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D E C E M B E R 2 0 13 E D I T I O N

PLANNING THE NEXT CROP — AND BEYOND

FOCUS ON

COMMODITY MARKETS Canola contract still healthy, market players insist Is high-frequency trading a boon or bane?

Winnipeg canola could attract electronic trade

PG. 12 PG. 16 PG. 18

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10/17/13 12:17 PM

CROPS GUIDE

DECEMBER 2013

CONTENTS

EVERY ISSUE

4

Editor’s note

5

Gleanings

Will Churchill survive?

Notes from around the industry.

28

Crop protection

34

Markets

FEATURES

10

Climate change is on hiatus, not gone, says one scientist.

20

Getting schooled

24

Tractor withstood mysterious burial in manure

IWM is going to be reality.

How to market as prices fall.

Heated debate

Manitoba’s Crop Scout School shows agronomists all the train wrecks in one spot.

The most famous tractor in Western Canada could have been rehabilitated.

26

Stopping cleavers

30

Tillage spreads clubroot. Period

A research project aims to determine just what’s happening in your cleavers patch.

FOCUS ON

COMMODITY MARKETS

12 NOT DEAD YET

REPORTS OF THE PENDING DEMISE OF CANOLA FUTURES ARE GREATLY EXAGGERATED.

16 HIGH SPEED

IS HIGH-FREQUENCY TRADING GOOD, BAD OR INDIFFERENT?

18 FIRM TRADE MAY

DRAW ATTENTION

CANOLA FUTURES COULD BE NEXT HFT TARGET.

Zero till is playing an important role in minimizing the spread of clubroot.

32

Customer concerns

Cigi is working to understand why protein levels are falling.

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DECEMBER 2013

3

EDITOR’S NOTE

PL A N NIN G T HE NE X T CRO P — A ND BE YO ND

www.agcanada.com

Due north

M

anitoba’s Port of Churchill has always b e e n a n anomaly.

It’s never really seemed to have commercial viability and has long depended on social engineering projects like various freight rate adjustments and the custom of the Canadian Wheat Board as the central seller.

Certainly there’s a clear-cut reason for wanting to maintain the port — after all there’s increased interest in shipping through the region and more and more challenges to our national sovereignty in the region coming from friend and foe alike.

In a world with a seemingly insatiable demand for resources and always interested in a cheaper shipping route, it would be foolish to depend on goodwill to maintain our interests. Better to have lots of activity, including regular shipping from this port.

What’s less clear is exactly what’s going to flow in and out of this port over the longer term.

Some say global warming will lengthen the season. Others say that’s always going to be a pipe dream.

In the short term it would appear that the port will continue. This past season OmniTRAX, the short-line rail operator that owns both it and the track running to it, reported record shipments. However, this isn’t a sign that the grain industry has seen Churchill in a new light.

Instead it simply shows that the old way of doing business in the region continues. Under the Churchill Port Utilization Program, the federal government is underwriting shipments to the tune of $9.20 a tonne, up to a total of $5 million a year for five years.

The unanswered question, of course, is what happens after

this carrot disappears? The reality of the port won’t change. It’s still isolated and far from regular shipping lanes. Using the West Coast and the St. Lawrence is easier and safer, not to mention more profitable if you own one of the terminals at the port.

All the compelling reasons remain for keeping Churchill.

The port and railway operator seems to be proceeding in good faith and trying to make a go of it. But I remain skeptical. There simply doesn’t seem to be a strong business case for it.

It makes one wonder if the current commitment to underwrite shipments will just be the first of many five-year plans.

See you soon I have mixed feelings as we pull this issue of C ROPS G UIDE together and send it out the door to the printer.

This is the last issue where you’ll see it as a free-standing publication of its own. Beginning in the new year, it’s being incorporated into the pages of COUNTRY G UIDE , our parent publication, as the new and improved production section.

Our new format is, in many ways, an exciting new challenge.

Working with veteran agriculture writer Ralph Pearce, who is based in southern Ontario, we’ll gain a national scope and have more resources to follow important and emerging crop-production-related stories.

Some of the familiar names you’ve seen over the past couple of years as regular contributors will continue to appear on those pages. Other writers and photographers we haven’t worked with before will be making their debut.

All this begins with the first issue of C OUNTRY G UIDE in the new year, so keep your eyes open, and we hope you’ll read our contributions there. ■

G O R D G I L M O U R gord.gilmour@fbcpublishing.com 4

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DECEMBER 2013

EDITORIAL STAFF Editor: Gord Gilmour (204) 453-7624 Cell (204) 294-9195 Email: gord.gilmour@fbcpublishing.com

Fax (204) 942-8463

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Ron Friesen Warren Libby

Richard Kamchen Clare Stanfield

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PRINTED IN CANADA Vol. 02 No. 07 website: www.agcanada.com The editors and journalists who write, contribute and provide opinions to CROPS GUIDE and Farm Business Communications attempt to provide accurate and useful opinions, information and analysis. However, the editors, journalists, CROPS GUIDE and Farm Business Communications, cannot and do not guarantee the accuracy of the information contained in this publication and the editors as well as CROPS GUIDE and Farm Business Communications assume no responsibility for any actions or decisions taken by any reader for this publication based on any and all information provided.

Gleanings

Higher canola acres in 2014-15: FarmLink Marketing Solutions

g r a i n

i n d u s t r y

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Commodity News Service Canada

FarmLink Marketing Solutions, a grain-marketing company in Winnipeg, expects Canadian canola acreage to increase in 2014-15 (Aug./July), according to a recent news release from the company.

They estimated that canola acreage in Canada would increase to 22.05 million acres, up from 19.74 in 2013-14 (according to Statistics Canada) and the five-year average of 18.85 million.

FarmLink also released estimates for all of the other major crops in Canada. They based their estimates on their analysis of supply and demand for 2013-14, price projections for 201415, the market signals and production economics western Canadian farmers are facing.

All-wheat area was estimated at 24.30 million acres for 2014-15, down from 25.97 in 2013-14. Winter wheat area was pegged at two million, spring wheat at 17.5 million and durum at 4.8 million acres.

FarmLink also estimated that 201415 soybean, sunflowers and flax area would increase from 2013-14. They expect corn, rye, oats and barley acres to decrease.

The release added that there are a number of trends at play heading into 2014-15, including improving genetics for soybeans and corn which will allow those crops to expand into new areas. Though, the price will have to be attractive enough to encourage growers to plant the crops.

Another trend is the spread of higheryielding mid-grade wheat and unregistered varieties, the release added. Returns from soft white, CPS and winter wheat for 2014 are near the top of the range of options, and the growth is stealing acres from barley and CWRS. But, there are still things to watch out for which could change the initial estimates.

“First is this year ’s carry-out. In several sectors, there is the risk of ballooning 2013-14 ending stocks, to the point that full bins would reduce farmers’ planting intentions,” said Brenda Tjaden Lepp, chief analyst with FarmLink Marketing Solutions. “Secondly, is where corn bottoms and stabilizes, because this could weigh on cereal prices harder and longer, hurting projected returns for 2014-15.

“Both influences seem to point to more of a shift out of cereals into canola, but any market that were to hold up in the face of depressed cereal markets would likely see 2014 acres come in above current projections.”

Grain shippers are blaming rail service for a plugged grain-handling system.

Record crop meets plugged system

By Allan Dawson, Manitoba Co-operator

Record crop? Meet plugged elevator.

Shippers say it’s a match made in purgatory for farmers and exporters trying to get this year’s harvest to market — and the railways are to blame.

“We’re not getting enough rail capacity to move the crop right now,” Wade Sobkowich, executive director of the Western Grain Elevator Association said late this fall.

“We’re getting maybe half of what people have put in for orders.” Sobkowich said new legislation the federal government promised would help grain shippers deal with poor railway service is useless.

Primary elevators are at 92 per cent of capacity, while terminal elevators have lots of space, Sobkowich said.

Statistics Canada puts western production of the six major grains and oilseeds (wheat, canola, barley, oats, flax and rye) at 58.98 million tonnes, almost nine per cent higher than the previous record of 54.34 million tonnes set in 2008. Some estimates put total production at almost 70 million tonnes.

Canadian Pacific and Canadian National Railways have been shipping 10,000 to 11,000 loaded cars a week to export terminals, which is historically high, but grain companies have been ordering up to 12,000 cars a week, Sobkowich said. To meet the current weekly demand, plus clean up the backlog the railways need to spot 20,000 to 22,000 cars a week, he said.

According to Sobkowich, the railways have the capacity to ship 12,000 cars a week, while still servicing their other customers.

“We don’t think the infrastructure is the constraint right now,” Sobkowich said. “They have cars that are parked. They have the ability to put locomotives and crews in place

if they choose to but… the railways see the grain is there and know it’s going to move eventually. So why would they increase their costs to move it (quicker)? They’ll move it when they get to it.”

Churches aren’t built to hold the Easter Sunday crowd and the railways aren’t built to move an entire crop all at once, Steve Whitney, CP Rail’s vice-president of marketing and sales, agribusiness and market development, said at a conference in Winnipeg recently.

But the railways can and should invest in surge capacity, Sobkowich said. Farmers and grain companies do. That’s the nature of agriculture. For markets to function properly there needs to be competition or regulation, said one grain industry official, who asked not to be named for fear of railway retribution.

“We have neither,” he said.

The railways are guaranteed by law a return on investment for grain shipping, but in return the total amount they can collect from grain shippers is capped. There are adjustments for the volume and distance hauled.

Eliminating the revenue cap would just allow the railways to charge more for the same service, Sobkowich said.

The Fair Rail Freight Service Act, which became law earlier this year, fails to give railway customers an effective and inexpensive way to address poor railway service, Sobkowich said. Grain shippers aren’t bothering to negotiate service agreements with the railways because they won’t include penalties for poor service, he said.

“I’ll have to spend hundreds of thousands of dollars with a lawyer to take it through that process,” a grain company grain official said. “By the time I do that the year is over.

The agreement only goes for one year. So it’s a completely ineffectual piece of legislation.”

Continued on page 8 CROPS GUIDE

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DECEMBER 2013

5

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GLEANINGS

Continued from page 5 Meanwhile, CP and CN say they are working hard to move Western Canada’s grain to market.

“Going into the fall, our railway recognized the strong demand, so as part of our grain planning process we have been working closely with customers to have programs and services in place to react to their shipping needs,” CP spokesman Ed Greenberg said in an email.

Moving a big crop requires all partners in the pipeline to work efficiently, CN spokesman Mark Hallman said in an email.

“It’s not simply a question about rail capacity,” he wrote. “Prompt car loading in the Prairies, steady railway movements from the country to port, and efficient car unloading at port terminals will be critical to solid hopper car fleet velocity so that the cars can be brought back to the countryside to meet new orders in a timely way.”

Churchill enjoys busy shipping year

By Phil Franz-Warkentin, Commodity News Service

Churchill is nearing the end of a busy grain-shipping season, with the tonnage moving through the northern port expected to come in well above the previous year.

“We’ll be wrapping up in the next 10 to 12 days,” Darcy Brede, president and chief operating officer of OmniTRAX, said at the end of October. More than 500,000 tonnes of grain and oilseeds had moved through the port as of that date, and Brede was anticipating a final tally exceeding 600,000 tonnes. That compares to 460,000 tonnes last year and the five-year average of about 550,000. October’s shipments of 270,000 tonnes would likely set a monthly record, he added.

Wheat accounted for most of the grain loaded during the season, with some durum and canola also moving, said Brede. Following the demise of the Canadian Wheat Board’s single desk in 2012, Ottawa set up the $25-million, five-year Churchill Port Utilization Program to encourage shipments.

Five companies used the port this year, and while the CWB is still a major customer, Richardson International was the biggest shipper this year, said Brede.

“The logistics are a little more intense because there are more customers,” said Brede. “But when it comes to operations, we love problems like that.”

