Making a buck on global warming

If there isn't any money in corn, at least you could pad your bank account with cheques from Stelco and Ontario Hydro for the carbon credits that you earn by pumping organic matter into your soil.

Welcome to the future, courtesy of the Kyoto Protocol, the 1997 agreement signed by 160 countries that aims to put the brakes on global warming by cutting the emissions of greenhouse gases. Canada is committed by the year 2010 to cutting its production of greenhouse gases to a level that's six per cent below its 1990 outputs.

In some respects, Canadian agriculture is well on its way. In 1990, the farm and food sectors produced the equivalent of 65 million tonnes of carbon dioxide, including 10 million tonnes a year from the loss of soil organic matter, primarily due to plowing.

This year, soil losses are expected to reach zero, mainly because of the adoption of no-till in Ontario and, to an even larger extent, no-till on the Prairies. Based on current adoption rates for conservation farming sytems, agriculture will probably cut another three million tonnes by 2010.

That means, says Michael Presley, director of the environment bureau of Agriculture and Agri-Food Canada, that farmers could have 13 million tonnes of carbon credits that they could auction off to industries that are having a tougher time meeting the new emission standards.

While it seems futuristic, the groundwork is now being laid. A federal panel will produce what's being called an options report by the end of August, setting out the policy paths that could help thwart global warming and its threats of violent, erratic weather for Ontario along with plagues of southern pests.

At this point, like the gases themselves, everything is up in the air. Saskatchewan wants its farmers to be able to sell their credits themselves. In Ontario, Terry Daynard, executive vice-president of the Ontario Corn Producers Association, doubts that approach would work.

"Realistically, we may only be talking one to two dollars per acre," Daynard says. Plus, he adds, all the benefits could get eaten up in administration. Growers would only qualify if they had adopted management programs that were leading to higher soil organic matter levels. "It sounds like a make-work project for bean counters," Daynard says.

Instead, he's leaning toward the view that agriculture's carbon credits should be handled on an industry basis, with government using the proceeds to fund research into ways of farming that reduce greenhouse gas emissions and build up soil organic matter. In Ontario, that would include developing profitable no-till systems for corn.

So far, Daynard thinks Ottawa will veer away from the other possible approach - passing new laws to force farmers to cut their emissions and reduce their tillage. Besides, he says, having global-warming cops patrol the back concessions won't work.

There are miles to go before a solution is found, Presley says. For starters, the Kyoto Protocol doesn't recognize the use of soil as a sink to absorb or sequester carbon. Canada is lobbying to get that changed. The U.S. has jumped on board, as have Australia and New Zealand. But, says Presley, Europe is opposed. The EU looks at the Great Plains giving the Americans an easy route to meet their targets while Europe faces costly industry restructuring. "We're making progress, but it is very political," says Presley.

Many environmentalists also challenge the carbon sink theory. Unlike other industries, agriculture doesn't emit a lot of carbon dioxide. Some comes from farm tractors and chemical factories.

Instead, the No.1 greenhouse gas from the farm sector is nitrous oxide. About half of agriculture's nitrous oxide comes from the plants that convert natural gas into nitrogen fertilizers; the other half is produced when those fertilizers are applied to fields.

Nitrous oxide is also more lethal to the upper atmosphere. A tonne of nitrous oxide has 300 times the greenhouse effect of carbon dioxide and 30 times the power of the methane emitted by livestock.

Production systems such as no-till that lock carbon in the soil may also use more surface applied nitrogen, so there could be an increase in global warming even though farmers are building up their organic matter. Under some scenarios, Presley says, farmers would have to sell their carbon credits simply to pay the global-warming tax that would be slapped on their fertilizers.

Daynard, though, is optimistic. "This is going to be a win-win situation," he says. "We're going to grow better crops and the world is going to be better because of it."

© copyright 1999 Agricultural Publishing Company Limited.


Ontario soys win in Pacific Rim

Despite lingering economic woes, the Asian market is gung-ho for our quality beans
Despite the Asian flu, Ontario's soybean sales to the Pacific Rim are healthier than ever. Sales from the 1998 harvest should top 200,000 tonnes (7.35 million bushels) for the first time ever.

Almost three-quarters of the sales are identity-preserved (IP). They're earning premiums of 50 cents a bushel and sometimes more for the growers with contracts to plant specific varieties and keep them pure.

By contrast, growers who planted white hilum varieties this spring in hopes of a big food-grade bonus may be chasing fool's gold. White hilum premiums may never again climb above the current 20 cents per bushel.

"The market has changed," says John O'Brien, specialty soybean manager for W.G. Thompsons in Blenheim. "IP is taking over. The old white hilum market is slowly but surely going down."

