Winnipeg Free Press - PRINT EDITION

'New normal' may not be so normal, after all

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By any measure, the Prairie crop last year was an astounding production feat.

Farmers grew 76 million tonnes, shattering previous records for most major crops. In all, it was 50 per cent higher than the five-year average and 30 per cent more than what farmers grew the previous year.

So the pundits were understandably giddy about what this could mean for Prairie agriculture. But did it represent "the new normal?"

That's how a senior industry official referred to it at the Canadian Global Crops Symposium last spring, suggesting 90 million tonnes of production is on the near horizon. The "new normal" phrase was also embraced by federal Agriculture Minister Gerry Ritz to rationalize the need for improvements to grain transportation efficiency.

The rhetoric was like a runaway freight train and the grain trade executives and politicians were quick to hop aboard

The rhetoric was like a runaway freight train and the grain trade executives and politicians were quick to hop aboard -- scoffing at the notion put forward by railway company officials it would be imprudent to make major investments into expanded capacity just to handle infrequent surges.

The push is on for new or expanded grain-handling and storage and, notably, more rail capacity.

There's general agreement, except from the railways, their performance heading into last winter was abysmal. By some calculations, the system was operating relatively less efficiently than back in the days when men used shovels to fill boxcars before the government brought in performance targets with the threat of financial penalties.

Ships were waiting at port -- something akin to cabs waiting with the metres running -- chalking up huge demurrage charges. Prairie grain was sitting in farmers' bins, machine sheds and sometimes on the ground. The cost on both ends was borne by farmers in the form of higher marketing charges and a shortage of cash flow.

The reasons included the bitter winter weather and the unexpected surge in production combined with a degree of logistical confusion due the 2012 changes in the Canadian Wheat Board's role in Western grain marketing. And it was also clear the rail companies had perhaps been a bit too aggressive in streamlining their locomotive power.

But a new normal it was not.

The latest data from Statistics Canada point to a 2014 wheat crop that is 26 per cent lower than last year's and a canola crop that is down by 23 per cent. One industry analyst is suggesting there might not be enough canola to meet the current demand for crushing and export, which would be great news for farmers -- until you consider the domestic crushers and seed exporters tend to be owned by the same companies, which makes bidding wars unlikely.

Similarly, the production trend is down for all cereals.

Western Canada could still produce a big crop, despite the fact 985,000 acres in Manitoba didn't get seeded due to excess moisture in the spring.

The data so far suggest this year's wheat crop is the third-largest in a decade. The canola harvest could be the third-largest ever.

The overall production trend is up. Data provided by Agriculture and Agri-Food Canada analysts last winter show western Canadian production has been increasing, on average, by about three per cent annually over the past three decades -- not the 50 per cent increase we saw in 2013 or the 23 to 32 per cent decrease in production we are seeing in 2014.

As for carry-overs, it appears this year's carry-over won't be anywhere near as big as the three-fold increase predicted last winter. And with all those unseeded acres out there, the affected farmers might be happy to have a bit left in the bin from last year to even out their farm's cash flow.

Perhaps the new normal is volatility, which comes with its own set of risks and rewards.


Laura Rance is editor of the Manitoba Co-operator. She can be reached at 792-4382 or by email: laura@fbcpublishing.com

Republished from the Winnipeg Free Press print edition August 30, 2014 B9

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