Aside from grain movement, the shipping season also included three vessels loaded with resupply shipments for the northern territory of Nunavut, said Brede. Potential exports of crude oil are still being investigated, he said, and many potential customers have expressed interest as the port has good access to the European market, said Brede.

Stakeholder meetings are currently taking place, and a test shipment will likely take place in 2014. A test run originally set for this fall was postponed in order to allow for further consultations.

8

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DECEMBER 2013

Low wheat protein causing alarm in France The Reuters news service is reporting that the lowest level of protein in French wheat for years has drawn the government into a debate on tackling a decline in crop quality that producers and traders fear will cost the European Union’s top exporter lucrative overseas sales.

Protein content is a basic measure of wheat’s suitability for making bread and a key requirement for importers in Africa and the Middle East that France targets in competition with North American and eastern European suppliers.

Average protein content in this year’s French harvest was 11.2 per cent, the lowest since at least 2009 and around the minimum accepted by buyers. Poor growing weather was a factor, but the continuation of a declining trend has caused alarm in the grain sector and prompted the government to call for action.

“The issue is clear: we’re on a slippery slope in terms of protein content,” said Remi Haquin, a farmer and chairman of the cereals committee at farm agency FranceAgriMer. “There is a real risk for us on the world market if we don’t get back to 11.5 per cent. That’s the standard for the French milling industry and for the French-style bread you find in the specifications of our customers in the Maghreb and Egypt.”

France exports about half of the roughly 36 million tonnes of wheat it produces annually, and in recent years has sent most of its exports outside the EU to meet emerging-market needs.

But the dip in protein has highlighted its relatively ordinary wheat quality.

The government has asked FranceAgriMer to put wheat protein in strategic plans for farming to be outlined by year-end.

“We know now that the protein levels in our wheat are too low,” Agriculture Minister Stephane Le Foll told a parliamentary committee last week. “There is the danger of losing markets, so we have to improve the situation.”

Lower protein does not look like it’s harming French exports this season, since EU wheat is being snapped up thanks to brisk demand and supply snags around the world.

But traders say this may be a lucky escape and France’s successful export model of highvolume, homogenous wheat needs to be changed to match the quality offered by competitors.

“French wheat gives you the basic quality,” one trader said. “The problem in future is that its clientele may be limited.”

Despite unstable output linked to a harsher climate, lower-cost exporters Russia and Ukraine are expanding their reach and unnerved French traders with sales to Morocco last season.

Unable to undercut its eastern European competitors on price, France will have to protect its wheat quality to keep core clients like Algeria and develop other outlets, they say.

All parties agree on the causes of the drop in wheat protein — including an erratic climate, less fertilizer use and a focus on yields — and that technical solutions are readily available.

Some 40 per cent of wheat fields in France already benefit from fertilizer precision tools — like satellite data on plant nitrogen absorption — and more uptake could bring results, said Jacques Mathieu, managing director of crop institute Arvalis.

“Our objective is in the next two years to set in motion a trend to at least stabilize and if possible raise again wheat protein. So we’re talking about the short term,” Mathieu said.

The backing of the Farm Ministry and specialists like Arvalis should raise awareness of quality issues, but getting growers to adopt en masse protein measures will partly depend on linking prices more to quality, traders and crop experts say.

Cash markets for wheat in France either do not impose a protein level or set an 11 per cent minimum, and price differences between these markets are modest, in contrast to clearer price scales used in other exporting countries.

“Pricing will need to be more nuanced,” the trader said. “If you don’t have a price differential between animal-feed wheat, standard wheat and higher-category wheat, nobody is going to produce the higher grade.”

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2013-11-05 10:52 AM

climate change

heated debate Pause in global warming not a sign it’s all clear, climate scientist insists

By Gord Gilmour

O

ver the past decade lots of people have staked their professional reputations by clearly stating that climate change is real and very likely caused by an increase in human activity.

But lately some of the evidence appears to be running against them as the rate of change has slowed — dramatically slowed, some say.

Danny Blair, a geography professor at the University of Winnipeg and the associate dean of science for that institution, has been one of the clearest voices in Western Canada calling for more attention to be paid to this issue.

Recently he spoke to the annual Fields on Wheels conference in Winnipeg, an event organized by the University of Manitoba’s Transport Institute. He concedes the trend is real, but insists that it’s simply a question of variability within a larger overall trend, rather than a complete reversal.

“Yes, I’ve certainly heard these sorts of questions,” Blair says. “One of the most recent was from my very own mother. Once I’d calmed down a bit, I explained some of what’s been going on to her.”

First, it’s still warmer than usual, Blair explains, and 2012 was no exception. Last year might not have been setting any new records, but it was still the 36th consecutive year that temperatures were warmer than the long-term average, which runs from 1880 to 2012.

That having been said, he concedes there is much variability within this overall global trend, and that your own senses haven’t been deceiving you about what’s going on.

“Yes, it has slowed down in the past decade,” Blair says. “But does this mean the global warming ‘theory’ is wrong and there’s nothing to worry about? No. Absolutely not.”

Blair explained that there can be a number of different ways that, over the short term, other factors override this longer-term trend, no matter how well established.

10 CROPS GUIDE

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DECEMBER 2013

One likely culprit is sunspot activity, which is linked to how much solar power the sun puts out. For the past several years the sun has been in a lower point in its natural sunspot cycle, and even though it’s now rebounding from that low, it still hasn’t reached previous peaks.

“The last 10 or 15 years, we’ve had a dim sun,” Blair says. “Solar output has been measurably lower, so that explains a small part of this hiatus, but not a very big part.”

That’s because globally the world remains in an energy imbalance. It requires a certain amount of energy to roughly maintain the status quo once all the various feedback mechanisms are figured in. But it receives more energy — about .58 watts a square metre more — than it needs every year, which means it remains overall a net contributor to global warming.

La Niña and El Niño cycles also likely play a role. They refer to the alternating periods of colder (La Niña) and warmer (El Niño) surface water temperatures at the equatorial Pacific Ocean. As these temperatures oscillate back and forth, they can affect global weather patterns and temperatures for several years at a time.

“This is known as the ENSO cycle (El Niño-Southern Oscillation) and we do know there is a strong correlation with temperature,” Blair says.

In recent years weaker and shorter El Niño periods have been seen, which translates into temperatures on the lower side of the range.

“The last few years it’s been mostly La Niña-ish for a relatively long period, though not unusually long,” Blair says.

One thing that has become clear is that the excess heat the globe has been getting has been going somewhere, and it’s not being manifest in higher surface temperatures, Blair said. That’s led climate researchers to look for spots where unexpected heat was showing up, and they found it in ocean depths.

“There’s been far more heat going into deep oceans for the last 10 or 15 years than predicted,” Blair says. “The heat is out there, it just isn’t being predicted in thermometers measuring air.”

That’s troubling because increases in deep ocean temperatures risk setting up feedback mechanisms that can vary from disruption of ocean currents to releasing extremely potent greenhouse gases.

Recent volcanic activity, such as the dramatic eruption of the Icelandic volcano Eyjafjallajökull in 2010, is also likely playing a small role in suppressing the effect of climate change, Blair said. These eruptions spew ash into the atmosphere which then reflects solar energy out of the atmosphere before it can heat the earth. At times volcanic activity has gone so far as triggering mini ice ages.

“It can take a few years, following a large eruption, for that material to settle fully out of the atmosphere,” Blair says.

In fact, there’s also increasing evidence that human activity, such as air pollution, also helps reflect solar energy back out into space, and also contributes to the global warming pause in much the same way.

But despite all this, Blair insists it’s wrong to say global warming has gone away.

“This is natural variability,” he says.

“Unfortunately it’s just wishful thinking to say that this hiccup or pause is anything but a pause. Heat in the ocean always finds a way back to the surface.”

In the end the best measure is always going to be greenhouse gas levels, because they determine how much of the sun’s energy the earth traps and therefore how much heat the planet takes on. And those numbers haven’t been taking any breaks.

In 2012 the carbon dioxide level of the atmosphere surpassed 394 parts per million, the highest level yet recorded. In fact, when compared to ice cores, it’s the highest level ever seen in the 800,000 years of available data.

“We’ve seen, and we will undoubtedly all live through, some numbers we haven’t seen in a very long time,” Blair says.

Turning from the theoretical to the practical, Blair said for the agriculture industry, it paints a challenging picture. Temperatures will rise, but it won’t be as simple as just getting warmer.

“We have a fair bit of confidence about where we’re going temperature-wise,” Blair says. “We have less confidence regarding precipitation.”

The most difficult thing to predict is just how much precipitation there will be and when it will fall. Most researchers suspect the answer is there will be much more variability because more solar energy means more transpiration and more raw material in the air for rain and snowstorms.

“Higher temperatures will mean more transpiration, more drying of the land and then it will rain or snow like hell,” Blair says.

Looking and the broad picture Blair says climate regions are creeping northwards, meaning parts of Saskatchewan and Alberta are beginning to look a lot more like Montana, a trend he expects to continue.

Bruce Burnett, a weather and crops specialist with the Canadian Wheat Board was also asked to speak on climate change and

agriculture. Burnett told the meeting there’s no doubt climate change will have an impact on growing crops in the region, but suspects it’s going to be just one variable affecting the change in the region’s crop mix, which is always a complex question.

There will be some negative impacts — some regions might see desertification as temperatures get drier, for example.

“You might see Wyoming moving north,” he says.

But vast swaths of the Prairie Grain Belt are going to remain productive, and some parts of it may even become more productive.

“We’re certainly going to remain a major grain-producing region,” Burnett says.

He cites four key factors that growers will use to determine their crop mix. They’ll assess suitability and risk. They’ll weigh profitability.

They’ll consider how crops fit their system and rotation. And they’ll consider what they’ve historically grown and found success with.

“We don’t change our crop mixes a lot,” Burnett says.

But that’s not to say growers won’t find better alternatives. He reminisced that in 1984 he was completing a master’s degree, and was looking at soybean production in suitable areas on the Prairies, something that’s really taken off in the Red River Valley.

“Why? Because they’re more profitable,” Burnett says. “But why are they more profitable than canola? The past several years the valley has seen some pretty difficult weather and they’ve found that soybeans don’t mind being wet, and also handle the dry pretty well. So if you’re a farmer and you can get $1 a bushel more, and less risk and cost, what are you going to do?”

As the impact of climate change becomes more pronounced other growers may find themselves in the same position, especially if predictions of a longer growing season prove out. Estimates for that range from an additional 15 days by 2050 to an astounding 50 additional frost-free days.

That could mean soybeans and corn become more significant, or changes in the crop mix that incorporate more winter wheat acres. But nobody should expect the Corn Belt conditions to migrate north, complete with regular weekly rainfall that annually nurtures enormous yields.

“I just don’t see that happening,” Burnett says. “I think if you’re looking for something similar, look south. Manitoba might, eventually, look a lot like Aberdeen, South Dakota and the rain shadow of the Rockies might look like Wyoming.” ■

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DECEMBER 2013 11

focus on

Commodity Markets

Not dead yet Speculation about the impending death of Winnipeg canola futures misses the mark, industry watchers say

W

innipeg’s canola futures have plenty of life left, say experts who refute any predictions about the inevitability of a death watch for the market.

A year ago, record open interest was being set in the canola market, but when June 2013 open interest hit three-year lows and July fell even further, it sparked talk it was just a matter of time before canola disappeared like other Winnipeg agricultural futures before it.

Not so, say those who see a vibrant market that not only remains relevant to farmers, grain companies, crushers and end-users, but will in fact continue to grow as a result of anticipated record Prairie canola production this year.

“As for the comments that the canola contract is in trouble, I think that’s bunk,” says a longtime market participant. “The contract has volume and open interest that we could only dream about a few years ago. And a big crop will mean good volumes for the coming year too.”

Open interest last year exploded as farmers forward priced to lock in good prices in anticipation the market would eventually go down. But when that strategy ulti-

ICE’s Brad Vannan argues against making broad conclusions based on a couple snapshots of data: “It’s like saying it’s cold out so we’re going to have another ice age. mately failed, they avoided repeating the mistake this year, causing the wide year-on-year open interest disparity.

