Winnipeg Free Press - PRINT EDITION

No crystal ball needed to forecast tough year

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Call it what you will -- superstition, intuition or premonition. But even before they went to the fields last spring, Manitoba farmers knew 2014 would be a tough year in which to make a buck.

Last year, many figured they were due for a reality check after 2012, when they enjoyed the rare combination of respectable yields and jolly good prices after blistering drought in the U.S. sent markets soaring. But there was more good news -- the bin-buster yields of 2013 surpassed all expectations to bring in a record harvest that was 50 per cent above average.

Some pundits were quick to call it the "new normal." The people on the land called it one for family folklore -- "the crop that built the new farmhouse," or "the year the machine shed was full of wheat."

One of the first hints 2014 would be difficult came in March when the provincial government issued its guidelines for estimating crop-production costs and returns. While not a forecast per se, these guidelines plug in the average costs of seeding, weeding and feeding each crop and calculate potential returns based on average yields and current prices. Just about every crop on that list, except winter wheat, fall rye, soybeans and sunflowers, was pencilling out with negative margins.

The biggest commodity crops, such as spring wheat and canola, were way down on the profitability index, which left farmers looking for ways to beat the averages, either through higher yields or lower costs.

This isn't new in farming. In fact, it's pretty normal.

But then spring wouldn't come. When it did, it brought torrents of rain --more than 200 per cent of normal in western parts of the province. Something close to a million acres hasn't been seeded at all. Even the possibility of seeding green feed as an annual crop for livestock is growing thinner as each day passes.

Cattle producers who have had their pastures flooded have had to turn their cows out onto their hay lands. This doesn't bode well for getting enough hay put away for the winter. Will they buy high-priced hay? Or will they sell cattle? If it's the latter, don't expect a break on grocery beef prices any time soon. The North American cattle herd was decimated by the 2012 drought and hasn't had time to rebuild.

Aside from the as-yet-unknown number of seeded acres that have been wiped out by overland flooding, heavy pressure from crop diseases caused by humidity and heat is increasing the cost of protecting what's left.

Provincial extension workers were urging farmers last week to use an online tool to determine whether their weather-damaged canola crop is worth spraying with fungicide to control sclerotinia.

As if that wasn't enough, U.S. farmers are headed for what some are calling an "avalanche" of corn. The trendsetting Chicago markets aren't waiting for harvest to find out. An editorial cartoon making the rounds in U.S. corn states last week joked you can actually hear the sound of corn falling.

So the profitability outlook for U.S. farmers is equally gloomy. "Average farmer return for corn grown in central Illinois on high-productivity farmland was $341 per acre in 2012 and $94 per acre in 2013. Farmer return in 2014 is projected at minus $48 per acre," says a June economic analysis put out by the University of Illinois. That estimate was based on corn prices of $4.20 per bushel. Corn prices on the Chicago Board of Trade last week had slipped below $4 a bushel.

It may seem counterintuitive, but a far bigger concern than income for farmers right now is cash flow, the outlook for which is looking bleak. A record number of farmers relied on cash advances, a portion of which are interest free, from the federal government on their unsold grain to get them through the winter.

Some of that grain is still unsold due to the continuing transportation backlog. The federal government last week offered a six-month extension to March 2015 for paying those cash advances back.

That's a relief, for sure. But farm leaders are already saying it's likely additional assistance will be needed.

 

Laura Rance is editor of the Manitoba Co-operator. She can be reached at 204-792-4382 or by email: laura@fbcpublishing.com

 

Republished from the Winnipeg Free Press print edition July 12, 2014 B7

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