| | Alberta farmers are facing a lot of uncertainty as they prepare to seed their crops in the coming weeks amid a global recession.
"The game has changed completely from this time last year," says Charlie Pearson, provincial crop analyst with Alberta Agriculture and Rural Development, Edmonton. "The collapse of world financial markets is affecting everything, including agriculture here in Alberta. The credit crunch is making it tougher for grain buyers to finance shipments of grain from farms to world markets. And grain prices have plunged more than 30 per cent from record highs last summer.
"Input costs such as fertilizer have fallen, but not far enough, creating a potential cost-price squeeze that is adding more risk and worry as producers struggle to budget for a profit this year."
Where crop and input prices may end up between now and harvest is impossible to predict. "The best guess is that grain prices will fall a bit lower," says Pearson. "While no major drops or increases in price are anticipated, there is no absolute certainty for what lies ahead.
"A drought in western Canada or somewhere else in the world that impacts grain supplies, or a spike in energy prices that reignites demand for ethanol, could push grain prices higher. On the other hand, perfect weather and bumper crops worldwide, or a deepening of the recession that drives consumer demand lower and makes credit harder to access, could chew away at prices even more.
"The challenge for farmers is to avoid getting bogged down in all the negativity. We can't control the world economy. All we can do is accept that we're in risky times, and then get down to the business of managing that risk and focus on being profitable."
Producers who are disciplined with their budgets and keeping costs low stand a good chance of turning a profit this year.
"I think there's room for cautious optimism. After all, $9 per bushel for canola is still pretty decent compared to the $6 per bushel often seen over the last 10 years. Of course, Mother Nature will have to cooperate. Weather is always the biggest risk when it comes to farming," says Pearson.
Pearson advises producers to consider locking in some profit margins this spring by signing forward contracts that offer locked-in prices for grain delivered in the fall.
"It's also important to look at ways of managing risk like crop insurance," adds Pearson, reminding producers of the April 30 deadline to purchase crop insurance in Alberta. "Each producer has to assess the risk that's out there this year and decide whether they can handle it themselves - or if they'd sleep better by offsetting some of that risk with insurance."
"With so much uncertainty around grain prices, many producers are paying attention to a crop insurance option called the Spring Price Endorsement (SPE). It protects against price drops of 10-to-50 per cent between the spring and fall," explains Chris Dyck, senior manager of insurance operations for Agriculture Financial Services Corporation (AFSC), the provincial crown corporation that administers crop insurance in Alberta. "The SPE is based on a spring insurance price set for each crop in January. We've seen a lot of volatility since then, and producers are realizing the price on many crops won't have to drop much further to trigger an SPE payment this fall. Barley has already dropped so low, it would trigger a payment unless the price rebounds by the fall."
If crop prices bounce back and climb 10-to-50 per cent above the spring price by fall, a built-in feature called the Variable Price Benefit automatically insures producers at those higher prices if their crops fail. "That's especially important if you're forward contracting because if you don't get a crop, ou may still have to honour those contracts at the higher fall price," says Dyck.
In addition to price risk, many producers are crossing their fingers for a healthy dose of spring rain as soil conditions are dry across much of the province. A growing number of people are requesting hail endorsement coverage with crop insurance as a result of record hail that has battered Alberta crops for three years straight. "You never really know what problems will arise each year," says Dyck, explaining crop insurance covers a wide range of weather risks, plant disease, insects, and wildlife damage.
Some important changes have been made to crop insurance for 2009, including that there are two new crops are now insurable: canary seed and camelina. And, due to high seed, fuel and fertilizer costs, payments under the Reseeding Benefit and Unseeded Acreage Benefit will increase.
Producers with questions about crop insurance can contact an AFSC insurance office or the call centre at 1-888-786-7475 before the April 30, 2009 deadline.
Contact:
Charlie Pearson
780-422-4053
Chris Dyck
403-782-8240 |
|