“There was a lot of forward pricing and it proved to be the wrong thing to do, as it usually is,” says John De Pape, president of Farmers Advanced Risk Management Co. “And so in the following year, it looked like guys weren’t doing it, thinking, ‘That hurt, I’m not going to do that again.’ And that’s why I think there was less open interest.”

Brad Vannan, president and chief operating officer of ICE Futures Canada, the exchange where canola contracts are traded, explains farmers anticipated a record-size canola crop in 2012 and were concerned about maintaining canola values.

“Not only were farmers marketing their current year crop, they were also marketing their next year’s crop, and that resulted in some very high open interest, unprecedented open interest for us,” Vannan says. “We had large open interest in the May, July and November contracts.

Our trading levels were very high too.”

But drought conditions in the U.S. caused prices to remain high, and lower-than-expected canola yields in the Prairies also supported values. With those low yields, farmers ended up pre-selling a higher percentage of their production than they had intended, Vannan points out.

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By Richard Kamchen This year, farmers were reluctant to significantly forward price again.

Seeing that as the reason for the decline in open interest rather than the beginning of the end, Vannan argues against making broad conclusions based on a couple snapshots of data: “It’s like saying it’s cold out so we’re going to have another ice age.”

Open interest has since climbed from those July lows of over 109,000 contracts to 178,741 at the end of October, which was actually off that month’s highs. And while open interest continues to grow again, many say volume is actually a better indicator of market liquidity.

“You can have huge open interest, but if everybody’s sitting on their hands waiting for the market to move, you have no liquidity,” says De Pape. “You can have huge volume, people trading in and out, and at the end of the day, very low open interest. But have great liquidity because there’s so much trade.”

And that volume has risen greatly over the years. One longtime trader noted that in the open outcry days, daily canola volume could be as low as 1,000 contracts and rarely above 5,000.

“I don’t think we ever have days now with electronic trading where the trade is under 5,000, with the more typical days around 15,000 to 25,000,” says the trader.

Vannan adds preliminary estimates suggest October was a banner volume month for the exchange.

“We’ve had the highest average daily volume that we’ve ever experienced and we’re on track to have the highest volume in any single month that we’ve ever experienced. And our volume year to date is about two per cent higher than it was last year, and last year was a record over the previous year.”

There’s also strong convergence between canola futures and the physical market, which is one of the most important facets to consider when judging the health of a futures market, Vannan stresses.

“I think it’s a very healthy contract, it continues to be the focal point in terms of international price recognition, and it’s the flagship contract that anybody that’s pricing canola certainly focuses on and prices off of,” says Tony Tryhuk, manager of commodity trading for RBC Dominion Securities. “We continue to see good participation, not only just the futures but the options as well. Option open interest is fantastic as a result of people looking at alternative risk management techniques and an increase in even speculative trade in the options markets.”

Cereals look for life While canola futures in Winnipeg remain healthy, the same cannot be said of ICE’s post-single-desk markets of milling wheat, durum and barley.

The exchange introduced those futures contracts in January 2012 and they’ve struggled to generate interest. Barley only had its first actual trades in October of this year.

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commodity markets

Continued from page 12 “You’ve got to have a degree of patience in the marketplace,” says Vannan. “I think you need to experience a variety of market conditions to fully appreciate the value of having a futures contract that is dedicated to representing the market value of the crops grown in Western Canada.”

He points out the separation in North American wheat market conditions. The Canadian Prairies produced a huge wheat crop this year while the U.S. winter wheat crop supply is tight, and its spring wheat is subject to different logistics than wheat in Canada.

“I think some participants are recognizing we don’t have the level of transparency in wheat pricing that would be optimal,” says Vannan. “So people who had previously been reluctant to even consider using another wheat contract, because they’re afraid it wouldn’t have the liquidity they desired and would therefore be a riskier hedge, are now looking at the contract and are saying it might not have the liquidity, but it might be a higher-quality hedge.”

What may convince people to use domestic wheat futures is dysfunction in U.S. wheat markets. As long as the Minneapolis market is functioning, that’s where trade will be focused, but a sudden surge, like the one experienced in 2008 when Minne-

apolis wheat rocketed to $20 a bushel, would change all that.

“If that were to happen again, I could see Canadian participants who are using that U.S. market today re-evaluating their decision to use Minneapolis, and then start to look at putting their hedges in the Winnipeg market, because it may represent a little less volatility and be more reflective of the supply/demand fundamentals in Canada,” says RBC’s Tryhuk.

Unlike wheat, which has to compete with several contracts with excellent liquidity around the world, barley is unique. And yet, it’s only just recently experienced just the lightest amount of trade.

“Futures work as much as the cash trade needs it. So if the cash trade is more flat price

T:18”

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FS:8.25” F:9”

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SBC13130.Performanc

I think it’s a very healthy contract, it continues to be the focal point in terms of international price recognition, and it’s the flagship contract that anybody that’s pricing canola certainly focuses on.

— Tony Tryhuk, RBC Dominion

T:18”

be delisted, and adds they were doomed to failure before they were introduced.

“For many years, the exchange has been focused on making the perfect contract for the commercials. They have given no consideration to the needs of speculators,” he says. “Every modification or new contract that the exchange

T:8”

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based and there isn’t a functional need for futures risk management because of the way the cash market trades, then barley cannot be successful,” says a market participant.

Hedges have simply continued using corn.

One independent trader feels it’s just a matter of time before the grain contracts will

has introduced has met with failure. There is no commercial need for these contracts.”

De Pape argues futures contracts are hard to start, but once they get going, they’re almost impossible to stop.

“Trying to get that volume to begin with is very difficult. I think that you basically have to leave them up there and available for quite a while and get out there and promote it, and get people bidding on the basis of it.”

Vannan says there is a limit on the exchange’s patience and that it can’t indefinitely support unused or little used contracts because it does cost money to maintain them.

If there’s no hope, ICE will have to look at removing its support. “But we’re not at that stage yet. It’s still early.” n

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focus on

Commodity Markets

High speed Breakneck algorithmic trading is a black box to most, a source of trepidation for others, and business as usual to some

By Richard Kamchen

T

he latest boogeyman to emerge in U.S. agricultural futures markets is the algorithmic high-speed trader, but not everyone agrees he’s quite the terror he’s been made out to be and has, in fact, contributed to improving market functionality.

High-frequency traders (HFTs) rose with the introduction of electronic trading and their dominance has grown with improving technology. Using sophisticated algorithms and powerful computers, HFTs access data with lightning speed and dart in and out of markets in fractions of a second.

The exchanges, for their part, love them.

“We believe high-frequency trading is a critical liquidity provider to markets,” says CME Group chief operating officer Bryan Durkin.

“HFTs are an essential source of liquidity in our markets and often provide price discovery where other traders may be reluctant to do so,” reiterates Atlanta-based IntercontinentalExchange (ICE) president and COO Chuck Vice.

But HFTs have attracted a good deal of negative press, often being blamed for disrupting markets and providing unnecessary volatility.

“We get very suspicious about anything that’s run by a computer modem and brings very big numbers in the market all at once, and attempts to get those numbers back in a very quick fashion on a small margin,” grain merchant Joe Christopher of Crossroads Co-op in Sidney, Nebraska says of their practice of flooding markets with bids and offers.

We believe high-frequency trading is a critical liquidity provider to markets.

— Bryan Durkin, CME Group COO

The size of their trades alone can move grain and oilseeds markets.

“If the market is trading very close to the stops, an order of their size could push the market into the stops, and they can make a quick turnaround by covering it when the stops are run,” says Christopher. “I tend to think it makes the charts self-fulfilling… You get false rallies started that are not really bound in fact.”

Finance Professor Pete Kyle at the University of Maryland dismisses HFTs’ long-term impact on prices, but says they can increase transaction costs.

“I don’t think they make prices more volatile or have a long-term effect on prices, and the reason is they can’t because they just don’t hold very large inventory. They take such small positions,” says Kyle. “They may instead just be making prices adjust faster and earning a little money doing it. So they’re kind of a tax on everybody… It would be like a very small tax on them.”

Aaron Smith, a professor with the agricultural and resource economics department at UC Davis, says HFTs 16 CROPS GUIDE

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provide far more liquidity than they do price disruption.

Since the introduction of electronic trade, which allowed for much faster trading to occur, price volatility has gone down, leading to improvements in market quality and liquidity, he says.

ICE Futures Canada president and chief operating officer Brad Vannan adds that liquidity providers, including fully automated algorithmic-driven traders, provide a service by taking on risk and removing a certain amount of volatility in the market.

“If you’ve got good liquidity, it typically means you’ve got less volatility,” Vannan says. “I’ve heard it suggested by people who aren’t very familiar with how markets work that these speculators cause the volatility. But the truth is, it’s exactly the opposite. Liquidity providers actually remove a certain amount of volatility from the market. It’s when (liquidity’s) not there, that’s when you see the markets get very volatile.”

The 2010 “flash crash,” when the Dow plunged several hundred points in mere minutes, is still brought up as an example of the damage HFTs can do. Some, however, suggest that was a tempest in a teapot for most.

“The example a lot of people go to is the flash crash in stock markets in the United States which lasted all of about 20 minutes, and for 99 per cent of investors, had no effect at all,” says Smith. “It was only a transfer between a few electronic traders who happened to be in the market at the time.

On average overall, we’ve had much better liquidity, ordinary people can go to the market and get much better prices than they used to, every now and then we might have these little spikes, but the chance of that happening when you happen to be in the market is almost zero.”

Criticism against HFTs is another example of longstanding complaints about speculative activity, according to Smith.

“If you go back 100 years, you have people decrying the influence of speculators in commodity futures markets,” Smith says. “People are inherently skeptical of those who seem to be able to make money without producing anything, and they quickly provide convenient scapegoats when prices don’t seem to be doing what we think they should be.”

Curbs against HFT activities are forever recommended and demanded, but the exchanges insist they’ve been doing their part.

“ICE believes that it is incumbent upon exchanges to adopt rules and design controls that effectively address the existence of high-frequency trading within the context of market structure,” says ICE’s Chuck Vice.

“We’ve taken great strides to ensure our markets are structured to promote fair, open access to all participants — no matter who they are, where or how much they trade,” says Durkin. “Our markets include risk mitigation technologies including stop logic, a critical tool in limiting the potential for disruptive market moves. It’s one of the dozens of safeguards in place to protect customers who trade on our markets.”

But one point of contention still unresolved is the

speed with which HFTs access key USDA supply/ demand reports. By sitting adjacent to the computers of exchanges, HFTs get their information faster than those farther away, and given the speed with which they can act on that data, others are left behind before they can even begin to digest the latest figures.

“Basically, you have to stay out of the market for the first few minutes after the reports become public,” says one independent trader.

It’s an unfair advantage, according to the National Grain and Feed Association, a U.S. trade group that represents over 1,000 grain and oilseed handlers and processors. It urges a one-hour pause in trade surrounding the release of key government reports. Doing so would “help ensure timely and more equal access to such reports for a wider range of market participants, including producers and small businesses without high-speed Internet service and/or sufficient personnel to immediately download and assess such reports,” the NGFA says. Such a move would also allow farmers and companies using futures and options to hedge reasonable time to prepare for “potentially dramatic market price moves as a result of information contained in the reports.”

Currently, there is no time of day when CME Group, KCBT, MGEX and ICE grain and oilseed markets are closed.

Christopher, however, believes that it’s unlikely exchanges will shut down when reports are released, for they consider it a volume enhancer to have government data come out during sessions.

“And make no mistake, the exchanges are hurting for volume right now. Trade volumes are down in the ag commodity side. Volumes are way off in the ag contracts,” Christopher insists.

