The 10-Minute Take: The Pressure Is On for Canadian Farm Crops and Commodities

Speaker 1 [00:00:02] Hi. It’s John here.

Speaker 2 [00:00:04] And it’s Theresa.

Speaker 1 [00:00:05] Hey, Theresa. I don’t think I can remember a year like this for agriculture. I mean, we all know as food consumers what’s happening with prices out there, but pity the farmer because they also have to deal with sky high fertilizer prices and energy prices and weather conditions that have been just crazy this year in different parts of the country.

Speaker 2 [00:00:27] You’re so right, John. Agricultural necessities like diesel, fertilizer, potash, herbicides are up 170%, nearly triple from a year ago. The latest provincial outlook from RBC Economics reported that the impact of droughts on crop production was so severe that Saskatchewan actually saw a decline in real GDP last year.

Speaker 1 [00:00:47] The outlook, believe it or not, is luckily a much more positive, strong global demand and prices for commodities are significantly boosting our agriculture prospects. And if the weather cooperates, very provinces stand to report significant production, and technology can make it even better this year and in the decades to come.

Speaker 2 [00:01:11] This is disruptors, the ten minute take, where we dive into the latest innovation, tech and economic buzz. This week’s take is on how all of these challenges are affecting the 2022 growing season in Canada and what solutions are available to support Canadian farmers. How can agriculture technology or AGTECH help increase yields?

Speaker 1 [00:01:31] To offer some insights, we’re joined by Wade Barnes, founder and former CEO of Farmers Edge, a Manitoba-based Agtech company and a farmer himself. Farmers Edge develops data driven technologies that help farmers run efficient operations while producing more food. Wade, welcome to the ten minute take.

Speaker 3 [00:01:49] Hey, I’m happy to be here. Thanks for having me.

Speaker 1 [00:01:51] It’s great to have you on the pod, Wade. And I want to start off with what’s happening in the ag sector. You’re a farmer, so you know this firsthand. But as we enter peak planting and growing season, we’re seeing Alberta experiencing drought like conditions, and Saskatchewan has the opposite, with heavy rain delaying planting season by a couple of weeks. I think that’s happened on your family farm as well. What are you seeing this year across the industry that’s most concerning to you?

Speaker 3 [00:02:15] Well, to your point, it’s really a mixed bag. There’s certain areas of western Canada that continues to be in a drought situation. And I think you’re getting to a very critical stage. Without some moisture, you’re going to see some farms get really affected around their yields. And then you’ve got these issues, you know, in eastern Saskatchewan, in Manitoba, where we’ve just had so much snow that turn into so much rain, that turn into really cold conditions. And there’s been, you know, really late planting and more rain on the way. And there’s going to be fields that don’t get planted this year.

Speaker 2 [00:02:46] And so with all of these mixed conditions and the fact that farmers are facing super high input costs that we mentioned on the other side of the coin are also seeing very high prices for commodities, wheat up 67%, canola, corn. How is the math, the economics working out for farmers bottom lines?

Speaker 3 [00:03:03] Well, look, I mean, I’m a farmer and the math still works out pretty well. You know, when you think about even with the cost of fertilizer up, the commodity prices are so strong. Now, that’s really dependent on are you going to get a good crop? And I think that the environment around agriculture, you know, there’s an ability for farmers to be super profitable, but the risk has never been higher. And so when you think about it with a grower as suddenly now your commodity prices are, you know, can almost $23 a bushel. Typically, we count on $10 a bushel. And with these really high fertilizer prices, if I get a decent crop, I’m going to do really well. But the risk now that if I don’t, that’s scary. And I think that farmers need tools to help manage their risk more so now than ever.

Speaker 1 [00:03:47] And a lot of this way comes back to the human component of farming. But in a technology driven era and a data driven era, we’ve done a lot of work on this out of our Farmer 4.0 Report a few years ago, and so much has changed since then. Curious how technology is accelerating in the sector given all these constraints, including labor, which everyone’s up against, but farmers particularly are having trouble getting people on the land. Where does technology come into play here?

Speaker 3 [00:04:19] Well, I think now you’re going to see farmers start to think about the adoption of technology more than they ever have. And I’ll just give you an example. You know, in these wet areas of Manitoba and Saskatchewan, last fall, we were facing a drought dry as we’ve seen in years and years. And so when you think about farmers and risk management, they have to make a huge decision how much fertilizer am I going to put on? What crops am I going to grow? And with these really huge increase in fertilizer costs, suddenly now technologies like sensors gives farmers a bit of an insight of what their potential yields are going to be. And as more moisture comes in, then suddenly they can get more confidence about how much fertilizer they should put on or what type of crops they should grow. And, you know, and I think back to it, not that long ago, we really didn’t think about managing soil moisture the way we do. We didn’t think about managing our nitrogen. And then you think about how that’s connected to sustainability and what’s happening in the carbon space. I mean, farmers are going to need these ag technology tools to help them make these decisions because gut instinct just doesn’t cut it. And it certainly doesn’t cut it right now with record high fertilizer prices. And the other side that you didn’t touch on is that as the commodity prices go up, you know what farmers do? They want to rent more land and it’s driving the cost of land up as well. And so, again, it’s another huge risk driver. So there’s never been a bigger opportunity to do well farming, but there’s never been a scarier time for a grower to deal with all the risks that he’s dealing with. Super stressful.

