The Rural Voice, 2006-02, Page 35News in Agriculture
Soaring dollar requires adjustment of expectations
Ontario's grain producing farmers
are facing a challenge of
expectations, according to Cal
Whewell, risk management
consultant with FCStone commodity
brokers of Ohio.
Speaking January 9 at Grey -Bruce
Farmers' Week in Elmwood,
Whewell said farmers long for the
days when they'll see a return to high
prices but the strengthening Canadian
dollar means that what would once
have been $9 beans now are worth
$6.75 because of the difference
between a dollar worth 65 cents in
U.S. currency and one worth 87
cents.
And don't expect a return to the
"good old days" of a 65 -cent dollar,
he said. With the U.S. government
facing a $371 billion deficit and
Canada running surpluses, the
Canadian dollar is likely to
strengthen against its U.S.
counterpart.
But there remain opportunities for
farmers to lock in at higher prices,
Whewell said.
"The challenge as a producer is
for you to become a much more
aware marketer," he said. "Draw a
line in the sand. If you get that price,
take it and don't look back."
Recently the USDA estimated
carryout of 405 million bushels of
soybeans, the largest since the mid-
1980s. History shows that the price
of beans should have been $5 a
bushel but instead it was $6.30.
Whewell feels the premium came
from traders waiting to see if crops
really were going to do well in South
America. After all, last year USDA
was predicting a carryout of 430
million bushes but that dropped to
257 million bushels. The current
USDA estimate is that there will be
record crops in South America but
the market won't believe it this year
until it sees it, he said.
The good thing about South
American production is that there are
now two weather markets a year, he
said.
But Whewell sees the U.S.
carryout as increasing because right
now the U.S. is 190 million bushels
behind last year in exports. USDA
expects an extra one million acres of
soybeans to be planted this year. "If
there isn't a weather problem in
South America, carryout could go as
high as 500 million bushels.
One opportunity comes from the
huge influence commodity funds
have on the market these days.
Despite gloomy news, funds bid up
the market recently because they
needed to fill their positions.
In wheat, carryout is expected to
be close to last year's with an
estimated extra one to 1.2 million
acres planted. Currently, however,
areas in Texas growing hard red
winter wheat are awfully dry.
The current U.S. Farm Bill which
frees farmers to plant whatever crop
they think is most favourable has
encouraged a lot more soybeans and
a lot less wheat. The U.S. has given
up a lot of its traditional share of the
markets and now its market stays dull
until someone in the world -has a
shortage and comes looking for U.S.
wheat. "We store it until we can get
our price."
Tremendous corn yields have
created a big surplus in that grain
despite a huge demand. Records were
set with a 160.5 bushel average yield
in 2004-2005 and despite crop
problems this past year, the average
yield still registered 148.4 bushels.
"The problem is we believe we
can grow 150 -bushel corn without
trying — as long as we get get it out
of the bag," Whewell joked.
The saving grace has been the
exponential growth of the ethanol
industry in the U.S. from using 1.6
billion bushels in 2002 to three
billion. As long as there's $60 oil and
$2 corn that growth is likely to
continue, he said. Potentially, ethanol
production could grow to the point
that it uses up all the corn the U.S.
currently exports. "But it doesn't
make sense to make all corn into gas
and not feed people," Whewell said.
But the stronger the demand for
corn for ethanol production, the more
essential it is to have the big corn
yields Americans have come to take
for granted, he said.0
Pork exports increased in 2005 despite higher dollar
Despite the increased value of the
Canadian dollar, Canadian pork
exports grew six per cent in 2005,
Ontario Pork chair Larry Skinner told
the annual meeting of the Perth
County Pork Producers Association,
January 19.
The U.S. declined from 44 to 39
per cent of exports with Japan taking
29 per cent and Mexico, 6.4 per cent.
Growth in the past decade has
come from exports, Skinner said,
with 60 per cent of the pork produced
leaving the country today compared
to 30 per cent a decade ago. This
underlines the importance of being
prepared for an emergency like a
foreign animal disease and
emphasizes the need for traceability,
Skinner said. "The pennies per pig to
finance traceability will seem cheap
compared to the potential loss."
There were 5.59 million fed pigs
marketed in Ontario last year for a
total of $841 million. This was
actually a decline of 1.5 per cent. Of
these, 78 per cent were processed in
Ontario with live exports down one
per cent to the U.S. but up to Quebec.
There are now just 3,300 producers
marketing hogs in Ontario with 462
in Perth, second to Huron in
producers numbers but Perth leads in
hogs marketed at 945,453.
Herd sizes continue to grow with
17.5 per cent of producers marketing
more than 3,000 hogs in 2005
compared to two per cent in 1995.
These large producers account for 62
per cent of hogs marketed today
compared to 19 per cent a decade
ago. On the other hand, only 14 per
cent of producers shipped less than
50 hogs in 2005 compared to 31 in
1995.0
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