Rain will do more than determine the size of this year’s crop.
It will also have a big influence on how much farmers spend to grow
that crop.
“It’s going to all depend on how quickly demand develops at the time of
seeding,” said Jim Mann, president of Farmers of North America, a
farmer-owned organization that buys inputs on behalf of its members.
And the key to that demand will be moisture.
If it stays dry, farmers will be looking for ways to keep their
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expenses to a minimum, and one of the few ways they can do that is to
buy fewer inputs, especially fertilizer.
So a dry spring could prompt manufacturers and retailers to drop their
prices in an attempt to stimulate demand.
“If there’s any leeway for some of these companies to move more product
by lowering prices, they will try to do that,” said Bill Brown, an
agricultural economist at the University of Saskatchewan.
Mann agreed, saying that the longer farmers put off making decisions
about buying fertilizer, the more likely it is the price will be cut to
reduce inventory.
“You may end up with panic selling by some of the suppliers, which will
bring things down considerably from their retail price guidelines,” he
said.
On the other hand, if the moisture outlook improves, all bets for lower
prices would be off.
“Increased moisture would definitely increase demand,” said Steve Epp,
a spokesperson for the Canadian Agri-Retailers Association. Stronger
demand invariably leads to higher prices.
That creates a dilemma for farmers. If they don’t buy because it’s dry,
the price stays low. If they decide to buy when the moisture improves,
then the price takes off, fuelled in part by the renewed demand.
“It’s a catch-22,” said Mann. “If we get the moisture I think we’re
going to see pricing close to retail pricing on inputs because of the
last-minute decisions.”
Epp, who runs Wendland Ag Services in Rosthern, Sask., said prices for
the major farm inputs have remained stable this winter compared to last
year, when they seemed to be constantly on the rise.
He expects that flat line to continue, regardless of any
moisture-driven hikes or declines.
“I don’t think overall we’re going to see the high levels we saw last
spring on all input costs. They should be down.”
Farm input price surveys published by the provincial agriculture
departments in Alberta and Saskatchewan point to generally stable or
lower prices compared to last year.
While the prices in the surveys don’t reflect the situation in every
local market across Western Canada, they do provide a snapshot of where
things stood as of February 2002.
Fertilizer prices were down 10 percent from last year, although last
year’s prices were at historic highs.
Diesel and gasoline prices were down by around 25 percent, propane down
60 percent and natural gas down 97 percent.
Seed prices were higher, along with automotive parts, farm machinery,
machinery repair costs and feed supplies. The cost of building
materials was relatively unchanged, as was farm labour, while the price
of plastic baler twine was lower.
However, one farm organization official said those surveys don’t
measure one item that could be a huge cost for many producers in the
coming year, especially in the livestock sector.
“If we don’t get good rains in the spring, or even three feet of snow
to fill the dugouts, there’s going to be a lot of water hauling,” said
Rod Scarlett, executive director of Wild Rose Agricultural Producers.
“That’s going to be a tremendous expense.”
