Canada/Ontario – Observations, musings and the price of land

The previous year many were getting stuck in the parking lot leaving due to all the snow. As they say “what a difference a year can make“. As Canadians we’re a “winter people“ and here in Ontario living in the lee of a very large Great Lake (Huron) know about lots of snow. So this year of the non-winter (never had to blow snow once) although mostly welcome and a great mood lifter also somewhat unsettling. At the annual meeting lots of discussion of conditions allowing manure spreading that had begun or was going to, some spring grain maybe even in and how early you could plant corn and have it make sense. However perhaps inherent in farmer’s psyche and particularly in a northern climate lots of thoughts that there had to be some kind of retribution for this great weather.

This view on the weather probably extends to the markets. A general upbeat mood of a reasonable run with opportunity for it to extend for a good part of 2012 but again the cautionary note of what it might bring. If we take a look at the OMAFRA Weekly Hog Market Facts compiled by John Bancroft, Market Strategies Program Lead, Stratford OMAFRA [email protected]. We see a nice string of respectable margins.

These favourable margins along with some other factors as Jim Long has noted for North America is also bringing some moderate expansion in my small patch. How it seems to be evolving is the survivors with everything held together with baler twine and number 9 wire, now have to do some renovations! In that exercise many are adding crates under the pretext of extending their weaning age to boost weaning weights. All makes sense but I expect the result will be the squeezing out of another 5 per cent plus sows in the same operation. Producers can’t help themselves. They hate extra empty space. We don’t appear to have reached “irrational exuberance“ but the march seems to have started.

Coming close to the end of the traditional producer meetings season, some observations. Producer meetings I find a reasonable method to get your finger on the pulse of an industry by who’s there, by who’s not there and picking up the general mood. In February I attended one meeting whether by a combination of timing and agenda that appealed to producers or what, was one of largest producer meeting I’ve attended in some time. Not only that but it had a high concentration of actual producers rather than the usual suspects of us serving the industry. The other encouraging note was a considerable number of younger producers. Much has been made of our aging industry and the lack of new blood and entrants into it. I believe I’m seeing with the general current of optimism, a returning farm generation that has been out in the “wide world“ doing various things and reconsidering the gig the “old man“ has as perhaps not a bad one. With that return seeing the innovation & enthusiasm of the young and their embrace of technology. I’ve tried to keep up moving to email and with an increasing number text as the preferred method of communication. However I heard a great discussion at a local county pork producers meeting on the merits of Twitter to gather information, insights and even by its chatter and volume garner a sense of market moves. Clearly I have more scrambling to do up the learning curve of technology. So I’m not suggesting that, we are being overwhelmed by young people into our industry but I believe I’m seeing signs that we may be getting enough. Also they’re figuring out that by evolving solid plans with the embrace of technology and sound management the rewards to this industry can be found.

Finally land prices. A dear friend, once explained there are two important things in business. “How you get in and how you get out“. He went to suggest that actually the second part the “exit strategy“ in fact might be the most important and his addendum that it needed to be something other than death! Well Jim has suggested correctly that we’ve all been “marooned in the hog industry“. A possible reasonable exit is appearing, land prices. Seems every week I hear a new high price - $10,000 per acre - $12,400 per acre - $15,000+ per acre. Even taking in the possible embellishment of cycling through too many “coffee shops“ we clearly have prices reaching into the stratosphere. These prices at least antidotal seemed be driven primarily by land with building (hog barns or otherwise) only having a marginal influence of the perceived value. This phenomenon is presenting a range of potential “exit strategies“ with many producers experiencing a two, three, five thousand per acre increase in their land values in the last similar number of years. I had one producer suggest his land had appreciated ten thousand dollars per acre in the last 14 years. Certainly sounds better than any stock market (or casino for that matter) that I know of. For some a respectable and decent parachute out. For some if this is not in fact a bubble, perhaps a peak with some opportunity for a pullback presenting some opportunities for an exit and an entrance in a generational rollover. In any event as we seem to endlessly try to see and predict the future in this industry we’re seeing some new dynamics here in Ontario that point to renewal and a reason for optimism.