Business & Policy
All Things Considered: September 2010
Heavy Price for Weather
By Jim Knisley
One of the guilty little pleasures of living in Southwest Saskatchewan –
if you happen to play golf – is taking a shot that goes into the rough
and setting the ball on one of those little round cacti.
One of the guilty little pleasures of living in Southwest Saskatchewan – if you happen to play golf – is taking a shot that goes into the rough and setting the ball on one of those little round cacti.
While you haven’t stayed strictly within the rules, it is fun and you are guaranteed a perfect lie.
Early this year it looked like it was going to be a good year for cacti, if not for much else. It was dry and drought forecasters were busy drafting their maps and preparing to offer comparisons to the dirty thirties and 1988. While I wasn’t around for the ‘30s I was there for 1988. I recall taking an Ontario-based journalist on a mini tour of a few wheat fields. We stopped beside one field just north of Regina. It was bare except for a single plant. It looked ornamental. It was mature, the head had formed and it stood – in solitary splendor – six inches tall.
In late winter it looked like 2010 could be a repeat of 1988. Instead it has turned out the complete opposite. Instead of drought, rains of biblical proportions arrived. Areas received a season’s worth of precipitation in mere days. And it kept coming.
Maple Creek led the national news for perhaps the first time in the history of that pleasant town that sits in the shadow of the Cypress Hills. News teams videoed the flood waters as they inundated the community. Then they moved up the road to the Trans Canada Highway, which had been closed by a washout.
But it wasn’t just the southwest that was flooded. The heavy rains and flooding affected much of the province.
Many, many fields were too wet to seed. Some of the fields that were seeded were lost to the water. In others, weeds and disease problems have erupted and there is nothing the farmers can do about it because it is too wet to spray.
There is one thing 2010 has in common with 1988 – Canadian crop conditions are making worldwide headlines and impacting international grain markets. Wheat prices have moved up – they tend to do that when it looks like a major producer may come in with two-thirds of a crop. Problems in Europe and Russia have added to the momentum.
But this isn’t 2008 revisited when reports of tightening supplies and intense dabbling by investors in the grain market sent prices skyward. This year, prices seem to reflect supply, demand and quality issues and aren’t being driven by a frenzy of in and out speculation.
Meanwhile south of the border, ethanol production is picking up as the American economy slowly improves. This has reunited U.S. poultry, beef and hog groups. They are again lobbying Congress to get rid of corn ethanol subsidies. The livestock groups are arguing that the ethanol industry is now mature and should have to compete on a level playing field with other users of corn.
One can only wish them luck because they will need it. The U.S. ethanol lobby is, incredibly powerful and has to date easily withstood the slings and arrows of outraged livestock producers.
The U.S. corn crop looks to be smaller than last year’s, but is set to be huge. The same can be said for Ontario where expectations are for higher yields from a smaller acreage.
A quick look at the corn fields in deepest, hottest, most humid Ontario confirms this. The corn is thriving in the heat and thunderstorms. Already it is as high as the proverbial elephant’s eye.
Meanwhile, soybeans were the crop of choice this year and are also doing well. Barring some type of weather or disease problem soybean supply should not be a problem.
In the Prairie provinces, the federal and provincial government’s have stepped up to the plate with a special $450-million program to help flooded out farmers. The payments are expected to be about $30 an acre with about 80 per cent of the cash going into Saskatchewan.
But even that, combined with other programs, won’t offset the costs of the flooding. Agriculture represents about 10 per cent of Saskatchewan’s GDP and with grain production expected to be down by about a third the whole economy will take a hit.
A recent analysis by TD Bank estimates that the growth in the provincial GDP will be 2.1 per cent or 1.1-to-2.0 percentage points less than forecasts produced before the rains came. The bank estimates the gross revenue losses to farmers at $1.6 billion.
That is a heavy price for weird weather. From predictions of drought to the reality of record rain, all in a couple of months, the weather has become, in a word, strange. ■