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Alberta Farmers Hope for Profitable Growing Season Amid High Crop Prices

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Alberta Farmers Hope for Profitable Growing Season Amid High Crop Prices

April 2013

 High crop prices are fuelling the possibility of a profitable growing season as Alberta farmers prepare for spring seeding.

“With canola fluctuating around $14.50 per bushel in March and barley averaging about $5.30, farmers are hoping the weather cooperates better this year – so they can cash in on these high prices with bumper crops,” says 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,” says Hulston. “Prices were high and the growing season looked promising. Then came a series of unexpected weather and disease issues that left many clients with below average yields and crop insurance claims.” 

Close to $532 million was paid out through crop insurance across Alberta last year. Claims were triggered by several factors including widespread hail, lack of moisture, severe wind, 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,” says Hulston.

“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,” says Hulston. “With crop prices even higher this spring, there’s a lot of value farmers will want to protect this year,” she adds, reminding producers of the upcoming April 30 deadline to apply for crop insurance in Alberta.

‘Mother Nature is in Control’

Whether prices remain at current levels – allowing farmers to cash in once they harvest crops this fall – depends mainly on the weather, says Charlie Pearson, a provincial crop market analyst with Alberta Agriculture and Rural Development. “Mother Nature is in control.”

Pearson explains 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.

Grain Prices Could Drop 10 to 20%

“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 says 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 explains. “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, adds 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 says 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.

All-Risk Coverage

Most farmers enrolled in crop insurance take the highest coverage levels – insuring 70 to 80 per cent of their average crop yield – along with the Hail Endorsement rider because it’s impossible to predict what might impact their crops each year, says Hulston, noting about 60 per cent of crop insurance premiums are subsidized by government. “It’s all-risk coverage that insures everything from drought and hail to frost, flooding, insects, wind, disease, and wildlife.”

As producers fill out their crop insurance forms, Hulston reminds them to declare all acres they intend to seed this year – whether they plan to insure them or not – to be eligible for the Unseeded Acreage and Reseeding Benefits if those fields become flooded.

Farmers can also Auto-Elect Straight Hail Insurance coverage at a 2 per cent discount if they choose that option with their crop insurance before April 30. And producers wishing to defer claim payments until the next calendar year are urged to notify AFSC as soon as possible, because once claim cheques are issued, payments can no longer be deferred.

Producers with questions about crop insurance can contact their local AFSC District Office or the AFSC Call Centre at 1-877-899-AFSC (2372) before the April 30 deadline.

Created April 5, 2013 | Category: Farm Business Management

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