Canada Markets

Musings from the DTN Ag Summit

By Cliff Jamieson , Canadian Grains Analyst

The 6th annual DTN/The Progressive Farmer's Ag Summit is named Agriculture 2.0 -- Business Intelligence for Tomorrow's Farms. This year's event in Chicago is the 6th annual event held by DTN. While the first year's attendance was roughly 150 people, the past two years have seen attendance in the 650-670 range. The wide-array of attendees makes this a most interesting conference. A group of Canadians from Alberta (myself not included) through Quebec join the mass of US producers from across the entire grain growing area of the country. The ability to converse with people like DTN's South American correspondent Alastair Stewart and hear first hand of the challenges and the threat of South American agriculture was also most interesting.

Despite the U.S. Midwest drought in 2012, suggested to be the worst in more than 50 years, many reasons exist to give reason to remain optimistic about the future of the industry.

The U.S. crop insurance program is said to have paid out some $20 billion this year. More than once I've heard producers mention that they did better financially without a crop this year than they achieved in 2011. One Iowa producer suggested he was fortunate to receive timely rains that allowed his corn crop to hang on to yield 200 bushels per acre, while others who were affected by drought and had much lower yields may fare even better than he.

While one cannot ignore the threat of the current expanding drought area, U.S. producers are said to have laid down inputs this fall as if this were a normal year.

The optimism within the industry was shared by Carl Casale, president and CEO of CHS. CHS is an agriculture cooperative with a global reach, formed as a result of a previous merger between Cenex and Harvest States. In fact, Casale's presentation focused around his five reasons for optimism, delivered in a way that would leave little doubt as to which direction the future of this industry is going.

Dr. William Wilson, a professor at North Dakota State University, elaborated on the opportunities and challenges facing the industry in his presentation titled Game Changers for Grain Exports, which is centered on what he calls the "9 billion people problem".

Wilson sees growth in export demand to exceed growth in supply for some time to come, and threw out a challenge, if you don't believe him, "do the math".

Included in the list of game changers was a potential 70% increase in export capacity in the Pacific North-West, an area that now ships 25% of U.S. grain exports. Another is the potential widening of the Panama Canal, which could one day not only increase transits but allow larger ships through.

On the list of challenges, however, lies the increased market risk faced by producers. Wilson compared the good old days when corn prices would move as much as a nickel during the course of a year to the current environment where prices can move 50 cents/bu. before breakfast. Management skills will undoubtedly be challenged.

Land prices and investor activity in the land market are big stories down here as they are everywhere. The investor-buying of farm land in the U.S. was said to have taken place during the last 80 years, but it has largely been viewed as a boring investment until recent years. Investor groups and pension funds of all kinds are now active in the market, while it was suggested some $10 billion is poised to yet enter the market.

Land prices shown for a number of states indicated low prices in the $5,000/acre range, which was suggested to be land which would be largely wooded and used more for recreation purposes.

A significant threat exists on the U.S. farm with respect to potential changes to estate taxes which I believe are to be determined within the next U.S. Farm Bill. The potential cost to a single farm could vary by millions of dollars, depending on how the government chooses to deal with this issue. There has been a spike in farm sales in order to mitigate this risk.

Two brothers shared a humorous and heart-warming story of operating a farm in Missouri and Argentina for more than 10 years. Operating in Argentina was compared to herding cats, while the current business climate in Argentina is creating more challenge for the family operation. Some Argentina farmers are now farming in the U.S.

I've merely skimmed the surface, but these are a few of the things that jumped out at me. Wednesday will prove to be most interesting, with the Chief Operating Officer of the CME Group discussing risk management, along with DTN's Bryce Anderson presenting on weather and Darin Newsom presenting on the markets.

Cliff Jamieson can be reached at


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