When exchanges were privately held, they were run by the members for the members. The commercial trade controlled a large number of those memberships, and the exchanges were there to make sure the market functioned in order to facilitate price discovery. “(Now) I think the prime function of the exchanges is to get as many contracts traded in any given time as they can, because that’s what puts money on the bottom line,” Christopher says. “And high-frequency traders contribute a lot of volume, so the exchanges are not going to be antihigh-frequency traders.”

One way to create a level playing field would be for exchanges to add a small random amount of time to an order when they receive it, says Kyle.

“The important part is the randomness. By adding a random amount of time, you’re shuffling up the arriving

As commodity exchanges have switched from open outcry pits to electronic trading, it’s provided an opening for high-speed algorithm-based trading. orders and that would tend to level the playing field,” Kyle says. “Also, the market makers, in particular the high frequency traders, tend to place a lot of orders and cancel a lot of orders… So what you could do is either require that the orders sit in the order book for a minimum amount of time, or alternatively, charge a fee for cancelled orders that are not executed.”

That, however, wouldn’t solve a lack of transparency in the market, a loss still commiserated about by longtime players.

When we surrendered the market to the black box, we really surrendered an awful lot of transparency.”

— Joe Christopher, Grain Merchant, Crossroads Co-op, Sidney, Nebraska

“When we surrendered the market to the black box, we really surrendered an awful lot of transparency,” says Christopher. “When the pit was there, you could always in pretty short order find out who was doing what and why. And that’s something that has only been guessed at, for the last four, five years when we went to 90 per cent trade on the machines and very little trade in the pits.

“It would be nice if the exchanges would release the players of who traded volumes of over 400 to 500 contracts on any given futures every day, whether they bought or sold them or whether they did both.” n

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focus on

Commodity Markets

Firm trade may draw attention Algorithmic speculation could be coming to ICE canola

By Richard Kamchen

D

espite grain company consolidation, trading activity in Winnipeg canola remains brisk, which could help draw in algorithmic speculators.

When the three Prairie Pools and United Grain Growers merged to form a single entity, the cries went up that volumes would surely slump in canola.

It’s true that amalgamation has led to change, for grain companies have grown to the extent they can manage their price risk to some degree without futures.

“If you bought 10,000 tonnes and you’ve sold 10,000 tonnes, then you have no price risk. So to the extent they do both every day, they net out what they can,” says grain market analyst John De Pape.

“You’ve got companies like Richardson that now have their own crushing facilities, so they can buy direct from the producer and sell that to their crush plants, and with that, there isn’t as much risk to manage,” says one keeneyed market observer.

They certainly add a lot of intraday liquidity.

Tony Tryhuk, RBC Dominion

Nevertheless, futures hedging remains a necessary part of doing business.

“I think markets have been reasonably stable and somewhat predictable, which may be leading some grain companies to think they don’t need them for hedging,” an independent trader speculated. “A major, fast, downward move might make them realize that there is value in hedging.”

“Often customers are just buying on a basis, so you 18 CROPS GUIDE

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still need to hedge what you’re buying,” adds De Pape. “(Grain companies will) match whatever they can, but it’s whatever you can’t match that you have to put on a hedge. Same goes with crushers, they might be putting on oil and meal sales, but they’re not necessarily buying the grain in the same position. So they’ll buy futures to hedge their eventual canola seed purchases.”

Although some tasty rumours have suggested Viterra, Canada’s largest grain company, stopped using Winnipeg canola futures, Viterra strongly refutes any such claims and insists it does indeed continue using the market.

De Pape doubts a company would refuse to trade a futures market as long as it’s liquid, simply because futures remove so much risk. It would simply be uncompetitive to drop out when everyone else continued using it. He recalls ADM once threatening to stop using CBOT soybean futures in the 1980s. It ended up a hollow threat as it remains one of the biggest traders in the soybean complex.

While the intrinsic amount of risk that needs to be managed by massive grain companies might be shrinking, the size of Prairie canola production is growing, and that’s offsetting consolidation in the industry.

“Back in the days when we were floor trading, canola production was seven million to nine million tonnes; now we’re potentially up to 18 million tonnes,” says Tony Tryhuk, manager of commodity trading for RBC Dominion Securities. “The crop size is growing, there is more demand, so there is more risk to manage in that sense.”

Even taking account lost grain company players in the market, their numbers have been more than made up by institutional traders, new crushers, international cash traders and large proprietary traders, De Pape says.

And more speculative trade might make its way to

BLACK SEA REGION DEVELOPING INTO MAJOR GLOBAL GRAIN EXPORTER

BY BRANDON LOGAN, CNS CANADA

The Black Sea region’s development as a big player on the global export market is seen continuing, as it has become one of the biggest exporters of wheat in the world.

“The region went from being one of the biggest net importers to one of the biggest exporters of grain,” said Dr. Dmitry Rylko of the Institute for Agricultural Market Studies (IKAR) at the Cereals North America global grain conference in Winnipeg.

Southern Russia, he noted, now makes up 10 per cent of world wheat exports.

Despite that, Rylko said wheat exports from the Black Sea region (Russia, Kazakhstan and Ukraine) are expected to

Winnipeg given the smaller size of canola versus corn and soybeans, and the fact the latter markets already have so many proprietary, algorithmic-based firms trading.

“With less algo trading in Winnipeg relative to those markets, there probably is more opportunity for that kind of volume and that type of trader to be attracted to Winnipeg because there are probably better profit opportunities,” says Tryhuk.

When open interest was a mere 50,000 contracts around the time Winnipeg introduced electronic trade about eight years ago, canola would never have attracted that sort of business. But with open interest of 175,000 to 200,000 contracts, canola is large enough to be on the radar of such proprietary trading firms, who’re always looking for new opportunities and ways to diversify their holdings.

“They may not carry large positions at the end of the day, but they certainly add a lot of intraday liquidity,” says Tryhuk. “And (ultimately), that’s the measure of success in a market: can I get in, can I get out, what’s the spread between the bid and the offer? Is it a dollar wide, is it 30 cents wide, is it a dime wide? That’s the critical thing to look at, and that’s the one nice thing about algorithmic trading and competition in that space, is that the bid/ask does tighten up quite a bit.”

Although the “flash crash” is evidence algorithmic trading can cause dysfunction, Tryhuk doubts the possibility of similar disruption in Winnipeg simply because the market here is very much commercial based.

ICE president Brad Vannan is aware such sudden crashes can occur when there’s a gap in liquidity and says ICE has taken steps to prevent it from happening.

“To mitigate the impact of these rare occurrences, ICE has programmed interval pricing limits into its trading platform, which slow the market down if it is going up or down too fast during a given time interval,” says Vannan. “And markets like canola have daily price limits.” ■

be lower than the USDA’s September estimates, mostly due to lower production.

He said it’s expected that Russia will export roughly 15 million to 15.5 million tonnes of wheat, Kazakhstan 6.5 million to eight million tonnes and Ukraine approximately nine million tonnes. The quality of wheat in all three countries, he noted, is not very good.

However, even with the poor wheat crops, the Black Sea region produced a large corn crop.

Ukraine “produced an incredible volume of corn,” Rylko said, adding that country exported more corn this year than wheat. “Russia also surpassed its record of corn production.”

Looking forward, he warned that climate, logistics, moisture content and other factors could hold back the region from becoming a major player in the corn market.

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agronomy

Getting schooled Manitoba’s Crop Diagnostic School is a one-of-a-kind showcase of everything that could go wrong

By Gord Leathers

T

here’s something about human nature that makes us extremely reluctant to acknowledge and understand our own mistakes.

Talk about them? Too mortifying. Better to ignore them, brush them under the rug, and go on and pretend nothing is wrong.

But in a science-based business like agriculture, with so many potential pitfalls, it becomes more important to take a hard analytical look at these things — after all if you can’t identify what exactly has happened, how can you take remedial action today and make sure it doesn’t happen again tomorrow?

And it’s not like it’s an easy thing — after all you’re working in an uncontrolled environment, with a lot of variables at work and a finite window to cover a whole lot of acres.

One of the things that makes it difficult to diagnose these issues is the fact there are so many of them even the best farmer or agronomist can’t keep up, especially with new ones cropping up every season.

In Manitoba, a unique consortium of provincial extension staffers and agronomy academics from the University of Manitoba tackle this challenge every season.

Every July, on the outskirts of Carman, Man., agronomists from every corner of the province gather to view a collection of plots showcasing some of the gaffes that farmers make, and learn how to spot them, how to analyze them and even how to fix them. This is the annual Crop Diagnostic School, the only one of its kind in Western Canada.

“It’s a one-day workshop where we show agronomists some of the common happenings in the field such as the wrong fertilizer application, herbicide MAFRI’s Mitchell Timmerman recreates the effect of erosion last summer at the Crop Scout School near Carman.

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damage or drift,” explains Gary Martens, staff agrologist at the University of Manitoba. “It’s anything a normal farmer wouldn’t want to show anybody because it’s embarrassing. So we show all the embarrassing stuff to educate people about visually identifying problems in the field.”

This workshop is where agronomists spend an intensive day steeping themselves in the art of diagnosis.

The word diagnosis comes from the Greek “diagignoskein” — to learn or to know. The art of diagnosis is using knowledge of possible outcomes to determine the cause of a failure by learning to recognize the symptoms. The concept really came to prominence with the popularity of “House,” the television show that followed the life of Gregory House, the medical version of Sherlock Holmes.

House is a brilliant analyst who, along with his team, sets about finding causes to strange afflictions by listing possible symptoms and eliminating each one that doesn’t fit. As with the Baker Street detective, the game is to follow the evidence to a proper conclusion. Agronomists are often called upon to do the same thing.

“What springs to a lot of people’s minds when they talk about field diagnostics are the biological causes such as diseases, insect pests and weeds. Those are living things that we can deal with, but there are other symptoms in crops caused by non-living or abiotic things related to soil fertility and crop nutrition,” relates David Kaminski, former manager of Extension Services MAFRI. “They might be related to a range of soil factors such as chemistry, salinity and compaction. And they could be related to weather with excesses of moisture and heat.”

Plot by plot Examining all of these factors is on the agenda for today as the doors open in the main building at the Ian Morrison Research Farm.

The 50 agronomists registered for today’s session begin arriving and at 9 a.m. they break into four groups and head out into the fields in the wagons provided.

DL Seeds of Morden, Man. has two of their agronomists on one of the wagons. Derek Mohr, a diploma graduate in agriculture from the University of Manitoba sits next to Reanne Pernerowski a master’s graduate in soil and plant science. They both have the lesson booklets given to them at the door on arrival.

“I’ve come here to learn about different diseases in crops, different insects and how to control them,” Mohr says. “I meet people from the government here as well as other agronomists from different places. I’m interested in hearing their opinions on the different measures you can use in the field and get answers to any questions I can ask.”

Most of the people here are agronomists working for private companies. Some of them are independent and there are a few farmers in the crowd. Although many of the private companies provide training in the use of their own products and technology, they like the larger scope of the diagnostic school and its approach to practice and tech-

We try to engineer train wrecks, learn from them and get the message out how to do things properly.

— Nasir Shaikh, weed specialist, MAFRI

nique. They’re keen to send their people to one of the 10 sessions where they’ll see more in one day than you’ll see in several seasons.

The wagon pulls over to the weed plots and everyone gets off and walks to the whiteboard installed in the ground. Nasir Shaikh, the provincial weed specialist, greets them and starts outlining today’s lesson about herbicide resistance, a hot topic in farming right now.

“There are about 20 weeds in Manitoba that are resistant to one or more groups of herbicides and you’ve probably heard about wild oats resistant to Group 1,” he tells them. He names hawk’s bill and some of the problems with kochia. Today’s lesson is about Group 1 resistant weeds and this particular plot has a history of resistant green foxtail. The crowd moves in to take a look at the plot that Shaikh prepared that spring.

Although this is the 17th annual school, the actual preparation began last year after the end of the 16th. Every group that goes through fills out an evaluation and the input from working

agronomists is valuable. They are the front line, the first to see a lot of these things in the field. The school staff meets within a couple of weeks to read the evaluations and then several times over the winter to develop and flesh out the ideas for next year.

