Hursh Consulting & Communications Inc.

Maybe it’s the sky high price of canola. Maybe it’s the tightening stocks to use ratio on many commodities. Maybe it’s all the uncertainty in a pandemic-stricken world. Whatever the reason or reasons, new crop production contracts are more widely available than usual for this time of year and some are worthy of consideration.

Saskatoon’s Crop Production Show in early January has often been the time frame for companies launching new crop offerings. The 2021 version of the show is a COVID casualty so that interaction between farmers and buyers has been lost.

As we head into Christmas, new crop contracts have been available for quite some time on flax, all types of mustard and feed barley. Now, postings are showing up for red lentils, yellow peas and Canary seed.

In Saskatchewan, depending upon your location, new crop feed barley can be locked in for as high as $4.50 a bushel picked up at the farm. These are deferred delivery contracts meaning you still have an obligation to deliver even if you have a crop failure.

On new crop flax, contracts with an act of God clause have been readily available at around $14 a bushel FOB farm. With brown flax currently selling at $18 or more a bushel, the new crop price may seem like a letdown, but it’s still an attractive offering relative to historical values.

New crop contract offerings are the norm for mustard. Companies and end users like to have some of their supply assured. When farmers see canola in the $14 a bushel range, mustard buyers know they need to up their game to assure a supply. Mustard acreage, even in southern Saskatchewan and Alberta is tiny compared to canola.

It appears some buyers are willing to pay just over 20 cents a pound for new crop red lentils. That seems unlikely to elicit a lot of interest since it’s well below what the market has been paying this fall.

Yellow peas are a similar story. With current prices increasing to well over $9 a bushel, a contract price that’s $2 less may not have much appeal.

Of course, contract prices can and do change. Mustard prices have edged upwards since the first contract offerings came out. Perhaps there’s more upside potential on red lentils and peas, but that isn’t assured.

It’s always a balancing act between market realities and farmer expectations. The current price of Canary seed at 31 to 32 cents a pound is the highest in many years. New crop contracts are apparently being offered in the 24 to 25 cent a pound range. A couple years ago, that would have been exciting, but expectations are now higher.

Some farmers rarely if ever price any crop in advance, believing better prices will almost always be available after harvest.

Production contracts are certainly a double-edged sword. I’ve signed some that I came to regret, but others have been good money makers. If the price is profitable and near the top of the historical range, it’s comforting to have a bit of price certainty.

Most act of God contracts are for only 10 bushels an acre; it’s not as if you’ve priced everything you hope to produce. But it is a starting point that provides some protection in case the market goes sour.

I follow what various market analysts are predicting, but you can’t take that to the bank the way you can a new crop production contract.

The Liberal government’s new climate plan boasts that most Canadian will receive more in rebates than they pay in additional carbon tax, but nothing in the plan explains how Canada’s export-reliant industries are supposed to remain competitive.

Farm fuel is exempt from the carbon tax and one assumes that will continue to be the case as the tax rises from the current $50 to $170 a tonne by 2030. The 79 page document released by the government is actually silent on the matter.

However, the tax is very costly for farmers in numerous other ways. The carbon tax on natural gas and propane for grain drying has received a lot of attention. Less obvious are the rising costs for manufacturing and transporting fertilizer and the cost of moving grain to export. In fact, almost all other input costs feel the impact.

The purpose of an ever more onerous carbon tax is to direct Canadians to lower carbon alternatives. For most farmers, the ability to pivot is minimal and for farmers serving export markets the opportunity to recoup their extra costs from the marketplace is practically non-existent.

Most other export-oriented industries face the same dilemma. Liberal chest thumping about a new green economy with well-paid jobs is pie-in-the-sky wishful thinking as compared to the certainty that existing industries will be severely disadvantaged.

The economic theory is that putting an increasing price tag on fossil fuels will encourage greener alternatives. Interestingly, the government obviously doesn’t believe that will be adequate on its own since their plan also calls for pumping billions of dollars in taxpayer money into renewable energy projects, energy-efficient building retrofits and subsidies for buying zero-emission vehicles.

The plan also recycles the promise to plant two billion trees over 10 years at a cost of $3.16 billion. If you’re wondering why planting trees sequesters carbon, but agriculture is not given credit for doing the same, it’s really a matter of meeting the Paris Climate Accord which calls for carbon decreases from the base level.

Trees already growing and current farming practices are “business as usual” and don’t count for emission reductions.

Watch for action on fertilizer use. The plan notes that direct emissions associated with synthetic nitrogen fertilizer application have increased approximately 60 per cent since 2005. A national emission reduction target for fertilizers is set at 30 per cent below 2020 levels.

In fairness, the plan does set aside money to “help farmers adopt commercially available clean technology.” Watch for the next Canadian Agricultural Partnership between the feds and provinces to have an emphasis on measures to “boost climate-smart agriculture.”

Shortly after the carbon tax bombshell, the Liberals announced their Clean Fuel Standard whereby the lifetime carbon footprint of liquid fuels will need to be reduced over time. This will jack up the price of fuels over and above the carbon tax and from this increase farmers will not be exempt.

Benefits to biodiesel and ethanol production from the Clean Fuel Standard should trickle down to the farm gate, but that all depends on the details.

The Liberals misled Canadians last year when they said the price on carbon would not go up. For that, they deserve to suffer re-election ramifications. However, to capitalize on the deception, the Conservatives will need a viable carbon reduction plan of their own. Simply criticizing the Liberal plan won’t be enough.