Is a Record Crop a Bad Thing?

In Western Canada, 2013 will be a year long remembered – but maybe not for the reason we expected. This was a crop larger than any in history for the provinces of Alberta, Saskatchewan and Manitoba, with improving genetics and fertility plans coinciding with a growing season that would make Iowa jealous. Our farm participated in this, with a crop unlike anything we had ever seen before rolling off the fields at harvest (click here for more on this). It was one of the most exciting harvests I have ever been a part of, with an incredible crop coinciding with some still-good prices to generate profits surpassing any in our farm’s history.

Too much of a good thing?

As the realization began to dawn on grain buying companies like Viterra, Richardson Pioneer, Cargill and others that this was going to a true monster of a crop, the proverbial sh*t began to hit the fan.

Source: http://www.flynnbros.com/mhandling-cbins-featureproject1.html
Source: http://www.flynnbros.com

Picture your local professional football team. Say the stadium has seating capacity for about 45,000 people, which usually gets filled for home games. Every game, traffic getting out of the stadium is slow, but liveable, because it is largely expected. Then the announcement comes that the championship game, say the Grey Cup or the Superbowl, is going to be held at you home stadium. Awesome!

Source: http://www.dreamstime.com
Source: http://www.dreamstime.com

So, to draw in more fans and more revenue, the seating is expanded from 45,000 to 60,000. Suddenly, traffic goes from slow to stopped. Getting out of the stadium after this game with an extra 15,000 people, or another 33%, is a huge problem. People get mad, people get frustrated, and things just generally become difficult (especially if you have a few fans who have enjoyed too many beverages). Why didn’t the event planners think of this? Why didn’t they do something ahead of time to prevent this traffic jam?

That is the grain movement situation this year. Too much grain has to move in too short of a time. So what happens? You get a backlog. A traffic jam. Things slow to a crawl, and frustration grows (but without the inebriated fans, I suppose). So again, why didn’t the line companies (our grain buyers) or the railways do something about this ahead of time? Put simply, because a) they didn’t know the crop was going to be this big (who did?) and b) the system is designed for an average crop, not a record crop.

Who’s to Blame?

Does that excuse the railways of responsibility? No way. Over the past 10 years, farmers have been applying more and more fertilizer and seeding better and better genetics. This crop was coming; it was only a matter of time. Records are made to be broken, and a record-breaking crop like this was only one good growing season away.

Source: http://flickrhivemind.net
Source: http://flickrhivemind.net

Our rail system in Canada is almost exclusively controlled by two companies, Canadian National Railway (CNR) and Canadian Pacific Railway (CP). Yes, there are a number of scattered short line railway companies, but they all have to work around CNR’s or CP’s schedule. These two big guys have an oligopoly (market controlled by a small number of players – think smartphone operating systems: Apple, Google, Windows) so they can pretty much haul what they want, when they want, regardless of what farmers and line companies want them to do. Our country is huge, and our grain has to go a long way to move it to one of the coastal port facilities, such as Vancouver, Churchill or Thunder Bay. Far enough that movement by truck is horribly uneconomical. We rely on the railways – heavily. And, frankly, they are failing us.

Falling Prices and Falling Profits

The result? The price is not good – really not good. Last year at this time you could sell your canola for about $12 per bushel. Today, if you can even find a price, you might be able to sell it for $8.60 per bushel. That`s nearly a 30% loss in market price. The worst part is just being able to get it sold at all and get it moved. We are already looking into 2014 and 2015 crop years to figure out how we are actually going to be able to move it.

Source: www.123rf.com
Source: http://www.123rf.com

Is this another case of farmers always finding a reason to complain? Maybe. But selling canola at $8.60 per bushel today and not being able to move it until July presents serious cash flow problems, not to mention the fact that this record crop has suddenly become little more than a breakeven year for many farms. Running the farm business suddenly became much more complicated.

Fortunately, we sold most of our crop ahead of time, when prices were still pretty decent. We have also sold much of the 2014 crop. There are risks to selling this far in advance, but this year the benefits far outweighed them. We were lucky to have made this decision, but we also carefully considered that selling durum at $6.75 per bushel early last fall was still very profitable, so why be greedy and wait for it to go to $7?