“There are a lot of experts and personalities involved in this school and a lot of them are good ideas people,” Kaminski says.

“It’s the synergy of having all those people around the table that gets us started and then we just work it from there.”

The ideas gel over the winter and it’s a delicate balance of looking back and looking forward. The topics should be fresh so they try to avoid repetition but there are some problems that just keep coming back. Once they’ve agreed on next year’s presentations they hand the proposed program to Alvin Iverson, the full-time manager of the research farm. Iverson selects the best plots for the various presentations as well as devising

Continued on page 22

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CROPS GUIDE

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DECEMBER 2013 21

AGRONOMY

Continued from page 21 the preparation schedules for each one. He also hires and manages the summer students who do the actual seeding, spraying and field work. Once it’s finished the upcoming plot should be a deliberate disaster.

“We try to engineer train wrecks, learn from them and get the message out how to do things properly,” Shaikh laughs. “We prepare a protocol as we would for any kind of experiment with the pesticides we’ll be using as well as the rates and the timing then we take it to Alvin. We tell him this is the map and this is what you have to translate it to on the field.”

The agronomists in the weed plot are looking for Group 1 resistant green foxtail but they’re not really finding it. Shaikh told them about the history of green foxtail popping up after spraying. This year they cultivated the plots to make the seedbeds uniform, sprayed them and then sat back.

“Do we see a lot of foxtail?” he asks them.

“No,” they respond. But there is a lot of barnyard grass. So what happened to the foxtail? “We cultivated the field and that cleaned up the first flush of foxtail and then there was a long dry spell and the second flush of foxtails didn’t come up at all,” Shaikh tells them. One answer to herbicide resistance may be limited tillage.

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I always put aside time to talk about insects that are causing trouble this season.

— JOHN GAVLOSKI, MANITOBA PROVINCIAL ENTOMOLOGIST But there is barnyard grass treated with Puma and he asks why it survived. What went wrong? The answers start to come out.

“Rain?” That wasn’t it. “Timing?” Good point, we did spray a little late. “Temperature?” not this time around.

“What is an important thing on the label that we have to keep in mind?” Shaikh prompts. “The rate. Puma has two different rates. For barnyard grass and wild oats the application rates must be doubled.”

Point made. You have to know the weed history of the field and the characteristics of the spray you’re using. So today another group of agronomists has conferred and learned more of the ecological quirks that agriculture contains. Back into the wagon and off to the next lesson.

The wagon stops at a blue and white striped shade tent set up on one of the side fields and this year’s round of pupils takes their places on hay bales set there as seats.

The next presenter is entomologist John Gavloski and this year he has a guest. Jor-

dan Bannerman is an instructor from the University of Manitoba and he’s going to talk about parasitoid wasps, a very important group of insects that makes a living by killing many of our common crop pests.

“In the entomology part I have a four-year rotation where I use four major themes,” Gavloski says. “Insect monitoring and forecasting was the theme this year, last year it was insect identification. The other two are natural enemies and control. But every year different insects cause problems for farmers and I can’t leave them out. If we’re in a year where we’re doing biocontrol or basic identification I always put aside time to talk about insects that are causing trouble this season.”

The monitoring theme dovetails nicely with the first part of Gavloski’s presentation. There’s a new pest in the province, the cereal leaf beetle, and it’s a problem in wheat and oats. The attending agronomists get what may be their first look at the beetles as well as their larvae and hear about where they’ve been spotted and how they

travel. Gavloski tells them the beetle is only trouble when it shows up alone because if it’s accompanied by its nemesis, a parasitoid wasp, its numbers don’t swell to economic pest proportions.

Then Bannerman finishes the talk with an overview of parasitoids, what they are and what they do. Many of them are very small so you may not see them but you may find their victims, dried-out hulks that were once pests or mummified caterpillars. Gavloski concludes by talking about an Alberta program that breeds the right parasitoid to control the cereal leaf beetle. “If you see them let us know and we can help,” is the take-home message.

Bannerman’s talk also shows the close collaboration between the Manitoba Department of Agriculture, Food and Rural Initiatives (MAFRI) and the University of Manitoba. The Ian N. Morrison Research Farm belongs to them and so does the machinery and infrastructure. They also provide the labour since the people who do the farm work are usually summer students in agriculture or biology. There is also input from the Manitoba Pulse Growers Association and expertise from many of the producer groups.

The next stop is the soil fertility lesson where John Heard, Mitchell Timmerman and Marla Riekman hold forth. The soil people have a bit of a flair for the theatrical

so you may want to choose your hay bale carefully. One year they brought out a big cardboard sheet that they ran a fertilizing rig over. It showed where the solid granules or the liquid droplets landed when you ran the rig at different rates. This year is about soil run-off and there’s a sprinkler up front emptying into trays of different soil types. Some are bare while others have crop cover. A collecting jar picks up the run-off. There’s an umbrella in the front row. Don’t take a camera or writing pad.

Timmerman turns on the water and it pours forth. Some of it even gets into the soil trays where it runs through the samples and into the jars below. The collected water shows that different soil types in different places handle water differently. It also shows that protected soil with a crop cover erodes less. These are important concepts in soil conservation and input application.

The last stop is the crop disease display where Holly Derksen talks about root rots in soybean. Soybean is getting to be a popular crop in Manitoba so the more it’s grown, the worse its disease outbreaks will get. She also talks about canola because she’s been dealing with some of its problems as well. Blackleg is sneaking back so be on the lookout.

“Earlier in the season it can be hard to tell what’s blackleg, what’s root rot, what’s

insect damage or what’s environmental damage and it’s probably more than one thing in these fields,” she tells them. “But the plants were sent into the lab and tested.

They all came back positive for blackleg.”

The last lesson is done and everyone gets back in the wagon and heads for the main building. The evaluations are filled out and submitted. In the next couple of weeks all of those who make the crop diagnostic school function will begin reading them and the outline for next year’s school will start to take shape. But this season is nearly over and today’s group proceeds out the door to the parking lot and heads back home where they’ll practise what they’ve learned.

The diagnostic school is an effective way to improve the quality of agronomy here and it’s a great example of how the private sector can benefit from a public-sector service.

“It really improves our stature and our credibility within this sector because it connects those of us in MAFRI, the University of Manitoba and the commodity group specialists who lead the lessons with the over 400 top agronomy field scouts in Manitoba,” concludes soil fertility specialist John Heard. “But the ultimate beneficiaries are the farmers who receive better agronomic service and, further down the line, the consumers of food.” ■

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11/4/13 6:28 AM

machinery

Tractor withstood mysterious burial in manure Stolen Steiger was sold for salvage after recovery

By Dave Bedard, agcanada.com

F

or a few days in the summer of 2012 it may have been the most famous tractor in Western Canada, though it would never pull an implement again.

But a southern Manitoba equipment dealer who bought the 2009 Case IH Steiger 485, stolen and later scrapped for salvage, says the unit, long since dismantled for parts, could possibly have been put back in use — even after it languished for months completely buried in manure.

When it was reported missing on Dec. 21, 2010 from Leo’s Sales and Service in the RM of Rosser, just northwest of Winnipeg, the Steiger Quadtrac was valued at about $300,000.

Needless to say, the tractor had depreciated by the time it was found in early June last year. RCMP from Fisher Branch — about 150 km north of Rosser — followed a Crime Stoppers tip to a farm in the RM of Fisher, southwest of the town.

any case it turned out to be worth more as parts. The engine, transmission and rear end and other major components were all salvaged and sold.

“We thought (the damage) would be worse than that,” he said, noting a bit of rusting.

“Even the interior of the cab wasn’t that bad,” Chabot said. “We put the seat in a payloader we have here.”

Don’t expect answers to the lingering questions, though: How did the tractor end up in Fisher? And why was it then buried in manure?

Julian Friedrichs, 25, who operated the farm where the tractor was buried, pled guilty in December last year to a charge of possession of property (value over $5,000) obtained by crime.

Friedrichs’ former common-law wife, Christin Peter, 23, was also charged in 2012 with possession of the stolen property and was not convicted, according to RCMP. Provincial Court Judge Cynthia Devine gave Friedrichs a conditional discharge with 12 months’ probation

RCMP said they took out a search warrant, hired an excavator and, over the next couple of days, found the tractor “buried underneath a 12- to 15-foot manure pile on the property.”

RCMP photos of the dig were widely circulated. The tale of the tractor’s discovery made nationwide news and was the second-most viewed story on AGCanada.com in 2012.

The photos show a tractor in which the cab’s glass broke under the weight of the burial. “The pile of manure was like a sponge to water,” and water had collected in the unit’s major cavities, Gerald Grandmont of Leo’s later recalled.

The tractor’s insurer had already settled with Leo’s for the unit after it had disappeared, he said, thus the insurance company owned the recovered tractor. It was put up for salvage tender, thus wouldn’t be put back into service, he added.

However, the 534-horsepower tractor could conceivably have run again, according to Bernie Chabot of Chabot Implements of Elie, Man., which bought the Steiger from the insurance company for parts.

Service staff at the dealership hooked up a battery to the unit and were able to restart it, Chabot said. Two offers came in to buy the tractor whole, he said, but in

and 25 hours of community service, based on a joint recommendation from Crown and defence lawyers, and also ordered him to attend counselling.

Crown attorney Kathleen Tokaruk told the court Friedrichs admitted knowing the tractor was on his property and that it was stolen, but he has denied stealing it.

Defence lawyer Greg Gudelot said Friedrichs — who emigrated from Germany to Canada years earlier, bought the rural property and had tried since then to farm — “reluctantly” agreed to a request to keep the tractor there.

Lawyers at the December court hearing did not name anyone as having made such a request.

“I don’t know if he’s necessarily aware of why it was put there” in the manure, Gudelot told the judge, adding the tractor was never used on the farm and was buried “continuously” from when it arrived there.

“It doesn’t appear… that you’ve benefited in any way from having the tractor on your land,” whether through farm use or resale, Devine told Friedrichs during sentencing.

She noted he had “faced some financial disaster” on the farm and was in the process of “trying to pick up (his) socks.” The lawyers noted Friedrichs had no prior arrests or criminal record. n

Fisher Branch RCMP found a missing tractor in an unexpected location — a gigantic manure pile — following a tip.

Photos: Fisher Branch RCMP

24 CROPS GUIDE

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DECEMBER 2013

Analyst sees less corn, more soy in U.S. in 2014-15

Ritz plans changes to Plant Breeders Rights Act

By Terryn Shiells, CNS Canada

By Allan Dawson, Manitoba Co-operator

The United States’ corn crop is expected to be smaller in 2014-15 compared to this year, while soybean production should increase.

Speaking at the Cereals North America global grain conference in Winnipeg, Dr. Bill Tierney, chief economist with AgResource, projected U.S. corn production in 2014-15 would total 13.77 billion bushels, which compares to his estimate for the 2013-14 crop of 13.865 billion bushels.

Corn yields in the U.S. should be up a little bit next year, Tierney said, adding that planted area is expected to decrease slightly.

Though corn acres will be lower, Tierney expects producers in the U.S. will not cut corn acres dramatically for at least another two years because it will take that long for the market to find a real bottom.

He estimated the average U.S. farm price for corn would range between $2.80 to $5 per bushel in 2014-15, which compares with his 2013-14 estimate of $4.05 to $5.15/bu. (all figures US$).

U.S. soybean production may increase to 3.432 billion bu. in 2014-15, Tierney said, up from his 2013-14 estimate of 3.205 billion.

U.S. soybean acreage would be up slightly next year compared to this year, with yields also slightly higher, he estimated.

With better production in the U.S. and expected record-large crops out of South America, prices should continue to move lower.

He estimated the average farm price for soybeans in the U.S. to be $6.50 to $12/bu. in 2014-15, down from his estimate of $10.85 to $13.65 for 2013-14.

NEWS

Canada intends to sign on to an international convention to give increased variety protection to plant breeders, federal Agriculture Minister Gerry Ritz told the Canadian Seed Trade Association’s semi-annual meeting.

