CREMONA – A sharp jump in fuel and fertilizer prices has Canada’s agriculture producers engaged in a pricey game of chance.
Prices for diesel and fertilizer have nearly doubled since the war involving the U.S, Iran and Israel, as the stalemate has choked vital oil and gas shipments through the Strait of Hormuz.
That’s impacting commodities down the line, and a shortage of fertilizer could make this upcoming crop year a gamble for farmers.
The families of Bruce Bird and Dave Reid have had farms in Cremona, northwest of Calgary, for more than a century.
Both men threw the dice last fall and pre-purchased both fuel and fertilizer to get them through this growing season, with seeding about two weeks away.
“We’ve tied up hundreds of thousands of dollars,” said Bird, 48, who farms about 1,300 hectares.
“Had I not been able to justify the cost involved, I would have been a minimum of $100,000 further behind for exactly the same product, the same rates, the same everything.”
Bird said even with the savings win, the cost is still high.
“Our preplanning comes at such a cost. I don’t need to go Vegas. I live in Vegas,” he said.
“As my grandfather said, ‘You have to have deep pockets to play the game.’ So you’re sitting at the table losing money, then you throw another chip on the table and say, ‘Let’s go’ because you believe.”
Reid, 49, is planting about 1,012 hectares this year.
“Pre-buying in the fall was a gamble because, people were suggesting prices were going to be going down in the spring,” Reid said.
He said the price of diesel is about $1.50 a litre, because agricultural producers are exempt from paying excise taxes.
But Reid said the costs are still daunting.
“Your tractor can go through a thousand litres in a day. It is a lot of money. Grain prices are not great right now and that’s part of the problem. (Profit) margins are thin,” he said.
“You still have your equipment payments, your land payments, so you have continuing expenses whether you do it or not.”
Jill Verwey and her family farm more than 4,000 hectares near Portage la Prairie, Man. She’s a vice-president of the Canadian Federation of Agriculture and president of Keystone Agricultural Producers in the province.
There’s a lot of volatility in the industry that squeezes profit margins even further, she said.
“We’re still going to feel the impact on fuel prices, which are up significantly, and the last I heard fertilizer was up 40 per cent,” she said.
“Last diesel shipment was $1.51 (a litre). I would guess it probably doubled, really. When I was doing my budget last spring, I was probably at 80 cents a litre.”
Verwey said although farmers may look to switch their crops to commodities that require less fertilizer, tweaking an operation only goes so far.
“If you reduce your fertilizer, then you’re going to reduce the overall yield potential, and then you’re losing your profitability per acre. So you try to tighten your belt on any additional costs that you might have and make some tweaks,” Verwey said.
University of Guelph agriculture professor Dr. Asim Biswas said it’s a difficult time for farmers.
He said there definitely will be a shortage of fertilizer and, despite having potash at home, other fertilizers still need to be imported.
“It will be awfully expensive. And the other thing is we may not have the amount of supply to apply to the right level that farmers will want to do it,” said Biswas.
“Right now, the situation is maybe someone already ordered, but it’s not delivered. It’s stuck somewhere. We don’t know how long … geopolitics will affect it bringing it so us. Everything is out of our control.”
Biswas said some producers may simply decide not to plant this year, but that would be a mistake.
“Many times farmers are thinking, ‘I’m not going to grow any crop this year,’” he said.
“It’s a very difficult situation, because once they do that … it’s going to hit our trade, it’s going to hit our economy and it’s going to effect internal food security.”
