Lower prices and higher costs a recipe for trouble

The University of Manitoba’s Gary Martens says farmers have options, but they don’t like hearing them

After several years of good yields and good prices the party is over for western Canadian farmers, unless they change tack, according to University of Manitoba agronomy instructor Gary Martens.

“I’m predicting 2014 will be a financial disaster — total disaster — because the prices (for crops) are crashing right now,” he said in an interview Jan. 9.

But the problem isn’t just lower prices, it’s higher production costs, some of which farmers caused themselves, Martens said.

Strong crop prices and bumper crops since 2008 have boosted farm profits, prompting farmers to bid up land prices and rents. In the meantime, crop prices have plunged as supplies exceed demand.

Until now, excess corn and wheat stocks in the U.S. were sopped up by the thirsty ethanol market. But American ethanol subsidies have peaked, Martens said.

“And based on that I am predicting minus (profit) numbers for crops across Manitoba, Saskatchewan and Alberta if we farm the same way we have,” he said. “If we farm the Betty Crocker way with lots of inputs, expensive seed, expensive rent and lots of nitrogen fertilizer and lots of fungicides, that’s not going to fly this year.”

There are things farmers can do, but it means farming differently — a message, Martens said he would deliver to the CropSphere conference in Saskatoon.

“It’s stuff they don’t want to hear — more diversity in their agriculture, integrating crops and livestock, grow some of their own nitrogen,” he said. “These are not new ideas but they’re ideas that will save you money. And we haven’t been doing them because we didn’t need to. We may have to. Farmers have a bit of a bank account. They can afford one loss, but they can’t farm this way forever.”

Many market analysts have said world grain prices would continue to fluctuate but in a new higher range. Some called it “a new paradigm.

“I used to believe it, but not anymore,” Martens said.

About the author

Reporter

Allan Dawson

Allan Dawson is a reporter with the Manitoba Co-operator based near Miami, Man. Covering agriculture since 1980, Dawson has spent most of his career with the Co-operator except for several years with Farmers’ Independent Weekly and before that a Morden-Winkler area radio station.

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