Uncertainty around high grain prices and Mother Nature are two big issues facing producers this spring.
“Crop prices are up significantly over last year – roughly 25 to 50 per cent higher on average,” says Charlie Pearson, provincial crop market analyst, Alberta Agriculture and Rural Development, Edmonton. “It’s a demand-led price rally where the world is consuming more than we’re producing. World grain supplies are extremely tight, and that fuels prices.
“The tight supplies and high prices are driven by a number of factors, including a growing world economy, growth in Asia, and a U.S. ethanol policy that now accounts for 40 per cent of American corn production.”
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It’s certainly looking like a year for optimism, says Pearson, but the question bothering many producers is whether crop prices will remain at these high levels between now and harvest. “Prices could climb higher, but there are several reasons why they could decline in the months ahead.”
Social instability in North Africa and the earthquake in Japan have already caused price volatility, he notes. “Weather is another major factor. If Mother Nature co-operates and we have bumper crops worldwide, prices will come down. On the other hand, lousy weather and poor crops will push prices higher.”
The economy and the Canadian dollar are also wild cards, says Pearson.
Price and weather insurance
As the April 30 deadline to apply for crop insurance in Alberta approaches, Pearson suggests producers sit down and carefully plan how to manage the risks in front of them – both their price risk and their weather risk.
If grain prices do drop, he says, a crop insurance rider called the Spring Price Endorsement (SPE) could prove to be valuable. The SPE, available only in Alberta, insures producers against price drops of 10 to 50 per cent between the spring and fall.
“Of course, weather is always the greatest risk farmers face, so the production guarantee that crop insurance provides will be very important again this year,” says James Wright, Agriculture Financial Services Corporation, which delivers crop insurance in Alberta.
In the Peace Region, dry growing conditions over the past few years continue to cause concern for producers, says Wright.
In southern Alberta, farmers are once again worried about excess moisture. To qualify for the Unseeded Acreage Benefit, Wright urges farmers to declare all acres they intend to seed – whether they plan to insure them or not.
Producers who have questions about crop insurance should contact their nearest AFSC office or the AFSC call centre at 1-877-899-AFSC (2372) before the April 30 deadline.
Producers are also reminded that April 30 is the deadline to submit 2011 AgriStability enrolment fees without penalty. Because these deadlines fall on a Saturday, crop insurance applications and AgriStability fees will also be accepted on Monday, May 2.
