Near record crop prices are fuelling the possibility of a profitable growing season as farmers in the Taber and Vauxhall area prepare for spring seeding.
“With canola fluctuating around $14.50 per bushel and barley averaging about $5.30 in March, farmers are hoping the weather cooperates better this year — so they can cash in on these high prices with bumper crops," said Lorelei Hulston, provincial insurance manager for Agriculture Financial Services Corporation (AFSC), which administers crop insurance in Alberta on behalf of the provincial and federal governments.
“Producers would like to avoid the disappointment of last year,” said Hulston. “Prices were high and the growing season looked promising. Then came a series of unexpected weather and disease issues that left many with below average yields and crop insurance claims.”
Close to $532 million was paid out through crop insurance across Alberta last year, including the M.D. of Taber. Claims were triggered by several factors including widespread hail, lack of moisture, and heat stress caused by hot July weather.
“Many canola fields were hit by an unexpected disease called aster yellows. Diseases like sclerotinia and insects like army cutworms also became a problem, and many southern Alberta farmers watched their crops blow away when a severe windstorm swept through,” said Hulston.
‘Mother Nature is in Control’
“It still ended up being a decent year financially for many — thanks to high grain prices — but it was far from what they’d hoped for,” said Hulston. “With crop prices even higher this spring, there’s a lot of value farmers will want to protect this year,” she added, reminding producers of the upcoming April 30 deadline to apply for crop insurance in Alberta.
Whether prices remain at near record highs — allowing farmers to cash in once they harvest crops this fall — depends mainly on the weather, said Charlie Pearson, a provincial crop market analyst with Alberta Agriculture and Rural Development. “Mother Nature is in control.”
Grain Prices Could Drop 10 to 20 per cent
Pearson explained today’s high prices were created by last year’s drought in the U.S., Russia, Ukraine, and South America — leaving tight corn and oilseed supplies worldwide. “If the world gets good weather and decent crops, we’ll have larger grain supplies this fall — causing prices to drop 10 to 20 per cent depending on how much grain is harvested,” he predicts. “But if drought conditions continue in these major grain growing regions of the world and supplies tighten further, prices could climb higher.”
While he expects grain prices will soften this fall, Pearson said strong demand for meat and cooking oil in China and the U.S. ethanol policy should keep prices “historically high and profitable for most producers.”
SPE Protects High Prices
“However, we’ll probably see wild price swings. Historically there’s more market volatility when prices are high,” he explained. “It’s a good year for farmers to consider locking in some of the profitable prices being forecast with a tool like the Spring Price Endorsement (SPE).” The SPE is an optional crop insurance rider that compensates farmers if prices drop 10 to 50 per cent between spring and fall on harvested crops.
If grain prices climb higher —by 10 to 50 per cent — a built-in crop insurance feature called the Variable Price Benefit (VPB) insures farmers at the higher price if their crop fails, added Hulston. The VPB paid out nearly $108 million in 2012 — a record amount — when prices jumped by up to 50 per cent on some crops between spring and fall.
Hulston expects interest in the SPE will rise this year as producers look for ways to protect against falling prices, but she said the production guarantee crop insurance provides will once again be the key reason farmers insure as much as 14 million acres of Alberta cropland this spring.
‘Too Much Risk’
Mitch Honess, who grows more than 11,000 acres of canola, peas, durum, and cereals with his family northwest of Vauxhall near Lomond, is hoping crop prices remain high this year but he’s not counting on it. “So many factors can change prices. We’ll be lucky if they stay the same,” said Honess, noting they may consider adding the SPE on their crop insurance this spring along with the Hail Endorsement rider. “We wouldn’t farm without crop insurance. There’s too much risk,” said Honess, explaining it costs them $250/acre to seed canola. “If we have a wreck, at least we know some of our expenses are covered by insurance.” Last year looked like they were going to get one of their biggest canola crops ever. “Then we lost up to 10 bushels per acre from heat blasting in July. It was disappointing but we still managed to harvest average yields.” He said hail and lack of moisture are their two biggest concerns this year. “We could really use more moisture this spring.”
Hulston said most farmers enrolled in crop insurance take the highest coverage levels — insuring 70 to 80 per cent of their average crop yield — because it’s impossible to predict what might impact their crops each year. The majority also take the Hail Endorsement rider, she said, noting about 60 per cent of crop insurance premiums are subsidized by government. Producers with questions about crop insurance can contact their local AFSC District Office or call 1-877-899-AFSC (2372) before April 30. deadline.