Ritz said the government plans to sign on to the International Union for the Protection of New Varieties of Plants convention (UPOV 91)

by Aug. 1, 2014.

UPOV is an international standard which provides variety protection for plant breeders. It has undergone three revisions since 1961, and Canada’s present Plant Breeders’ Rights Act is based on the 1978 UPOV convention.

Signing on to the convention requires parliamentary amendments to the Plant Breeders Rights Act. A Canadian Food Inspection Agency (CFIA) website says amendments in UPOV 91 contain new elements which are intended to facilitate a breeder’s ability to enforce his/her rights on protected plant varieties.

This has raised some concern that the signing on to UPOV 91 would restrict farmers’ ability to save seed for replanting.

It is also seen as a prerequisite to the introduction of end-point royalties, under which royalties would be collected when the farmer sells grain.

Ritz told reporters that UPOV 91 would attract more investment to plant breeding in Canada.

B:10.5” “At the end of the day we have to put it in place if we’re going to T:10” draw investment here in new seed varieties,” he said. “The biggest S:8” howl would be farmers can’t save seed. Well, they can’t save seed now if they sign a contract.” n

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Unsung hero.

WGRF RESEARCH UPDATE Western Grains Research Foundation (WGRF) is a farmer-funded and -directed non-profit organization investing primarily in wheat and barley variety development to the benefit of western Canadian producers. Through investments of over $57 million, WGRF has assisted in the development and release of more than 100 new wheat and barley varieties over the past decade and a half, many of which are today seeded to large portions of the cropland in Western Canada. WGRF also invests in research on other western Canadian crops through the Endowment Fund. In fact, since 1981 the WGRF Endowment Fund has supported a wealth of innovation across Western Canada, providing over $26 million in funding for over 230 diverse research projects.

Stopping cleavers Knowing the enemy could lead to better control

BY CLARE STANFIELD

I

t’s just another bad joke to a canola farmer.

Q: How do you kill a cleaver? A: You don’t.

OK, you definitely try, and sometimes you’re even successful, but cleavers just keep on coming — even if it seems that you get them just at the right time — and they are getting to be a bigger problem every year.

All of that got Chris Willenborg wondering: what do we really know about cleavers populations, their germination and emergence patterns in Western Canada and, if we knew more, could we find better ways to control them? So, with funding from the Western Grains Research Foundation, he and his team recently began a three-year study to find out.

Willenborg is an assistant professor in the College of Agriculture and Bioresources at the University of Saskatchewan. He says it comes down to knowing more about the recruitment biology of cleavers. “That’s the term to describe how a plant moves through germination and emergence and becomes a juvenile — it has to survive those three steps to become a viable seedling.”

He says that while researchers in Europe have a fair bit of information on how their growing conditions affect the recruitment biology of cleavers, and the U.S. has a little bit of data specific to some regions, there has been very little recent research into how the growing conditions of Western Canada affect the germination and emergence characteristics of cleavers here.

“The main thing is that we’d like to be in a position to know what’s driving recruitment biology here,” says Willenborg. Temperature and moisture are part of it, naturally, he says. But what else is at play, in terms of our weed control and cultural practices, that is driving germination and emergence, and what can we learn from that to develop better control strategies?

Getting to know you There are two main species of cleavers: Galium aparine, otherwise known as catchweed bedstraw, is common in Europe (less so here), and Galium spurium (false cleavers), is believed to comprise the majority of populations in the Canadian West. Having said that, populations of cleavers on the Prairies could contain both species in varying proportions.

Willenborg and his team are trying to find out the species composition of various cleavers populations here, along with the recruitment biology of each species, and then use that information to come up with improved control strategies.

To that end, his team has collected eight populations of cleavers from heavily invested areas — two from Europe and six from across Western Canada. They are being grown on two sites just north of Saskatoon, in replicated microplots (1x2 metres), with spring and fall seeding timings.

26 CROPS GUIDE

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“It’s called a ‘common garden’ approach, which allows us to eliminate the environmental variables,” says Willenborg.

It means that each population is taken out of its “natural” (or home) environment and grown side by side with other populations so that they all experience the same growing conditions. The idea is that, those things being equal, any differences in responses to things like seeding date, herbicide choice and application timing, will be easier to identify and measure, and can be chalked up to genetic differences between the populations and not to environmental conditions.

The plots were established in the summer of 2013 and with only one year in, he says the data is inconclusive.

“But we can see differences between the populations in germination speed and emergence.” And those differences can be quite stark. “If you take the fastest- versus the slowest-emerging populations, there can be three, four even five days between them,” says Willenborg.

“We’re developing genetic tests to determine what portion of the populations belongs to each species,” he says. “We’re looking to see if they have differences in emergence, and also morphological characterization — such as leaf area, biomass, height and so on — again, to see if there are differences between the populations as these things may indicate difficulties in control.”

Identifying the species mix in populations is the first goal of his research. The second is to identify better control measures.

Emergence is really critical, says Willenborg. Current practice for cleavers control in canola is a pre-emergent burn. But there often seems to be a second flush at, or just after, crop emergence and it’s difficult to spray again because most herbicides are registered only up to the third or fourth whorl and, by the second flush, it’s too late.

“We want to know the efficacy of current herbicides on bigger weeds, past the third whorl,” says Willenborg.

“Do any of them fail, and at what growth stage do they fail?” And, of course, at what rate and timing are herbicides effective on cleavers, but still safe on the crop?

To this end, there are two things his team is looking at. “First, the response of some populations to current herbicides — that work began this fall. Second, we’ve already started to look at a few new options for control.”

By “new” Willenborg doesn’t mean new active ingredients. Rather, the team is looking at existing broadleaf actives, like quinclorac and clomazone, not currently registered for cleavers, as well as mixes of these and existing registered products.

This goes hand in hand with species composition within populations. There is some prior evidence, for example, that the efficacy of non-selective products, like

DECEMBER 2013

WGRF

glufosinate, is more variable (weaker) on the Galium aparine species of cleavers than on other weeds, but no one really knows if that’s also true of the Galium spurium species. In other words, the response of a specific population of cleavers to certain herbicides may vary based on its species mix.

If, as Willenborg hopes, this research leads to a DNA test to determine the species mix within a population, then it may be possible for farmers to tailor their control measures accordingly — and maybe even have new herbicide mixes to choose from.

Such a DNA test could provide growers with resistance information, too. “We believe we have Group 2 herbicide resistance in Galium spruium,” says Willenborg. “But if another grower has populations comprised mostly of G. aparine, and

Big tent funding at work

Cleavers just keep on coming. outcrossing rates between the two are low, the Group 2 product could still be used on the G. aparine population. So, understanding outcrossing rates, about which little is known, and species biology could have a large impact on control.”

Willenborg says that Alberta’s most recent survey shows that cleavers are the No. 3 weed in that province, and it’s No. 9 across the Prairies. With the massive increase in canola acres and domestic crush capacity, farmers simply need better ways to deal with cleavers in canola, and he hopes to be able to provide them with that. ■

Chris Willenborg’s cleavers research is one of the newest beneficiaries of the cofunding partnership established about a year ago between the Western Grains Research Foundation and Saskatchewan’s Agriculture Development Fund. A third co-funder, the Saskatchewan Canola Development Commission, rounds out the slate of public institutions kicking much-needed dollars into this important work.

“From the point of view of a researcher, it streamlines things so much when you can send in a single application and come out with multiple funders,” says Willenborg. “I think it leverages grower dollars very well; they are the major beneficiaries in the end.”

Cultivating Growth Increasing Endowment Fund expenditures for the benefit of western Canadian crop producers

$15 million

in new funding to crop research over four years

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100 new projects

Research

priorities identified by producers

Leveraged to $30 million by co-funding

New research funding examples:

Weed Management

Blackleg & Clubroot in Canola

Improving Oat Nutrition

Pulse Disease Management

Graduate Student Scholarships

Fusarium Resistance in Cereals

WGRF is committed to utilizing the Endowment Fund for the benefit of western Canadian crop producers by managing and investing the fund in order to provide future long-term benefits to producers. To find out more, visit us online.

www.westerngrains.com WGRF Endowment Fund Half-page Ad_final.indd 1

2013-09-12 8:34 AM

CROP PROTECTION

Integrated weed management After several decades of chemical control, there’s a growing need to consider a more holistic approach to weed control

Warren libby President of Savvy Farmer

I

was challenged to write an article about integrated weed management (IWM). Apparently, there is some frustration out there that farmers are not lining up to adopt the principles of IWM even though the benefits of IWM are well understood.

I must admit, I had to do some research to get a better handle on exactly what is involved with IWM these days, why we should all adopt these principles, and why we sometimes don’t. So of course I turned to Google.

After checking out the many definitions of IWM, I realized that many of us have been practising some form of IWM all along.

I was born in 1951 and raised on a typical small dairy and mixed crop farm in southern Ontario. Unlike kids today, I never had to worry about finding summer work. I knew what I would be doing every day… weed control.

Integrated weed management back in those days was actually quite complicated. We plowed in the fall and disked a couple times in the spring to prepare the seedbed and kill overwintering weeds. We had our saved seed cleaned at the local elevator to remove weed seeds and always rotated fields. We planted in wide rows to allow the cultivator to get through and then we kids followed with hoes to clean up what the cultivator missed and to remove weeds too close to the crop for the cultivator to reach.

Even on our small farm, by the time we finished hoeing the fields, new weeds had germinated and it needed hoeing once again.

Later on, in the dog days of summer, Grandma would hand us burlap bags and send us into the grain fields to cut the tops off curled docks and sow thistles going to seed and stuff them into the sacks to be burned later. But we never really got ahead of the weeds, and at harvest it was often difficult to tell whether we had a field of weeds or a field of wheat.

Looking back, I can only now imagine the millions of new seeds we allowed to mature and drop to the ground. And of course, being a dairy farm, we generated lots of nice fresh manure that went right back onto all those fields (after all, who could afford commercial fertilizer) adding yet another source of weed seeds for the next crop. Yes, that was IWM in the 1950s.

Then something truly revolutionary happened. The first synthetic herbicide 2,4-D, became widely available in the mid- to late 1950s and then in the early 1960s atrazine was introduced as the first soil-applied selective herbicide ever. For the first time, weed control now included the use of synthetic chemicals.

During the next 20 years the big petrochemical companies and phar-

IWM — a holistic approach using a wide variety of weed control management techniques designed to control weeds without total reliance on any one control method.

Basics of IWM Pre-Seed

Eliminate weeds early: Use a burn-down treatment (e.g. glyphosate) or tillage to eliminate weeds, especially winter annuals, before planting. Include a pre-emergent residual herbicide to provide early-season control to allow the crop to get off to a good start without weed competition. If herbicide-resistant weeds are present, include a tank-mix partner using different mode of action.

Seeding

Sow certified seed: These have a lower tolerance for noxious weed seeds.

Help the crop compete: Higher seeding rates and narrower row spacing can increase the crop canopy and help the crop outcompete many weeds.

Consider seeding date: Early seeding helps the crop outcompete late-geminating weeds. Late seeding allows the use of tillage or burn-down herbicides to control early germinating weeds. Consider your weed problems when considering planting dates.

Fertility: In-row starter fertilizers give crop seeds an advantage over weeds.

In-Crop

Multiple modes of action: Use in-crop herbicide combinations with multiple modes of action. This strategy is only effective if the herbicides chosen have overlapping weed spectrums, that is, more than one mode of action controls the target weeds.

Full rates: Cutting rates can contribute to the development of weed resistance.

Adopt a no-seed policy: Scout all fields more than once during the season.

Do not allow any weed suspected of being resistant to a herbicide to mature and spread seeds. If necessary, spot spray suspicious patches of weeds.

Strategy

Keep records: Keep weed management records for every year and for every field.

Know your weeds. Record weed populations, herbicides used, and results. A free form can be downloaded from www.savvyfarmerlite.com.

