The News & What it Means: Farmers, Tighten your Belts

By Dave Milne – July 17, 2018

 

The news:

“Canadian producers need to focus on building resilience into their business to maintain or grow their operations in turbulent times.”

– Pembina Valley Online, July 16, 2018.

 

What it means:

That’s perhaps a nice way of saying that farmers ought to batten down the hatches.

 

Because right now, Canadian farmers are facing a tsunami of bad news, generally bad prices and maybe worst of all, a very uncertain future.

 

It used to be that one of the biggest unknowns a farmer would face every year was the weather. Of course, that’s still the case and it probably remains the No. 1 thing on the minds of producers in those areas of the country where crops are burning up in the field or dealing with rain, hail or other types of weather damage.

 

But lately, there’s been other things too – things that just feel different.

 

Across the border, the U.S. government has picked a trade fight with China, one of the world’s biggest buyers of agricultural commodities. With demand prospects uncertain because of tit-for-tat import tariffs on both sides (along with good weather in the American Midwest), soybean futures have dropped to around their lowest in 10 years. With soybeans dragging it down, the canola futures market has fallen to a price level under $490 not seen since last fall.

 

Supposed to be one of the potential bright lights in 2018-19, corn futures are instead plumbing 1-year lows, and wheat futures – which have been beaten down for years in the wake of unrelenting heavy world supplies – still have not been able to get back on track in a meaningful way.

 

Lots can still happen in the 2018-19 marketing year to get prices turned around and pointed higher again, but it’s no secret that a huge amount of damage has already been done.

 

According to a Statistics Canada farm income report released earlier this year, Canadian realized net farm income was already down in 2017 (-2.5%) – the first annual decline since 2013 and only the second decrease since 2009. Meanwhile, farm cash receipts through the first quarter of this year were down more than 5% from the same quarter in 2017.

 

And that was before the latest sharp price declines.

 

When Mike Babcock took over as head coach of the Toronto Maple Leafs he famously admitted that pain was coming, knowing plenty more losing was in the offing before the team finally turned the corner toward respectability.

 

The situation now may be even more challenging for farmers, simply because no one is quite sure how the trade battle will eventually play out. It may cost a little; it may cost a lot. Or, it may cause even more lasting damage.

 

After some of the best times ever in farming in the not-so-distant past, the pendulum was always going to swing the other way.

 

Now with prices lower, farmers are facing a future they have little control over in terms of tariffs, a rising debt load and increasing interest rates.

 

Hopefully, farmers put a little away during the good times to help them ride out the bad times – how ever long they may last.

 

In addition, under current challenging market conditions, getting easy-to-understand, sensible marketing advice is more important than ever. The team at DePutter Publishing Ltd. can help.

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