Just the Tip of the Iceberg

We have had good times in agriculture for many years now; it has been since 2007 that prices have been very strong (excepting 2009) and it is time for the cycle to swing the other way. Can we afford it? Can we survive a trend to lower prices, a trend that, if history teaches us anything, could last for 25 years? Exacerbating this long-term trend is the very real threat that if we grow another decent crop in 2014 on the Prairies, how will we move it when we are still overloaded from the 2013 crop? Put another way, can we host the Grey Cup two years in a row?

The 1980’s through the early 2000’s saw some pretty tough years for a lot of farms. In all likelihood, these are the times we are returning to. Did we build enough net worth to survive it? Or, did we learn enough to prosper in these upcoming lean times?

Time will tell. I will never lose my optimism and my faith that agriculture is the best industry in the world, and is the best way to raise a family. We will find a way to survive, even prosper, no matter how tough things get. We are farmers; survival is what we do, in spite of the odds.

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Seeding is Coming

Well, things have changed greatly since my last blog post. Things looked rather dire then, as a fresh layer of snow had just covered the ground, and seeding looked as though it would never come. Fears of a repeat of 2011’s disasterous crop tore through my mind like an earthquake splitting asphalt. But, the snow melted, and hope rekindled as the weather took a turn for the better.

Bright, summer-like days have graced us for the past week now, and the snow is all but gone. The soil has shown itself after an 8-month slumber. Grass grows green (kind of) again, and weeds are poking their fledgling shoots out of the still-cold soil. Yes, spring has arrived, and none too soon, for despite the excitement of seeing spring begin again, it is the eighth of May. Seeding is quite delayed, and this will be one of the latest starts in my lifetime.

You may think my last post was a severe overreaction to an event hardly unimaginable, given the year so far. You may be laughing at my rashness, to go so far to excitement for seeding to begin, to the next day believing all was lost, and coming full circle today believing again that seeding will start soon. It does sound awfully foolish, even I will admit that.

This, however, is the very nature of farming. The weather chooses to do what it does, and sometimes this can be extraordinarily frustrating, painful and depressing. Sudden joy can erupt from even the smallest of rain showers in the early days of June, giving the seeds the moisture they need to germinate. Conversely, a July storm can quickly turn from wonder and astonishment of the power of nature, to a devastating, horrified feeling as you watch hailstones shred the crop of your dreams.

Farming is full of ups and downs, and can be a rollercoaster of emotion. Such has this spring been, and for this reason I have swung from optimism to pessimism more times than I can count. It is for this reason that I started this blog. It is an outlet for me, a place for me to pour out my emotions and lay them bare. Nature can be a cruel mistress, taking dreams and hammering them mercilessly to the ground. These are the lessons we learn, and the longer we farm, the better we learn them.

Fortunately, my fears last week were proven wrong, and we plan to begin seeding as early as Monday (we hope). Our air drills are pulled into the yard, and we have one of them pulled apart to get it ready. It is entering its sixth season, and has seeded nearly 40,000 acres in its lifetime. Not surprisingly, it needs some maintenance. Our other drill is newer, a 2010 model, and being that 2011 was not really a year where many acres are seeded, it is still relatively new, and needs little work.

You see, an air drill is a toolbar that steel soil openers are mounted to. These open up the soil, close it, then a packer wheel seals the soil closed again. As the opener runs through the soil, it drops metered seeds and fertilizer into the row. While there are dozens of variations to this design, this is the basic premise of all air drills. They are called air drills because the seeds and fertilizer are forced through the opener by a large fan mounted on the tank following, which holds the seed and fertilizer. Search “air drill” in Google and you will see what I am talking about.

Yes, we are moving to the most exciting, adrenaline-fueled part of the year, where we will drop hundreds of thousands of dollars into the soil and pray that Mother Nature rewards us. I will try to keep you updated as this intense season continues. Talk to you soon.