Crop Rotation: Allows the use of different herbicides, planting dates and harvest dates, which provide opportunities to address special weed issues.

Herbicide Rotation: Avoid two consecutive applications of herbicides with the same mode of action.

Boundary Management: Control weeds in ditches, around sloughs and between fields to limit the spread of perennials like Canada thistle.

Manure Management: Spread only well-rotted manure (min. five months old).

Equipment Cleanliness: Clean all equipment when moving from a field suspected of having resistant weeds, even if the weeds are not in the seed head stage.

Seeds can easily be transferred on tires.

Do you have a crop protection issue you’d like Warren to write about?

Send any suggestions to gord.gilmour@fbcpublishing.com.

28 CROPS GUIDE

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December 2013

maceutical companies developed dozens of herbicides, which greatly simplified our lives and reduced our reliance on IWM. While these synthetic herbicides were tremendous advancements in weed control, they weren’t perfect.

Few, if any herbicides controlled all weed species in a typical field and some had the nasty habit of setting the crop back. Farmers wanted and needed something better to control their weed issues, and science didn’t disappoint, launching perhaps the most important weed control technology of our generation — herbicide-tolerant crops.

The first glyphosate-tolerant crops were introduced in 1996 and after a shaky start; farmers came to appreciate the benefits including simplified and often better weed control, less crop injury, lower herbicide costs, reduced herbicide carry-over problems, and potential environmental benefits.

And despite objectors with their own agendas, after nearly two decades of planting herbicide-tolerant crops, the only real issues that have arisen are the predicted development of weed shifts and selection of resistant weed biotypes. This new technology was so easy, so effective, and so cheap; achieving a weed-free field at harvest was an expectation, not a hope.

Imagine, near-perfect weed control without cultivating, without hoeing, and no more rouging. We could forget about fallowing, burning, and crop rotation. In other words we could forget about IWM altogether and still achieve almost perfect weed control. But those days are now virtually over. An application of glyphosate will no longer guarantee a clean field and weed control will again become more complicated. Glyphosate needs help and that help will undoubtedly come in the form of integrated weed management.

We already know most of the principles of IWM and have practised several of them over the years, but perhaps decreasing so in recent years due to the convenience and effectiveness of glyphosate. Glyphosate, one of the greatest weed control innovations since the invention of 2,4-D, has allowed us to neglect some of the more basic good agronomic practices we previously used as part of our overall weed control strategy.

As a bit of a refresher, the chart on the facing page lists some of the more common IWM practices. Not every technique will make sense on every farm, but the more of these tools you can incorporate into your weed control strategy, the fewer weed control problems you will face in the future.

That’s all there is to IWM. Common sense, sound agronomic practices for sustainable weed control. It isn’t particularly difficult; we just need to do it a little better. n Warren Libby is president of Savvy Farmer, a web-based service for farmers and crop protection dealers. He previously held leadership positions in several crop protection companies and is the former chairman of CropLife Canada.

NEWS

Co-ops seal deal for Viterra stores, will shut two Fifteen Viterra crop retail outlets on the Prairies will soon fly the banners of their communities’ local co-ops, while operations at two others will be wound down.

Federated Co-operatives Ltd. (FCL) recently announced it has closed its deal to buy the fertilizer, seed and agriculture chemical supply centres from Viterra, the grain-handling arm of Glencore Xstrata.

FCL said it picked up federal regulatory approval for the sale at the end of October.

Under what it describes as a “two-step” deal, FCL will now transfer the sites’ ownership and operation to local retail co-ops.

Of the 17, seven each are in Saskatchewan (Canwood, Cupar, Lloydminster, North Battleford, Prince Albert, Strasbourg and White Star) and Alberta (Barons, Claresholm, Crossfield, High River, Manning, Stettler and Viking) and one is in northwestern Manitoba, at Roblin.

FCL and the local co-ops “have spent significant time assessing the viability of each site,” FCL said.

Coming out of that review, all but two of the 17 will be transferred to the local co-ops. Those remaining two are at Leoville, Sask., about 150 km northwest of Prince Albert, and at Grimshaw, Alta., about 25 km west of Peace River.

FCL said it will manage the Grimshaw and Leoville locations for now but will “phase out operations during the next few months.”

Viterra earlier announced plans to demolish its old 4,760-tonnecapacity elevator at Grimshaw and replace it with a new 30,000-tonnecapacity high-throughput elevator. A Viterra spokesman said the company had no plans to build an ag retail site with its new Grimshaw facility.

“All but just a few” of about 60 employees at the 17 affected retail sites have agreed to join local Co-op ag teams, FCL said.

Local co-op employees now plan to contact former Viterra customers to discuss their farm supply needs and will be “encouraging them to become Co-op members,” FCL added.

DuPont Pioneer expanding Manitoba research centre Seed and biotech firm DuPont Pioneer plans to dial up its crop-breeding and development capacity at its southern Manitoba research centre.

Pioneer’s Canadian arm says it has budgeted $2 million for a facility expansion including a new greenhouse for its multi-crop research centre at Carman, Man., about 75 km southwest of Winnipeg.

The expansion, which Pioneer said it’s now completing, is expected to support “year-round research on high-yielding, highperforming canola hybrids, as well as expand corn and soybean breeding and testing activities,” the company said in a release.

Canola-breeding work will focus on developing “high yield and herbicide resistance as well as shatter and sclerotinia resistance traits and other Pioneer Protector traits,” Pioneer said.

“Adding state-of-the-art greenhouse capacity at our canolabreeding centres is critical to enabling rapid delivery of products that meet the needs of western Canadian growers,” Pioneer research director Dave Charne said in the release.

The Carman centre also houses early-maturity corn- and soybean-breeding programs.

Pioneer, in its release, said it believes corn and soybeans “could become widely established rotational crops in Western Canada over the next decade” and the expansion will help “serve growers’ evolving needs.”

The Carman centre is one of three on the Prairies for the company, including facilities at Edmonton and Saskatoon.

Iowa-based Pioneer last year set up a new office for Western Canada in Saskatoon, with its eastern office still at Chatham, Ont. Pioneer’s global headquarters for canola breeding is at Georgetown, Ont. and its Canadian head office is now run out of DuPont Canada’s headquarters in Mississauga.

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29

canola production

Tillage spreads clubroot. Period Clubroot is a soil-borne disease. The more that soil moves around, either on tillage equipment or by wind and water erosion that increases with tilled soil, the faster we’ll see clubroot spread B y J ay W h e t t e r

Y

ou know the benefits of zero tillage. It reduces the number of equipment passes in a field, thereby reducing fuel, manpower and wear-and-tear costs. It increases soil microbial and faunal populations, soil organic matter and overall soil health. And it reduces soil loss to wind and water erosion.

Did you know that zero tillage also reduces the spread of clubroot?

“Anything that moves soil also moves clubroot,” says Clint Jurke, agronomy specialist with the Canola Council of Canada. “So, to turn that around, anything that reduces the movement of soil, reduces the spread of clubroot. Zero tillage is an important step in clubroot management.”

An important add-on to this point is that clubroot, being a soil-borne disease, has to be managed in all crops, not just canola. “Canola is the only major crop in Western Canada that is susceptible to clubroot infection, but clubroot prevention and management needs an all-crop everyyear approach,” Jurke says.

Clubroot resting spores have a half-life of about four years — meaning that about half the spores in a field will die after four years — but spores can live in soil for up to 20 years. They don’t need host plant material to survive.

Tillage at any time of the year and before or after any crop will move clubroot-infested soil around a field and throughout the farm.

Anything that reduces the movement of soil, reduces the spread of clubroot. Zero tillage is an important step in clubroot management.

— Clint Jurke

Stephen Strelkov and colleagues set up these dust samplers along fields known to have higher levels of clubroot. As many as 220,000 spores per gram of soil were found in some samples.

Source: Stephen Strelkov

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Tillage tools can hold a surprising amount of soil at any one time. It is common to have 100 pounds of soil on the frame, in wheel wells and on knives and sweeps.

Tillage tools pick up this soil and drop it in other parts of the field, and in other fields. “That is why we encourage growers to clean tillage tools, drills and tractors between fields,” Jurke says.

It can take up to six hours to scrape off soil, pressure wash and then disinfect a field tool. “We know that doing all three steps isn’t really practical, and few growers are going to take the time to do them,” Jurke admits. “But even just the relatively simple job of brushing off the large deposits of dirt can remove 90 per cent of the soil on a tool, and therefore reduce 90 per cent of the clubroot movement.”

Zero tillage, to add to its benefits, eliminates the need for this task entirely. “You still have the drill to keep clean, but zero tillage means you don’t have to perform the extra sanitation required after each pass with the cultivator or discer,” Jurke says.

More than 200,000 spores Stephen Strelkov, professor and clubroot specialist with the University of Alberta, has done a few studies recently on soil movement as it relates to the spread of clubroot. Each year in Alberta, clubroot spreads to new counties and to more and more fields within counties.

Soil movement is key to that spread. Soil on equipment remains by far the most significant vector for moving clubroot-infested soil, but Strelkov is starting to understand how wind and water erosion can also play a role.

Strelkov and colleagues have set up dust samplers along fields known to have higher levels of clubroot.

“Resting spore concentrations as high as 220,000 spores per gram of soil were found in some of the dust samples,” he says. Strelkov’s surveys have also found clubroot spores in water runs.

Clubroot spores are much smaller and lighter than soil particles. Therefore anything — tillage, harrowing, etc.

— that encourages wind or water erosion of that soil will also move clubroot spores.

“That is why zero tillage is an important part of an integrated clubroot management strategy,” Strelkov says.

Jurke emphasizes again that zero tillage and the overall prevention of soil movement has to be done in all years and all crops — not just in canola crops — to keep this serious disease contained. “If we rely entirely on resistant varieties to manage clubroot, we will see the effectiveness of these genes reduced,” he says. “An integrated approach, which includes zero tillage, will reduce the spread of clubroot spores, help delay the increase in spore load across whole farms, and help keep these genes working longer on more acres.” n Jay Whetter is communications manager with the Canola Council of Canada. For more on this topic, visit clubroot.ca.

Sign up for the CCC’s free and timely Canola Watch agronomy updates at www.canolawatch.org.

Clubroot update

Alberta The epicentre of the clubroot outbreak is Alberta, where it’s long been present at low levels.

The first appearance was on susceptible crops in home gardens in the 1970s, in the central part of the province. By the early 2000s heavy infestations on market garden crops were being found.

The first appearance on canola crops was in 2003, when a dozen fields northwest of Edmonton in Sturgeon County showed symptoms.

Since then the provincial government has been actively searching for infections through an annual field survey, beginning in 2004. In that time they’ve checked more than 6,000 fields and have found the disease present in more than 800.

The most drastically affected regions of the province remain around Edmonton, though infections have been found in southern Alberta.

This fall in Manitoba two canola fields were confirmed with clubroot symptoms on plants. The previous year, clubroot was confirmed in two soil samples in the province, but plant symptoms were not observed.

Like Alberta, there’s a longer history of the disease because of horticulture production in the province. It was first detected in Manitoba in vegetable crops in 1925, but this is the first time it’s been seen on canola.

The provincial Agriculture Department is telling growers the key is to become more aware of the disease, what it looks like, how to scout for it, and how to prevent its spread. With early detection, use of resistant varieties and equipment sanitation practices to keep it from moving around, growers can manage the disease.

MAFRI encourages Manitoba canola growers to assume they have clubroot within 50 km of their farm, and act accordingly to prevent the spread of the disease. Clubroot spreads primarily by soil movement on machinery. It is a soil-borne disease, not a canola residue-borne disease, so be mindful of soil movement in all fields, not just those seeded to canola.

Saskatchewan Next door in Saskatchewan, the first hint of clubroot was in 2008, when it was detected in a soil test in the west-central part of that province.

Then there was a reprieve, until this fall, when the disease was observed on a live canola plant, an unwelcome milestone in the disease’s development, according to Brett Halstead, head of the Saskatchewan Canola Development Commission, who told media at the time that the development was concerning.