In fact, the revolution in the market has helped Ontario preserve and even build its market share. Instead of duking it out with the Yanks, the South Americans and the Chinese for the low end of the food-quality market, Ontario has gone upscale, offering the world's best identity-preservation program.

Success is breeding success, says Scott Brackenbury, manager of the NutriLine soybean program at First Line Seeds. The more inroads that Ontario makes with its IP sales to Asia, the wider its reputation as the top supplier of IP soys, Brackenbury explains. "We've differentiated ourselves."

Ontario's soy exports to the Pacific Rim have edged up throughout the decade, reports Kim Cooper, marketing specialist with the Ontario soybean board. (See On a Rim Roll).

Like others, Cooper was expecting a tough sales year as Pacific Rim economies continue struggling with the so-called Asian flu. Ontario shipped 144,000 tonnes (5.3 million bu) from the 1996 crop, and it was widely thought the industry would need luck to match that record.

Instead, Statistics Canada records to the end of March (the most up to date available) show sales from the 1998 crop had already reached 196,000 tonnes (7.2 million bu) - more than double the 89,000 tonnes (3.3 million bu) pace of 1997, when Pacific Rim exports for the year totalled 136,000 tonnes (5.0 million bu).

Sales have been helped by stronger economies in the region. Currencies may not have recovered their pre-recession highs, Brackenbury says, but at least they've stabilized, so importers are exposed to less risk that their beans will jump in value during the month it takes to get a container from Ontario to the Orient.

Pacific Rim buyers are looking for non-GMO (i.e. non Roundup Ready) soybeans, and Ontario's IP systems were in the right place at the right time, O'Brien says: "The market is GMO-free. That's a product we can deliver."

But can't other countries deliver it, too? "Our reputation for the quality of our IP programs is a significant competitive advantage," says Gary Nelson, oilseed analyst for the federal agriculture department. So Nelson predicts Ontario will hold on to its gains, whatever the fallout from GMO debates.

Yet Canada's traditional white hilum market is under pressure. American elevators are targetting the Pacific Rim's food makers, and China is back in the market with beans that O'Brien says are "fairly decent quality.

"A lot of our gains over the past seven or eight years have come at the expense of the Chinese," O'Brien says. "They're putting up a pretty good fight to win that market back."

© copyright 1999 Agricultural Publishing Company Limited.


IPs reduce risk, raise reward

In the early '90s, premiums for exportable white hilum soys bounced as high as 75 cents a bushel. Today, premiums are 20 cents, and buyers are fussy about the "bright and white" quality standards.

By next winter, white hilum premiums may be even lower because of competition from China and the U.S. For growers with IP contracts, meanwhile, there are bigger rewards and fewer risks. Premiums are higher - averaging 50 cents for conventional IP varieties that are delivered at harvest, and 75 cents for growers who hold them on farm for winter delivery. Premiums for high-protein and natto soybeans can be $1 per bushel and more.

Plus, says Scott Brackenbury, manager of First Line Seeds' export program, there's little uncertainty. Growers know at sign-up exactly how big a premium they'll get paid.

Companies say now is the time to put your name on the list for year 2000 contracts. Preference goes to growers with on-farm storage systems capable of ensuring good segregation: that means no legs. Plus, beans should be handled by belts, not augers.

Also be prepared to start with a small low-premium contract, probably no more than 50 acres. Companies want proof you can deliver a clean, unstained crop. Until you've proved that you can meet their standards, they'll give you varieties that can be sold to the crush market if they don't meet food-grade specs.

"IP is the future," O'Brien says. "The non-IP white hilum business is getting to be a very small part of our program."

© copyright 1999 Agricultural Publishing Company Limited.


Pre-harvest soy sales win out

Decade-long U. Nebraska study indicates selling out of storage rarely pays
"Sell it before you've got it" is emerging as the most profitable philosophy for crop marketing, with fresh evidence from a massive University of Nebraska soybean study.

"The best pricing opportunities are almost always pre-harvest," says Colin Reesor, marketing specialist for the Ontario agriculture ministry. Selling out of storage is riskier, with occasional gains from big price climbs erased by more frequent years with stagnant or sagging prices that are made worse by storage costs.

The Nebraska study by economics professors George Pfeiffer and James Kendrick - and summarized by Plattsmouth, Nebraska commodity analyst Roy Smith - examined a decade's worth of soybean prices from 1988 to 1997. The goal was to find which marketing strategies would give the best net price and which would cut the risk of low prices.

Overall, the best bet was to price a big share of crop before harvest, the Nebraska study found. Reesor says that Ontario soybean growers can learn the same lesson, since the provincial soy market operates pretty much in lock step with the North American soy complex.

Ontario corn growers, however, may see a better chance of a return on storage, especially now that extra industrial demand, including the Commercial Alcohols plant in Chatham, is pushing the province into an import-pricing bonus.

