In 2011, winter skipped the Waterloo Region. In 2012, a summer drought proved devastating to many local crop farmers. And 2013? From a protracted winter to a moist summer to a December ice storm that topped the year with a cherry, the weather has certainly kept the agriculture sector on its toes.Heading into 2014, what did an unpredictable year mean for our local farmers? And what can they expect in the next 12 months?
“We’re seeing a lot of this more extreme weather that everybody’s going to have to cope with,” said Neil Currie, general manager of the Ontario Federation of Agriculture.
“We’re really seeing some extreme weather happening on a fairly localized basis. In some areas, they might have had five-inch rain events, and in other areas nearby they were suffering from too little moisture.”
Agriculture is a complicated industry, and more than most, it’s volatile. For further proof, consider the list of five agriculture issues to watch in 2014 released this week by Regina-based Farm Credit Canada (FCC), which addresses some of the key trends for farmers to anticipate.
At the top of the list was value of farmland, which has generally increased rapidly in recent years, but could be heading to a plateau as grain prices drop. Also on the list are international trade deals (including the tentative free trade agreement between Canada and the European Union, and the Trans-Pacific Partnership); U.S. political infighting (with the ever-present risk of a debt default); increasing viability of Canadian beef (cattle numbers declined as a result of drought in the U.S.); and a projected decline in equipment sales (owing to a slight decrease in crop prices).
Closer to home, the Ontario Federation of Agriculture has noted a decline in the market for grains. “They came off a couple of really good years in spite of the weather … but that ended this year,” said Currie.
He continued, “Meanwhile, because of the high grain prices, the livestock commodities shrunk in terms of herd size, so now they’re starting to enjoy some profit with lower feed costs and less inventory.”
Currie concludes that markets are becoming more cyclical than we’ve seen in the last 20 years.
“In grain, we really haven’t seen those price cycles. 15 years ago it was a steady decline in margins, and it was pretty depressed until about 2007-2008. Now we’re starting to see some price cycling again; we’ll have to see what happens globally with the South American and Russian crops.”
Absent from the FCC list, Currie notes that the biggest recent change in the agriculture sector is the increased importance of marketing – arguably as central to the profession as farming. This will only become more relevant through 2014, as the weather and the markets grow more volatile.
“It’s not just plant-and-grow, harvest-and-sell anymore – they have to put a lot more work into their marketing strategy,” said Currie. “They keep their eye on the markets, and they pay attention to the trends like the South American crop reports on a daily basis.”
He continued, “You can’t sell 100 per cent of your crops in advance, or you’re in serious trouble if you have a drought. … A lot of guys are picking their pricing, watching the markets, they might sell half their crop, and look at different types of crops, like alternative grains. They’re just becoming smarter businessmen.”
When asked if he had advice for the region’s agriculture sector, Currie boils it down to a few keys points:
“The weather is always going to be a factor. They’re going to have to put in risk-management strategies in terms of the financial tools available from the government programs. They might want to look at risk management for irrigation systems if drought becomes a factor.”
Above all, Currie advises those in the industry to keep an eye on the trade deals that could have a dramatic impact on markets across the world. “Over the course of this coming year, we’re going to have to look carefully at the trade agreements coming up. There are some advantages, and there are some dangerous opportunities there.
“You’ll have to be looking at those international trends, because even if you’re not exporting, it clearly affects you anyway.”