Alberta Farming in 2012: This ain't no "Little House on the Prairie"

A farm client came into an ATB branch back in the fall, and was asked by the branch manager how things were looking. “Not too bad this year,” replied the farmer. And THAT response—for an Alberta farmer—is about the best review you’re ever going to hear! In the language of the rest of us, the “not-too-bad” really means things are unbelievably fantastic.

Farming is a rough industry, not for the weak of heart or faint of spirit. A thousand things can go wrong, from pests to drought, and from frost to low prices. However, a lot of the essential ingredients for making farming work were present in 2011, and farmers in this province posted record cash receipts. Prices were near-record highs for wheat and canola (the two major cash crops), as were livestock prices. Growing conditions started out rough in the spring with too little moisture and not enough heat, but by the time August and September kicked in, a combination of rain and heat resulted in what some described as “the perfect harvest.”

But as in hockey, what happened last season doesn’t matter. What’s in store for Alberta’s agriculture sector in 2012? And what factors are weighing on the minds of our farmers?

At least one report is suggesting the good times are likely to stick around for a while. Agriculture Canada’s Medium Term Oultook, released this week, paints a rosy picture for the nation’s farm sector for the next decade. “World prices for many agricultural commodities reached record highs in 2011.... the higher price plateau is expected to stay, as a result of: declining yield growth in world cereals; strong global demand; high energy prices; a relatively weak U.S. dollar; and growing demand for cereals and oilseeds from relatively new sources including biofuels and aquaculture.”

The report is also rather optimistic about the medium-term outlook for red meat and livestock prices.

Weather conditions, of course, pose the usual set of unknowns. At the moment, snow pack throughout the province is unusually light. What is normally a foot or more of snow across the fields and pastures of the province is more like a light skiff.

Southern Alberta is even drier. That could be a problem at seeding time. Fortunately, the statistically wettest month of all—March—is still ahead. Farmers will be looking for some nice, wet, heavy snow and rain between now and May when seeding gets underway.

There are other worries to wrinkle the brows of farmers. At a small gathering of farmers in Grande Prairie this week, I was told that the #1 challenge facing agriculture producers is input costs—especially fuel and fertilizer. Those negative factors are identified by the same Agriculture Canada report: "Many of the factors that will influence farm income in 2011 and 2012 will continue to be felt over the next 10 years," it says. "These include ... a rising price of petroleum, slow-moderate Canadian population growth, and a Canadian dollar near par with the U.S. dollar."

Rising input costs crimp the profit margins of farmers, and regardless of wheat or cattle prices, if input costs are rising by the same amount, the overall net farm income won’t rise. The graph below shows that farm input costs have been rising over the past several quarters. And if the Agricultural Canada forecasts are accurate, there is unlikely to be much relief at the gas pump in the months and years ahead.

Considering the death knells that have rung out over the past thirty years, Alberta’s farming sector is in good shape. True, the typical “family farm” has largely gone by the wayside, and most farm families now have to rely on at least one (and often two) adult members of the household working off the farm in adjacent towns and cities. The image of “Little House on the Prairie” has been replaced by high-tech combines driven (person-less!) by GPS. Cell phones and internet applications are as pervasive amongst farmers as any downtown Calgary suit-and-tie types. It’s big business.

That may seem rather sad to many Albertans who mourn the loss of farming as a simple and attractive lifestyle. But farming has kept up with the times—and for the sake of economic diversity in the province, it’s a good thing it has!