As well, Ontario growers may get better prices if they sharpen their negotiating skills.

The Nebraska team found that timing of sales was more important than method of sale, and that pre-harvest sales are more profitable than post-harvest marketing. (See Soybean Price Cycle.)

While the typical soy pricing pattern is a smooth flow from a spring high to an autumn low, every year has its own peaks and troughs. The Nebraska study identified peaks in early May, late June, mid-September (prior to harvest), and mid-December.

Best prices often come during weather scares. In years with late planting and cool summers, for instance, the study found that mid-September rallies caused by frost concerns provide much better pricing opportunities than for sales once harvest begins.

Ontario growers sell about a quarter of provincial corn and soybean crops before harvest. With soys, roughly 35 per cent are priced and sold at harvest, compared to 25 per cent for the corn, and the remainder is sold out of storage.

The level of pre-harvest sales is steadily increasing, says Brian Doidge, economist at Ridgetown College. He predicts that as the U.S. market continues to be dominated more by soybeans than corn, harvest-time soybean basis will be under greater pressure, leading more growers to sell pre-harvest or to store for later sale.

A realistic strategy is to sell a third of the corn and soybean crops before harvest, a third on peaks from October through December, and a third out of storage, watching for pricing opportunities. "I wouldn't want to see more than two-thirds sold pre-harvest," Doidge says.

Even within market periods there are profit opportunities for growers prepared to be a bit more sophisticated, Reesor adds. Instead of pricing at harvest, he notes, it can make more sense to price off the January futures via a forward or basis contract. Many years now see a price jump in late November as the market reacts to rainfall and planting progress in South America. The jump comes too late for harvest sales based on November futures, but can often make a sizable difference to growers who can wait the extra month to six weeks for their cash.

The Nebraska team found that, after storage and interest costs were deducted, selling out of storage from January through May returned an average net of two cents per bushel over the 10 years of the study. When soys were held longer, the extra costs more than ate up any price gain every year except 1995.

Smith warns, however, that while storage to spring on average was a bit better than break-even, in the three years when it was unprofitable it cost growers nearly US$1 per bushel. "Even though the strategy was profitable in the majority of years, when it was not profitable, the loss was huge," Smith concludes.

Doidge, meanwhile, recommends talking turkey when growers and elevators start to talk price. In the U.S., the board price tends to be the sales price. In Ontario, by contrast, dealer margins are much wider and that's an opening, especially for growers who are good at haggling and who have on-farm storage or can make other FOB arrangements. Doidge also tells growers who sell to full-service dealers to remind the elevator about the dollars rung up in pesticide and fertilizer purchases. "There can be a lot of potential to make deals," Doidge says.

© copyright 1999 Agricultural Publishing Company Limited.


Seedbed By Keith Reid
By Keith Reid

Keeping the corn watered

"Rain makes grain." That old maxim from the commodity trading floor still holds true - up to a point.

Each year some areas suffer from lack of rain, yet some farmers produce excellent yields while their neighbours' crops are very drought sensitive. Why do we see these differences? And how can we improve yields on the poorer fields?

Getting sufficient water into the plant is a complex dance between the amount of moisture that the plant requires at various stages of growth and the amount of moisture the soil is able to supply.

Think about two corn fields at tasselling time, one showing obvious drought stress, the other dark green and healthy. This is the growth stage when the corn plant is using the maximum amount of water, up to two-tenths of an inch per day, and also the time when moisture stress can have the greatest impact on yield.

The first difference between the two fields could be in soil texture, since this has a bearing on the amount of available moisture the soil can hold. Water in the soil is held in films around the soil particles and in the small pores in the soil. (If the soil stays completely saturated, even though all the pore spaces are filled with water it is not available to plants, because the roots will not grow without air.)

The upper limit to available water is called "field capacity," which is the point where excess water has drained out of the soil. This ranges from about an inch of water per foot of soil in sands, to almost five inches in a clay soil.

As the soil dries, the films of water get thinner and the water is held more tightly, until the water is held too tightly for the plants to pull it out of the soil. This is called the "wilting point," and it ranges from half an inch in sand to almost three inches in heavy clay.

The available water is the difference between field capacity and wilting point. The range is from half an inch of water per foot in the sands to just over two inches in the clays. The greatest amount of available water is in the medium textured soils - loams, silt loams and clay loams, with about 2.5 inches of available water per foot of soil.

This explains the differences between fields with obviously different soil textures, but not the cases where striking differences in crop condition occur on either side of a fenceline. For this, we have to look deeper.

The depth that roots can pull water from will have a huge impact on the total amount of water available to the plant. A vigorous root system can easily penetrate four or five feet into the soil, so if you multiply the amount of available water per foot by the rooting depth you can easily calculate the total amount of water available to the plant.

