peak and latter stages of the 2012 growing season. And many, many farmers were disappointed with their canola yields because of aster yellows, blackleg and other factors.
So there are lots of valid reasons why farmers could expect this year to be more profitable than last year.
But I found this finding a bit alarming, because much of last year’s mega-profitability for prairie farmers was based on the freakish occurrence of the Midwest drought, something which is a very rare event. The 2012 crop rally created some all-time record high prices. That isn’t likely to recur nor can farmers reasonably expect a similar-sized production disaster to strike another part of the world. Sure, big production disasters occur, but no-one should be banking on those. And no one should be banking on crop prices like last year’s. The futures markets certainly aren’t anticipating that new crop prices will be anything like old crop prices, and that’s probably the best guess at what new crop prices are going to be based on the present world situation.
So if the survey above is correct, the average farmer is expecting to be as profitable this year as last year, even though canola and other crop prices will likely be substantially lower. If they aren’t expecting another price spike due to a production problem somewhere, they must be expecting it due to bigger yields and overall personal farm production. That’s possible. But unlikely. And input prices haven’t become appreciably cheaper overall, so that part of the equation isn’t likely to help much.
Or maybe farmers are just being hopeful, as they perennially are at seeding time. They’re out seeding crops, taking massive chances with their finances, hoping the weather is some form of average this summer, and if you’re not feeling optimistic, it’s hard to go day after day after day with the energy and dynamism it takes to seed a prairie crop. It’d be pretty crazy to lay out hundreds of thousands of dollars to seed a crop you thought you would lose money on, after all.
It’s good that farmers are hoping for big profits this year. They certainly deserve it. I just hope they don’t require profits equal or better than last year’s in order to cover their expenses and keep farming. Profits like those of 2012-13 don’t happen often. And those sorts of profits aren’t a reasonable assumption of a “new normal” in farming.
