If GMO Opponents Win
I'm starting to fear the GMO opponents are winning the day. As more and more food manufacturers in the US and elsewhere pander to the forces of "marketing" and take advantage of consumer ignorance, the momentum against GMOs is growing. This is despite the complete lack of scientific proof of harm from GMOs. The latest move is Russia's consideration of a ban on GMO production in the entire country. Unfortunately the activists seize on these type of announcements as "proof" of problems with the GMOs and the vicious cycle of misinformation continues to build. So what will happen if this trend continues? Conventional agriculture will be booted to the sidelines and become a niche in itself. For consumers, this would mean a 40% increase in pesticides used on crops, lower yields and more videos of famine in various parts of the world. I hope the activists are okay with this outcome because it's the logical end of their irrational and ideological opposition to GMOs.
 
Farmer Myths
I've heard a couple of things the last few days that made me downright cranky. The first was a report on CBC radio that said farmers were a dying breed with 75% ready to retire. It was all doom and gloom. I guess the documentary writer hasn't been out to a farmer meeting in that last five years. I've noticed a huge change in the average age in the room, with far more younger people. That's a reason for optimism.

The other line I just heard recently I've come across many times; farmers are just "price takers". Using this victim mentality is a bit of an insult to the many successful farmers out there. And it's simply not true. Farmers have the ability to select prices over a long timeframe and use risk management tools to improve price performance. They're not victims of the market, they're participants. And besides, which business is able to set prices independently of the market? None. Even Apple has to take market realities into account when it prices its products. The farmers I know are smart enough that the "price taker" label simply doesn't apply.

End rant
 
Food Activists Misguided

Is it just me or do others also get really annoyed at food activists that would like to force farmers to abandon technological advances and return to a “simpler” time when all a farmer had was a hoe, a pitchfork and a straw hat? Why is it that new technology is automatically assumed to be bad or that manmade chemicals are worse than naturally occurring ones? Full disclosure: I don’t receive a penny from Monsanto. Would these activists be willing to give up “factory communication” devices like cell phones and the internet and only use old technology like the telegram or two cans and a string? Why should farmers be relegated to the 19th century while the rest of the world moves ahead, using the latest technology? Feeding the increasing population will require even more advances, not less. So far, technology has reduced the volume of pesticides used, the amount of land required to produce crops and losses due to insect damage. And it has the potential to increase yields even more through water use efficiency and disease resistance. That’s what people in food deficit countries need. Until these naïve activists come up with a better alternative, I wish they would just stop with their incessant demands. Required reading: Peak Farmland and the Prospect for Farmland Sparing.

 
New Small Grains Market Information
Recognizing the monumental shift in the Canadian grain marketplace and the resulting information gap, LeftField now offers a new Small Grains Letter covering wheat, durum, barley and oats. This weekly Small Grains Letter provides brief market developments and comprehensive market indications, including futures and cash prices, basis, spreads, global price tracking, S&Ds and statistical reference material. For more information, check out our services page.
 
10-Year Projections - Really?
At the risk of denigrating my profession, I really wonder about the value of Ag Canada releasing 10-year income projections for agriculture. I realize a bunch of assumptions and disclaimers go into these forecasts, but c'mon, really? Apart from annoying farmers and allowing bureaucrats to fill in blanks in their budgets, these forecasts are essentially worthless. First of all, no one can accurately predict the future (The Black Swan is recommended reading) of macroeconomic events, although some might guess right occasionally. Secondly, most agricultural markets are affected by this little thing called "weather" which is also highly unpredictable despite our best attempts. Finally, the forecasts ignore the basic rule that agricultural markets follow cycles -- high prices encourage higher production which causes low prices followed by lower production and higher prices, over and over again ad infinitum. So predicting an extended period of high prices simply ignores Economics 101. At best, market projections have about a six-month shelf life and even that's stretching it. Those who admit we can't predict the future tend to make the best risk managers.
 
Too Much Hype?
If you look behind all the hype about shrinking food supplies and commodity inflation, you'll probably noticed that it's mostly coming from a group of people with a very vested interest in making the markets go higher. That's right, news stories (and we use that description loosely) with headlines like "Get ready to be swamped by food inflation", are based on the sales pitches of commodity fund managers whose only interest is driving prices higher. In one sense, these are self-fulfilling prophecies; if you scream "food shortage" loud enough, someone will buy what you're selling. They conveniently forget that markets are cyclical -- high prices will encourage production and discourage consumption. That's Economics 101. We're not saying that commodities are plentiful right now. It's just a caution that when you see reports proclaiming new eras or new paradigms, consider the source.
 
Signs of Life

While traveling to various meetings across the prairies, I have been pleasantly surprised by the number of younger farmers in the crowds. After years of seeing mostly grey heads at farmer meetings, the share of twenty and thirty-somethings at every location was large enough to be striking. This is a great sign of the optimism in the industry and will help dispel some of the traditional doom and gloom that the media tends to focus on.

 
Marketing Support for Special Crops

The 2010 Canadian Special Crops Marketing Manual will help buyers and sellers answer questions such as:

  • How do current prices rank against historical values?
  • When is usually the best time of the year to market crops?
  • How often are prices at various levels?
  • What are the relationships between various crops?
  • How are prices in international markets behaving?
  • What factors are influencing the Canadian marketplace?

Click here to see a description of the Canadian Special Crops Manual. The Marketing Manual will be shipped in late 2010, but a discount is available for early orders.

 
The New Paradigm

I came across an article the other day that proclaimed "Higher Crop Prices Permanent, Says Top Economist". I'll give him the benefit of the doubt that he didn't choose the actual wording of the headline, but any economist who suggests prices will stay high forever must have flunked Economics 101. It seems every time we have a monster rally, someone will always claim that it's the new paradigm. It's the flipside of when prices are in the dumpster and the pessimists say that things will never get better. The truism that the best cure for high prices is high prices still holds true (and always will).

 
Curious StatsCan Numbers
When we look at the Stats Canada acreage and production estimates, we have to wonder what happened to all those flooded acres. Earlier this summer, some very credible people were "guessing" that anywhere from 8.5 to 12.5 million acres. Oddly, the survey shows that "only" 5.5-5.8 million acres were unseeded. What gives? We know that reports often get exaggerated, especially when things are looking bad. Once again, it looks like we got sucked in by the doomsday predictions.
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Wow, what a rally!
To quote Manuel, the bellhop from Barcelona in Fawlty Towers, “She’s a-crazy Mr. Fawlty!” That sentiment kind of sums up the recent action in ag markets. At first, the oilseeds were leading other markets higher, but now it’s wheat that’s screaming higher and pulling up other markets. I’ve heard a number of traders tell me that current prices aren’t justified based on the fundamentals. They tell me that wheat supplies are plentiful and there is no real shortage. But frankly, that doesn’t really matter.
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An "oops" for durum

It looks like the CWB may have miscalculated a little when it restricted durum acceptance last year to 40% on Series A and 20% on Series B contracts. When the CWB severely limited durum delivery opportunities and sent out market outlooks that encouraged farmers to look for other outlets for their durum, the response was predictable.

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Special Crops are Big Biz
Special crops aren’t really a specialty anymore. Canadian farmers are very good at diversifying, although some might say, they’ve been forced to. In any case, pulse crops now fit within the majors. This year, peas and lentils are vying with oats and durum for 4th place in the acreage derby. Meanwhile, acreage of crops like spring wheat and barley seem to be in a long-term decline (is this the year canola acres will overtake spring wheat?).
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