Divide this by the rate of water use, and you can see how many days the crop can go between rains.

Any restriction of the root system reduces the amount of available water directly. This restriction could be because of a high water table, or because the soil is compacted and the pores are too small for the roots to penetrate.

Conversely, anything that helps the roots to penetrate easily through the soil will increase the rooting volume. Planting corn following an alfalfa sod leaves lots of channels from the old alfalfa roots that penetrated deep into the soil and that the corn roots can follow.

Improving soil structure will also have an impact on the amount of available soil moisture. If you compare a granular structure to a cloddy structure, you will see the roots proliferating through the whole soil mass in the granular soil, while in the cloddy soil the roots are restricted to the cracks between the clods. There may be moisture within the clods, but the roots cannot reach it. A well-granulated soil will also absorb more of the rain that falls on it.

So going back to our contrasting fields, the healthy field is most likely a field with a hay-based rotation, with high organic matter and excellent soil structure. The drought-stressed field is most likely following cash crops, is compacted and possibly poorly drained, and has poor soil structure and possibly poor drainage.

In a year with rain every week, the differences may not show up. In dry years, the difference can be profit or loss. The problems with the poor field can be corrected, and although it takes time and effort, it's definitely worth the effort. After all, the best crop prices are often in the years with the worst moisture stress.
Keith Reid is OMAFRA soil fertility specialist at Walkerton.

© copyright 1999 Agricultural Publishing Company Limited.

back to July 5, 1999 Issue


Rye in corn saves N

And tests at Delhi also show benefits for drinking water and erosion prevention Seeding winter rye by aircraft into standing corn crops during August may offer a way to save nitrogen, protect drinking water, and reduce surface erosion with little or no net cost to the farmer.

First fit may be with sandy soils, says Bonnie Ball-Coelho, soil scientist at the federal research station at Delhi. In trials going back to 1993, Ball-Coelho has found the rye soaks up excess nitrogen.

In normal and wet years, the rye takes up little nitrogen since most of the applied N will have been absorbed by the corn crop. Rye growth is also restricted by the dense corn canopy.

Even so, the rye does reduce the amount of N leached into groundwater, and the rye also gets a head start so it's better able to protect against soil erosion through the winter compared to rye seeded after harvest. In dry years, rye makes a bigger difference, soaking up nitrogen that the corn crop hasn't been able to take up because of drought. Rye growth is thicker, too, in part because of the nitrogen and also because the moisture-stressed corn crop allows more light penetration.

The nitrogen absorption can make corn production both more cost-effective and more environmentally sound. Nitrogen that's tied up by the rye doesn't leach into groundwater. In Ball-Coelho's tests, it meant that even in dry years, nitrate levels were within the safe drinking water range of 10 parts per million.

In many areas with sandy soil, farm families get their water from shallow points, not deep wells, so they're vulnerable to groundwater contamination.

These are also the soils that are most prone to rapid leaching of crop inputs.

Plus, the rye overseed can prevent the loss of nitrogen from the crop production system. In her plowed tests, Ball-Coelho has found the rye keeps the nitrogen tied up until summer - just when a subsequent corn crop would have its greatest N demand. Growers, Ball-Coelho thinks, would be able to reduce their N sidedress rates.

The rye was seeded at 170 pounds per acre in early August and killed by plowing the next spring or by Roundup in no-till plots.

Ball-Coelho believes the rye overseed would let growers on sandy soils safely apply enough N for the yield they could expect in a good growing season. If the weather turned dry, they wouldn't have to worry about polluting their drinking water. Instead, the rye would absorb the N that the drought-stressed corn couldn't take up.

In commercial-scale trials in conjunction with the Long Point Region Conservation Authority, Ball-Coelho found the rye produced an average 0.75 tonnes per hectare (nearly 700 pounds per acre) of dry matter by spring and absorbed about 20 pounds of N per acre.

Corn yields weren't hurt by the overseed, nor were the yields of corn or soybeans the year after. In fact, in long-term plots, Ball-Coelho is seeing evidence of higher corn yields.

"There aren't a lot of solutions for growers who need to optimize their corn yields, but at the same time don't want to jeopardize the quality of groundwater," Ball-Coelho says. "Our research shows overseeding with rye will work."

Growers on a range of soil types could also see gain from reduced in-field and off-field soil erosion, she adds. "Most of us don't realize how much we're losing because of erosion," she says. "We've been able to mask the losses with better genetics and better productivity."

"The more that growers see of the true cost of erosion, the more they'll recognize that programs such as overseeding are cost effective." - Tom Button

© copyright 1999 Agricultural Publishing Company Limited.


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