Agriculture in the Heartland

2016 AGRICULTURAL OUTLOOK Conference Board of Canada says agricultural production is forecast to recover well above $3.5 billion in 2016 and 2017. According to Farm Credit Corporation forecasts that the low interest rates and the weak dollar will continue to contribute to favourable economic conditions for farming operations, agri-businesses and food processors in 2016. The price of commodities grown in Canada relies on what happens in other parts of the world, such as weather systems that disrupt or increase supplies of agricultural commodities. Demand is putting greater focus on Canada as a major supplier.

Over 60 million acres of farmland in Saskatchewan represent 40 per cent of total farmlands in Canada. Agriculture is big business in Saskatchewan and accounts for over 1/3 of Saskatchewan’s total exports.

SASKATCHEWAN GROWS (APPROXIMATELY):

  • 99% of Canada’s chickpeas
  • 95% of Canada’s lentils (61% of the world supply)
  • 86% of Canada’s durum (34% of the world supply)
  • 74% of Canada’s flax seed (55% of the world supply)
  • 72% of Canada’s mustard seed (41% of the world supply)
  • 65% of Canada’s dry peas (57% of the world supply)
  • 53% of Canada’s canola (2015)(34% of the world supply)

Saskatchewan’s 2015 total crop production will be close to average, at around 29 million tones. This compares to 30 million tonnes in 2014 and the record breaking 38.4 million tonnes recorded in 2013. In 2015 Saskatchewan farmers reported wheat seeding of 13 million acres making up 53.9% of the 24 million acres of wheat grown in all of Canada. In 2015, wheat production, including durum, declined by 7.9 per cent (to 13 million tonnes). Likewise 10.5 million acres of canola was sewn representing 53% of the 19.8 million acres grown nationally. In 2015, canola production increased by 10.4 per cent (to 8.8 million tonnes); Manitoba grew 2.9 million tonnes of canola in 2015, while Alberta grew 5.5 million tonnes).

Moose Jaw’s agricultural base is an engine of growth and sustained economic activity. Local growers are producing both good quality and quantity crops given the 110 frost-free growing days and annual rainfall of 12 inches per year. This area is known for its high quality milling wheat, durum, canola and pulse crops.

Moose Jaw region produces approximately 1.76 million tonnes of durum (39.9% of provincial production); 536,000 tonnes of lentils (36.2% of provincial production); 230,000 tonnes of flaxseed (32.5% of provincial production); and 45,000 tonnes of chickpeas (79.2% of the provincial production). The Moose Jaw area is a dominant player in the world trade of pulse crops, such as peas, lentils and beans. Countries like India consume about 18 million metric tonnes per year of pulses yet produce only about 14 million tonnes.

Canada is the world’s top canola producer, one of the world’s biggest wheat growers and the world’s biggest exporter of lentils to India (where vegetarians eat legumes at almost every meal). Production of canola skyrocketed over the past 50 years, and at one point its value eclipsed that of grain grown in the province. Oilseed-based products include food products like margarine, shortenings, cooking oil, salad dressing, mayonnaise and dessert toppings.

Nationally oat production increased 15.1 per cent in 2015 to 3.4 million tonnes averaging 85.3 bushels per acre. Canada is the largest exporter of oats with 90 per cent of oats going to the U.S. The Prairie Oat Growers Association says the future of oats is bright and will provide new opportunities.

Saskatchewan is the world’s largest exporter of canary seed with about 300,000 acres seeded in 2015. According to Statistics Canada, Saskatchewan farmers grew almost the country’s entire canary seed crop, producing 148,600 tonnes, up from 124,900 tonnes a year earlier. The seed’s price is about 25 cents a pound, lower than returns for other crops such as lentils and mustard. Health Canada and U.S. Food and Drug Administration have approved canary seed for use in human food as a nutritious, high-protein, gluten-free grain. But it will take a while for food manufacturers to develop their ingredients lists and figure out uses but in time a significant amount will go into the food industry.

FARMLAND CREATING WEALTH Farmers are well positioned after several years of near record incomes. Strong farm receipts over the past five years have lead to increased investment in Canadian Agriculture and higher farmland values. The good news is Canada’s net farm income has kept paced with farm debt and reflects a strong and vibrant agricultural industry.

Demand continued to be strong in areas where large producers were looking to expand as the number of younger farmers continued to grow. FCC’s report shows that farmland values have been rising in the province since 2002. According to Statistics Canada the average wealth of a farmer in Saskatchewan is $1.737 million. Farm wealth jumped by 57 per cent in five years ending 2013 reflecting higher land prices.