“We’re very dissappointed, but we knew it was probably going to be happening someday,” Halstead told a reporter.

Meanwhile the provincial government says the infection might just be in two RMs right now, but all farmers in all areas should be vigilant. Extension staff are working with affected farmers to develop management plans, based on best management practices from the Saskatchewan Clubroot Management Plan.

North Dakota On the other side of the Medicine Line, North Dakota State University plant pathologists have identified the disease clubroot in a Cavalier county canola field.

Northern Canola Growers Association executive director Barry Coleman says with clubroot found in several areas of Canada it’s not unexpected to find clubroot moving into northern North Dakota. He says canola growers should take precautions to help prevent the spread of the disease.

“Some of the things they talk about are minimizing soil movement from field to field, there are clubroot-resistant canola varieties that can be used.

They talk about controlling volunteers in your rotation crops like wild mustard that can help propagate clubroot. They also talk about having a little longer rotation. Some growers have a two-year rotation, they might encourage a three-year rotation or sometimes even a four year. So there are certainly things that can be done to manage the disease.”

Clubroot is slowly but surely spreading across the canola-growing region since the first outbreak a decade ago.

Learn more by visiting

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CROPS GUIDE

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DECEMBER 2013 31

MARKET DEVELOPMENT

Customer concerns Protein levels key to maintaining Canada’s wheat brand in a competitive global marketplace

BY ELLEN GOODMAN, CIGI

D

uring the past year Cigi (Canadian International Grains Institute) has been working with the Canadian industry to investigate a potential decrease in the gluten strength of Canada Western Red Spring wheat following concerns expressed by international customers.

Although the issue went public earlier this year, Cigi had previously been responding to customer concerns for some time, according to Rex Newkirk, Cigi vicepresident of research and innovation. “We were already collecting CWRS samples to look at the impact of fungicides, environment, growing location, and the varieties themselves that might impact quality. We want to identify the causes of any issues and find the remedies.”

A recently formed steering committee with representation from industry, producers, and researchers provides

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important feedback and helps keep the work focused, he says. The Western Grain Elevator Association, representing grain companies, has been instrumental in the process, committing some funding toward this work in support of their customers’ needs.

Cigi has contracted test plots in Manitoba, Saskatchewan and Alberta and is conducting an extensive set of tests on all high-grade wheat samples that are not affected by degrading factors. The tests include wheat analysis, laboratory milling, flour analysis, and baking analysis in Cigi’s test bakery.

“Quality traits such as protein development, water absorption, kernel hardness, rheological properties, and baking attributes are being studied in detail,” Newkirk says. “We’re looking at what production practices have changed over the last few years that might affect quality.”

Trait Stewardship Responsibilities Notice to Farmers He says that to get the best results the CWRS crop plots will be tested over the course of up to five years. However, because customers of CWRS need answers to their concerns more immediately, preliminary results are expected in early 2014. “We have some potentially interesting results but it’s too soon to discuss them. One of the challenges is that we don’t want to draw any conclusions with a single set of data as it could be an anomaly and we may not get the full answers. The first year helps us narrow our focus so the results show a number of replications but even after one year you have to be careful of factors like weather and disease that can significantly affect the results.”

The work is also about maintaining and understanding quality as a long-term investment, he says. “Right now we have the gluten strength concern to deal with but in the long term we want to keep an eye on anything that can potentially impact the customer.”

Cigi’s years of experience working with wheat makes it a fitting choice to conduct this investigation, he says. In 2012, Cigi also collaborated with Kelburn Farms to conduct an initial study of the impact of fungicide application on CWRS wheat quality for

bread production. One-acre plots of a single variety were grown with various combinations of fungicides applied at different stages. The wheat was milled and analysed at three and six months post-harvest and reanalysed recently at 11 months post-harvest.

“Results show that with increased storage time gluten (protein) strength increases so this information will be helpful in terms of the current research,“ he says.

Cigi also partnered with the Grain Farmers of Ontario in a multi-year and location study which examined management practices on Ontario soft winter wheat quality.

Results from that study were published by Cigi and GFO in 2011.

Newkirk says that historically CWRS has shown some variability, with gluten strength even being too strong occasionally. “Gluten strength is about being at the right level.

There’s always a little variability but the main thing we want is consistency. Canada’s reputation is staked on it and the bar is set very high as a result so I think we may get complaints before other exporting countries would if some loads don’t meet customers’ expectations. So really we’re trying to see what it takes to maintain that consistency and quality.” ■

Monsanto Company is a member of Excellence Through Stewardship® (ETS). Monsanto products are commercialized in accordance with ETS Product Launch Stewardship Guidance, and in compliance with Monsanto’s Policy for Commercialization of Biotechnology-Derived Plant Products in Commodity Crops. This product has been approved for import into key export markets with functioning regulatory systems. Any crop or material produced from this product can only be exported to, or used, processed or sold in countries where all necessary regulatory approvals have been granted. It is a violation of national and international law to move material containing biotech traits across boundaries into nations where import is not permitted. Growers should talk to their grain handler or product purchaser to confirm their buying position for this product.

Excellence Through Stewardship® is a registered trademark of Excellence Through Stewardship.

ALWAYS READ AND FOLLOW PESTICIDE LABEL DIRECTIONS. Roundup Ready® crops contain genes that confer tolerance to glyphosate, the active ingredient in Roundup® brand agricultural herbicides.

Roundup® brand agricultural herbicides will kill crops that are not tolerant to glyphosate. Acceleron® seed treatment technology for corn is a combination of four separate individually-registered products, which together contain the active ingredients metalaxyl, trifloxystrobin, ipconazole, and clothianidin. Acceleron® seed treatment technology for canola is a combination of two separate individually-registered products, which together contain the active ingredients difenoconazole, metalaxyl (M and S isomers), fludioxonil, thiamethoxam, and bacillus subtilis. Acceleron and Design®, Acceleron®, DEKALB and Design®, DEKALB®, Genuity and Design®, Genuity Icons, Genuity®, RIB Complete and Design®, RIB Complete®, Roundup Ready 2 Technology and Design®, Roundup Ready 2 Yield®, Roundup Ready®, Roundup Transorb®, Roundup WeatherMAX®, Roundup®, SmartStax and Design®, SmartStax®, Transorb®, VT Double PRO®, YieldGard VT Rootworm/RR2®, YieldGard Corn Borer and Design and YieldGard VT Triple® are trademarks of Monsanto Technology LLC. Used under license. LibertyLink® and the Water Droplet Design are trademarks of Bayer. Used under license. Herculex® is a registered trademark of Dow AgroSciences LLC. Used under license. Respect the Refuge and Design is a registered trademark of the Canadian Seed Trade Association. Used under license. ©2013 Monsanto Canada Inc.

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raising livestock:

More about being a Cattleman, less about being a cowboy.

Canadian Cattlemen invites you to subscribe to our free enews service.

Stay up to date on the latest news from the livestock industry, from your region and across the nation. Visit our website for details.

www.canadiancattlemen.ca

CROPS GUIDE

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DECEMBER 2013 33

MARKETs

Record yields, bumper crops, and not-so-record prices

D

espite a slow start to the planting season, yields have been nothing short of phenomenal. Not only are Canadian grain stocks building, but global stocks of grain are also increasing this year.

With record global production of corn, wheat and soybeans weighing on prices, the best time to sell was yesterday.

Take a drive across the Prairies and you will see long rows of white temporary storage units stretched from field to field. Once those bags are cleaned up, farmers will then focus on emptying their bins to make room for next year’s crop. This situation leaves little room for an improvement in basis levels any time soon. In fact, it could backfire waiting for basis levels to narrow at the end of the 2013-14 crop year.

The point is, it is not going to get a whole lot better by waiting. There will be the odd bounce, but strong demand will not be enough to sustain a sizable rally. When futures prices do rally, basis levels will likely deteriorate, keeping cash prices at bay. This is occurring as this year’s huge volume of grain is creating a logistical challenge for moving it by the end of the crop year.

Unfortunately, sometimes it’s hard to see the forest for the trees.

Some farmers get so hung up on price they do not see the pot of gold at the end of the rainbow. The rainbow is this year’s bumper crop. The pot of gold is the near-record revenues. The trees are the lower grain prices.

Corn growers in the U.S. Midwest have built grain bins in recent years, so they were intending to store their corn until prices improved. However, yields especially in the eastern Corn Belt have exceeded earlier expectations by a country mile. Once harvest picks up and the bins are full, the corn will eventually come to market despite farmers’ best efforts to hold out for higher prices.

By David Drozd Senior analyst and president, Ag-Chieve Corporation

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If private trade estimates are realized for a two-billion-bushel U.S. corn carry-out at the end of the 2013-14 crop year, feed grain prices should remain under pressure until there is a significant reduction in available supply.

Some would like to have their cake and eat it too. Who wouldn’t?

And as much as procrastinators can get lucky in a bull market, let’s remain focused. You have a bumper crop, your neighbours far and wide have a bumper crop — and yet some are holding back looking to sell grain at last year’s prices?

This is the year to have been nimble and quick in selling your grain.

Prices started to slip as soon as the combine monitors began flashing record yields. You may be disappointed you didn’t sell more grain sooner, but don’t be too hard on yourself. This can still be a very profitable year.

As an example, let’s assume you budgeted for a canola yield of 35 bushels per acre, but produced a 45-bushel crop. By selling the extra 10 bushels an acre for an average price of $10.50 per bushel, this generates an additional $105 per acre in gross revenue.

The point is, do not get so focused on price that you miss an opportunity to manage risk and lock in a profit.

Here are a couple of strategies you can use to take advantage of opportunities in the marketplace.

1. Sell production using a deferred delivery contract to benefit from the carry.

• This allows you to lock in a higher price by capturing the carry in the market and possibly a better basis.

• The cost of carry is the net cost of holding a cash market position. For physical commodities, the cost of carry includes storage, insurance, and interest costs.

• When a market has a carry, the deferred futures contracts are higher priced than the nearby contracts. This indicates that mar-

ket has all the grain it needs right now, but it is paying you to store and deliver it later.

• For example, you could sell spring wheat today for $6.45 or lock in a price of $7 for delivery in January-May 2014. An additional $.55 per bushel on wheat can add up to another $30-$45 per acre.

• A common mistake is to leave the grain unpriced, only to watch the deferred prices erode down to today’s spot prices.

2. Sell production in the cash market today to take advantage of an inverse.

• In the context of a futures market, an inverse occurs when the price of the nearby futures contract is higher than the deferred contracts. This usually occurs when a commodity is currently in short supply, which drives up prices in the short term.

• An inverted market indicates the production is needed now. Once the upfront demand is satisfied, the inverse will disappear.

• The soybean market is inverted.

The nearby futures contract has the highest price and each deferred contract is sequentially lower until the end of the 2013-14 crop year. This market is not paying you to store soybeans, which implies you should sell your production sooner than later.

Whatever you do, don’t make the mistake some farmers make by putting on a Texas hedge. This is where they are long grain in the bin and also long the futures market. Their thinking is the market can’t go any lower, so they buy paper with the intention of making back the missed opportunity of not selling their production at the higher levels. This is not a hedge. It is a speculative position. To be long both the paper and physical is a recipe for disaster.

Marketing is all about managing your risk. If you have unpriced grain in the bin, you are innately speculating that prices will rally. How much grain are you willing to gamble with? n

Growing today for tomorrow.

Farming, the biggest job on earth.

The population is increasing, but farmland isn’t. So the pressure is on for farmers to maximize yields and produce high-quality crops to meet the needs of a growing planet. This is why BASF is working with farmers to create chemistry that will increase the yield and quality of crops. With help from BASF, it’s in the farmers’ hands.

To learn more about BASF’s commitment to sustainable agriculture, check out our videos at agsolutions.ca/sustainability.

©2013 BASF Canada Inc. All Rights Reserved.

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2013-11-05 10:25 AM

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