What's new in the Canadian market.

TOP CROP MANAGER

by Ralph Pearce, Field Editor

At first glance, the corn and soybean crops across most of Ontario are looking very good.

From a numbers perspective, estimates from the Ontario Ministry of Agriculture, Food and Rural Affairs (OMAFRA) suggested a new record for corn planting is a possibility with estimates as high as 2.2 million acres (the current record stands at 2.175 million acres set in 1981). In a survey of growers' intentions conducted in March, Statistics Canada pegged corn acres at 2.17 million.

On the soybean side, the same survey from StatsCan estimated 2.2 million acres, or little change from 2006 acreage.

On the agronomic front, heavier tillage done in fall 2006 saw more growers cultivating and discing in the spring, reducing crop residues. On the surface, corn and soybean crops have responded well, although growers, dealers and advisors in pockets of southwestern Ontario and the Niagara Peninsula now are expressing increasing concerns about the lack of precipitation in their respective regions.

Despite spotty weather and pest concerns, the above average conditions in the fields could have significant impacts on the markets. According to John DePutter of DePutter Publishing in London, ON, if the weather cooperates subsequently highly volumes of corn could lead to short-term challenges in handling, transportation and storage.

"Some of that corn will be exported, which means the price of Ontario corn at harvest will have to be at a level that makes it competitive in the export market with American corn," explains DePutter, who publishes daily market summaries. "As time passes, Ontario will be using more corn, so eventually, we'll use up a large portion of the crop we produce, and the Ontario market should come out the other side with some substantial gains."

In soybeans, prices are likely to follow Chicago with adjustments to offset the impact of a rising Canadian dollar. By DePutter's estimates, since mid-March, the higher value of the Canadian dollar has shaved 80 to 90 cents off the price of soybeans (Canadian), and 30 cents in corn.

CANADIAN CATTLEMEN

by Gren Winslow, Editor

Canada came into 2007 with a national cattle herd of 14.3 million head built around five million beef cows and one million dairy cows. It's a marked reduction from the BSE-bloated herd of 15 million head from a couple of years ago, but still harbors 600,000 older beef and dairy cows that should have been culled by now. Half of them were open on January 1.

Four years after BSE, the Canadian industry is still scrambling to expand markets for this beef at home and abroad. To that end they received a shot in the arm in May when the World Organization For Animal Health (OIE) classified Canada as a controlled risk for BSE. According to the OIE's guidelines this means Canadian safeguards are such that there is no scientific reason why the beef from cattle of any age of cattle cannot be safely exported.

In each of the past two years Canadian exports of beef and cattle were valued at Can$2.5 billion, a little better than half the $4 billion sold in 2002 before BSE. However, the country appears on track to pass this mark in 2007.

By June, boxed beef exports were up again. Most ended up in the U.S., with smaller amounts going to Mexico, Hong Kong and Macau, Japan and a growing list of other nations around the world.

Meanwhile, back home percapita consumption of beef climbed by 3% over the last two years, and better-quality cuts were running at a premium to U.S. Choice this summer because retailers had so many Canadian only promotions on the go.

BSE didn't really touch the milk side of the supply-managed dairy sector. At the moment their biggest concern is the steadily rising cost of quota, which suggests milk prices remain profitable.

The chief uncertainty for dairy and beef producers today is whether USDA will publish its rule allowing imports of Canadian cattle and beef over 30 months as promised. No one really expects the U.S. to accept older Canadian cows under this revised rule, but it would do away with the need to preg check heifers before they cross the border, and offer an immediate lift to purebred breeders.

The recent sale of 975 Holsteins and 1,000 Black Angus breeding cattle to Russia marked the first time Canadian breeding stock has left the country in the last four years. It was a long time in coming.

THE WESTERN PRODUCER

by Barb Glen, Editor

The latest cliche making the rounds in agricultural circles is that "a rising tide lifts all boats," and that seems to suit today's scenario.

The highest grain prices in years have injected optimism into the Western Canadian grain and oilseed industry and that supports agriculture's many spin-off businesses.

Analysts project that grain markets will stay strong into next year and possibly beyond, supported by tight world stocks. Western Canadian farmers are also feeling the effects of the corn-based ethanol boom in the U. S., along with the development of their own biofuel industry.

Higher corn prices have driven up the value of other grains and oilseeds.

D'Arce McMillan, the Western Producer's Farm Management Editor, watches commodity markets closely. "Demand-based rallies are often long because it takes years for the world's farmers to adjust cropping patterns and increase yields to meet the need," he says. "So the fundamentals are right for a sustained period of strong revenue for crop farmers, although rising input costs and the strong Canadian dollar are cutting into profit margins."

The healthy loonie is indeed a challenge for Canadian producers. At the time of this writing, the Canadian dollar was worth 93.6 cents U.S. with speculation that it will go higher.

Hog and pork exports in particular have taken a hit from the exchange rate, and it has forced major hog processing companies to reorganize. Some smaller plants have closed, forcing higher transportation costs onto producers. Supply and demand fundamentals are only fair for that sector.

In the cattle industry, higher grain prices mean higher feed prices, which cut into feeders' profits and reduce what they're willing to pay for replacement animals.

In late May, Statistics Canada released its Census of Agriculture, which it compiles every five years. Figures for 2006 show a 7.1% decline in number of farmers and an increase in average farm size. Slightly more acreage is being farmed compared to the 2001 census. Crop input prices rose 8.6% over the census period but prices farmers received for their goods rose only 1.7%. Almost half of all Canadian farmers were reported to have an off-farm job.

On the agronomy side, we're seeing greater use by farmers of professional agrologists as governments withdraw their publicly funded services.

Bill Strautman, the Western Producer's resident Agrologist, notes that lower glyphosate costs prompted by patent expirations have supported prairie farmers' more economical use of direct seeding. More than a dozen plant protection products will come off patent in the next few years.

Strautman sees a major increase in use of precision farming techniques, which are particularly important given the larger farm sizes. And he predicts greater use of variable rate fertilizer application and more detailed fertility programs down the road.

Editor's note: To get a feel on what's happening in the important Canadian agricultural market, we invited prominent ag communicators to provide the following updates.