Ag-Value Added

WORLD TRADE AGREEMENTS - AGRICULTURAL PRODUCTS Canada has signed on to the ambitious Trans-Pacific Partnership, a massive 12 country trade deal that will open new markets. The agreement will increase Canadian exports in a wide variety of products and services, including beef, pork, canola, wines, spirits and seafood. The deal will substantially lower or eliminate tariffs on Canadian beef, pork and other agricultural products going to the lucrative Japanese market. As well the anticipated Canada-Europe Comprehensive Economic Trade Agreement calls for duty-free access to the European Union for 50,000 tonnes of beef products and 81,000 tonnes of pork.

In March 2014 the federal government announced a free-trade deal between Canada and South Korea, which is good for Saskatchewan thanks to the elimination of heavy duties against agricultural products. Duties on all crops will be lifted over the next five years, while the duties on beef and pork will take 12 to 15 years to be completely eliminated. Premier Brad Wall expects exports to South Korea to increase from its current level of $50 million, to $225 million.

CANADIAN MANUFACTURING 10 YEAR INCENTIVE Provides manufacturers with a ten-year tax incentive to boost productivity-enhancing investment by providing an accelerated capital cost allowance (CCA) at a rate of 50 per cent on a declining-balance basis for machinery and equipment used in manufacturing and processing. This is a substantially faster write-off than the standard 30 per cent rate, allowing businesses to defer taxes and recover the cost of their capital investments more rapidly. The measure will apply to capital assets acquired after 2015 and before 2026. New investments will help position them to meet both present and future economic challenges, while creating jobs and growth. The ten-year term will provide businesses with more planning certainty for larger, long-term projects.

SASK MANUFACTURING AND PROCESSING TAX INCENTIVE The Province has introduced two new non-refundable tax credits to eligible manufacturing and processing corporations. To be eligible the company must:

  1. Expand the number of M&P full-time employees above the number employed in 2014. The incentive offers tax credits of $3,000 in respect to each incremental full-time employee for each of the 2015 through 2019 taxation years, and/or
  2. Expand the number of full-time employees who primarily conduct activities typically considered “head office” functions, such as strategic planning, marketing, legal, finance, IT, HR, procurement, and communications. This portion of the incentive offers $10,000 in respect to each incremental full-time “head office” employee for each of the 2015 through 2019 taxation years. To qualify the company must have a minimum of 10 employees with a payroll over $1 million and demonstrate a 20 per cent increase over the 2014 base level of employment.

PULSES Plant Protein Demand is growing for the high-protein legumes known as pulses for which Moose Jaw has become known. Plant protein is now added to breakfast cereals and other snacks as health conscious consumers seek products with no gluten or genetically modified ingredients. Pulses can be processed into fibre, flour starch and protein concentrates. Many of the major food companies, such as General Mills Inc., Frito-Lay Inc., Kraft Foods Group Inc., and Unilever Plc., have launched new products that contain pulses. The demand for protein-packed products using pulses is being added to everything from Triscuits to Cheerios. This trend will continue to increase processing and export of locally grown dried peas, lentils and beans.

Plant-based proteins are more than just a fringe trend, says one Vancouver based analyst with demand being driven by millennials (people born between 1980 and 2000) as 50 per cent spend more for products that are GMO-free, says Bloomberg Intelligence. General Mills rebranding of Cheerios as non-genetically modified sent a message that this was a ‘more natural and healthy product’.

2016 International Year of the Pulses (as proclaimed by United Nations) Demand is growing for high-protein pulses, a major type of crop grown around the world, including lentils, peas, chickpeas, and some types of beans. These are protein-rich crops that are especially popular in India and the Middle East, where eating meat is either unaffordable or religiously forbidden where lentils are the protein of choice.

Thirty-five years ago Saskatchewan farmers knew little about pulses let alone how to grow them. But the advantages of growing lentils were hard to ignore and this new thinking started an agricultural revolution in Saskatchewan. In 1981, Saskatchewan farmers grew about 85,000 acres of lentils. Within a decade this number has grown to 450,000 acres and today it is 3.8 million acres in pulses. Pulses’ unique properties make them a valuable replacement for summer fallow, traditionally a vital part of prairie crop rotation. By seeding lentils into wheat stubble, producers replenish diminished nutrients fixing nitrogen back into the soil. As well the different class of crop helps break disease cycles. In the future we can expect to hear a lot more about peas, chickpeas and fava beans.

Consumers seek products with no gluten or genetically modified ingredients. Stockpiles in Canada, the world’s largest exporter of legumes, are down by half from a year earlier. At the same time shipments to India, our top buyer, are at an all time high after a drought reduced their domestic output. Vegetarians across India are getting sticker shock for legumes that they eat at almost every meal.

Countries like India consume about 18 million metric tonnes of pulses per year yet only produce only about 14 million tonnes annually. Saskatchewan is a major exporter to India.

El Niño is expected to reduce chickpea production which is expected to create a strong demand for Canadian pulse crops in 2016.