Speaker 2 [00:05:43] So as you chat with your peers, what’s the advice that you’re giving them? What are some of the immediate, tangible things they can do now to help them out in their operations?

Speaker 3 [00:05:51] Well, one thing, you know, when you talk about fertilizer placement and applying fertilizer, generally when commodity prices go up, farmers just put more on. But now with the fertilizer prices so high, you have to be really focused about where you’re spending your inputs. And I kind of consider a field, kind of like a hockey team on a hockey team, not everybody gets paid the same. I’m about, you know, in in areas of a field is very similar where there’s good producing areas and weaker producing areas. And I think the farmers now have to be really focused on utilizing technology to get the most efficiency out of their fertilizer or out of all their crop inputs. And look, with all the things that are coming, there’s lots of rumblings about mandated reductions coming. And so these things that farmers need to do isn’t just going to be focused on how to protect their bottom line. They may have to implement technology just to continue farming. That’s the way they are. So there’s lots of interesting challenges coming.

Speaker 1 [00:06:47] You’d think that farmers have enough to cope with between the weather and events like an invasion of Ukraine well out of their control. But that changed the economics suddenly in a matter of weeks. Layered on top of that, you mentioned the word mandate. There’s growing pressure on the agriculture sector to do more to reduce emissions, carbon, methane, nitrous oxide, and not clear how that’s going to be done in a fairly short period of time. Wait, I was in southern Alberta recently with farmers both on the livestock and the on the growing side. And the amount of pressure on them, as you were saying, is extraordinary. And yet there are technologies emerging. I mean, there’s so much going on in Agtech right now that there’s an opportunity for farmers to transform themselves. How do they do that in this kind of environment when they’re coping with a weather crisis, a geopolitical crisis that affects their livelihoods, and then the climate crisis that they’re increasingly expected to and perhaps required to do more to help solve.

Speaker 3 [00:07:48] Look, I have been in this business now for well over 20 years, and I’ve worked in many different markets the US, Brazil, Eastern Europe, Australia. And the one thing that I do know is that the Western Canadian farmers are super resilient. And to be honest with you, when times get really tough, that’s when the Western Canadian farmer looks for ways to make money differently, to be more efficient. And so I think that even though it’s super tough and super stressful, this is where they’re going to turn to be innovative and they’re going to look for tools to make their lives easier. Now, on the technology side, we have to keep up our end of the bargain from a technology company because we’re we need to put tools out there that the pharmacy benefit from it and they can utilize that. So I think you’re going to see farmers look to adopt technology needs to make sure we’re putting the right products in front of the farmer so they have got something to use.

Speaker 1 [00:08:40] That’s a great point for us to wrap up on, Wade. I mean, it’s extraordinary at this point in time that farmers do have the prices now too. If they get it right, invest in these technologies and maybe some incentives because of the high prices of inputs like fertilizer to do things differently and invest in those technologies, they can reduce their inputs and costs. But boy, it’s a risky time, fascinating for so many to watch, but also fraught for many of those on on the front lines who we rely on to get food to our table. Wade, thanks for being on the ten minute takeaway.

Speaker 3 [00:09:13] I appreciate it. It was awesome.

Speaker 2 [00:09:16] That was a sobering discussion, John. As we saw with last summer’s droughts, weather challenges are only going to become greater as climate change accelerates. But, you know, as Wade pointed out, farmers are resilient, they’re innovative. Even so, we will need all the solutions available, all hands on deck or maybe all holes in the ground to stave off potential future food shortages.

Speaker 1 [00:09:38] And what’s encouraging truth is so much of the technology that is emerging in the farm and ag sector is coming from Canadian centers, Calgary or Winnipeg or elsewhere. So this is this is an area where Canada really can lead the world.

Speaker 2 [00:09:53] That’s it for this week’s ten minute take. Join us again next week for a look into indigenous capital in this country and the various elements needed to achieve economic reconciliation. Until then, I’m Theresa Do.

Speaker 1 [00:10:04] And I’m John Stackhouse. Talk to you soon.

Speaker 4 [00:10:09] Disruptors, The Ten Minute Take is created by the RBC Thought Leadership Group and does not constitute a recommendation for any organization, product or service. It’s produced and recorded by JAR audio. For more disruptors content like or subscribe wherever you get your podcasts and visit RBC dot com slash disruptors.

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