Who Will Be The Winners And Losers This Fall? – for Aug. 30, 2010

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This year’s weather calamities have already picked their victims and there may be more to come. Alberta has fared better than Saskatchewan – at least most producers were able to get the crop in here, albeit delayed in many cases. But drought in the Peace area, excess moisture in some southern areas and sporadic hail have all taken their toll of growers. Perhaps its just another typical year for agriculture in this province. Is there ever a perfect year for everyone – grain, oilseeds and livestock?

Climate-change alarmists would have you believe that this is just the beginning. I think not; my ranching experience in the Peace showed that only about one in 10 years was a good year. Some variation of frost, hail, drought, bugs, disease, too much too little moisture, or too cold in any one year or all in one year seemed to be the norm, although that may be more true for the planet Peace River.

The livestock sector is especially on a roller coaster, or maybe its a treadmill. Hog and cattle prices have seen a slow but steady recovery as North American herd inventories decline and the recession moderates. But the weather has laid on some cruel discipline. Too much and too little rain has hit cow-calf producers hard in trying to get the hay crop in. That’s going to cost. Add onto that more age verification and traceability costs, and despite government assistance, producers will be paying more. Primary producers hoped that higher cattle prices might offset their increased costs, but I suspect that will be fleeting thanks to fickle feed grain prices.

Feedlot operators had seen the possibility of steady or even lower feed grain prices despite a possible barley shortage. That’s because most of the big players have learned how to make a buck importing trainloads of corn from the U.S. If cheap barley isn’t available then cheap corn usually is. Feeders also like corn’s consistency and easy handling. However, a Russian ban on wheat exports has dragged the barley and corn price complex along with it to higher levels. Add in massive speculation by commodity hedge funds and a strong loonie and high feed grain prices may be with us for awhile.

Cow-calf exit

That might force feedlots to hedge barley and corn at higher prices, and guess who they will extract that from – cow-calf producers through lower feeder prices. Their only salvation may be to decrease offerings of feeders, forcing feedlots to compete for what’s available.

Having said all that I perceive an ever-growing sense of exasperation in the cow-calf sector, which is seeing a continuous exit by many commercial cattle producers. Agriculture Minister Hayden foresees the cattle herd declining to 1.2 million. At the present rate I see a decline to one million as quite feasible. The minister is alarmed because at that level it begins to impact feeding and processing infrastructure. Feedlot operators are worried about the decline, and it’s been said they could stop the decline just by paying more for feeder cattle. But it’s not that easy, as they are also affected by market forces beyond their control.

Wasn’t the Alberta Meat and Livestock Agency supposed to save a declining and floundering cattle industry? It’s now almost two years and counting.

Between mounting losses and weather disasters, governments have had to resort to financial bailouts through various support programs. But there is another aspect worth noting. Even though this year will see various government levels probably spend a few billion dollars bailing out the agriculture industry, few consumers would have actually known that weather calamities caused problems in the countryside or that governments had spent so much of their money supporting the ag industry.

Consumers haven’t a clue about that because all they see are grocery-store shelves groaning with an over abundance of food products. No weather problems here, no shortages in sight, so what’s the problem and why are we spending all these tax dollars?

Its something to keep in mind because I expect some day in the future that may become a more widespread perspective and it will affect the way governments treat agriculture.

There are going to be winners and losers this fall and the government may well have to consider even further bailouts. What does it all mean? Perhaps not much in the long run – it may be just another typical year in the trials and tribulations of agriculture in Alberta.





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