The outlook for the upcoming growing season has become more guarded with various factors generating reasons for concern.
Canola prices have dropped about $1 a bushel since the beginning of March. What goes down can come back up again, but cropping budgets take a beating if you plug the market downturn into your assumptions.
Canola is the profit generator on most farms, making up for the poorer performing crops in the rotation. A lot of farms won’t do well if canola returns end up as mediocre
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Lentils have often been the most profitable crop on many farms in southern Saskatchewan. The crop doesn’t seem like such a sure bet after last year’s flooding and disease issues.
As well, lentil prices have now dropped dramatically. New crop red lentil contracts are sitting at 23 cents a pound or less, which is a huge drop from the 30 cent price used in many cropping budgets a few months ago.
Market access to India for our pulse crops has been uncertain for weeks. As this is being written, unofficial reports suggest India will grant a three-month extension to its fumigation rules, allowing Canadian lentils and peas to again be imported. Until the issue is completely solved, it casts a long, dark shadow over the Canadian pulse industry.
Another export threat is the value of the Canadian dollar. Many grain farms are losing money in the United States, and the price of land is dropping. American farm income has taken a big hit over the past few years. Canada has been shielded from much of that pain by a 75 cent dollar.
The American economy has been slipping in recent weeks. If that continues, it’s likely to cause a weakening in the American greenback and generate a comparative rise in our loonie. An 80 or 85 cent Canadian dollar would be tough on our export-reliant industries.
Even without currency pressure, the general price direction has been downward for a majority of our crops.
Meanwhile, production costs continue to rise, especially in Saskatchewan where the farm fuel tax exemption on gasoline has been removed and the exemption on diesel has been reduced to 80 percent. While some change was largely expected and telegraphed by Premier Brad Wall’s government, other budget changes were more of a surprise.
The provincial sales tax, which has gone from five to six percent, applies for the first time to insurance premiums, including Saskatchewan Crop Insurance, hail insurance and the insurance on buildings and equipment. On top of that, the education portion of property taxes will be edging upward.
While the monetary impact will vary widely from one farm to the next, the Saskatchewan budget will add costs of at least a few dollars per acre on many operations.
Fortunately, we continue to see fertilizer prices at some of the lowest levels in many years, which is a significant cost saving.
As we head into seeding, the first hurdle facing thousands of producers is last year’s unfinished harvest. Depending on the weather in the weeks ahead, dealing with last year’s mess could put this year’s seeding seriously behind schedule.
The uncertainty makes a difficult start to the season. What quality issues will emerge on the leftover crop? Will it have any value? Can a sufficient amount of residue be removed to allow seeding operations to proceed without plugging issues?
The weather might co-operate and crop prices might improve, but it could also go the other way.
