Areas from Vulcan, about 130 km south of Calgary, past the Canada/U.S. border and down to Montana, experienced freezing temperatures for at least eight hours on the night of May 11. Temperatures reached as low as -4 C to a reported -8 C in some areas.

Troy Prosofsky, the Canola Council’s agronomy specialist at Lethbridge, said the damage could have been worse, but cooler temperatures in the days leading up to the frost hardened canola crops.

"With canola and frost occurrences it’s a function of how hot it was the day before, and then how cold it got, et cetera. So it’s those extreme changes that actually cause more damage.

Prosofsky said he scouted over a half a dozen fields a few days after the frost and saw some fields that lost 60 per cent of their plants.

"There was definitely a lot of high mortality rates in some regions. What I did find was no two fields were exactly the same. It was a difference of what stage the crop was, the topography, what their plant counts were, et cetera. However, despite the damage, there weren’t any fields that I saw that needed to be reseeded."

Neil Whatley, crop specialist with the provincial Ag-Info Centre at Stettler, recommended farmers wait at least four days to check their crops after a frost before taking action.

"If there’s still one or two per square foot, you don’t want to reseed. With canola you never want to reseed unless you’re down to about three plants per square foot," he said.

Prosofsky said at this point in the season it may not be worth it for farmers to reseed.

Research done by Ross McKenzie, agronomy research specialist for the provincial ag ministry, shows that in southern Alberta, 1.8 bushels are lost for every day crop is planted after May 1, Prosofsky said.

"If we’re seeding this late in the game, we’d already be losing 25 bushels of potential yield. So you’ve got to consider if I’m going for 65-bushel yield, and I only get 40 if I reseed. Or, if I lost 10 per cent, maybe I’m down to 55 bushels."

Prosofsky said it is important for growers affected by the frost to protect their crops from insects and disease.

Questioned Monday in the House of Commons by NDP agriculture critic Malcolm Allen, Ritz noted an estimated two-thirds of affected fruit growers, whose trees were pushed into early blossom by warm weather ahead of the frost, will be covered by crop insurance.

"We also have AgriRecovery, which will pick up the slack after that," Ritz was quoted as saying in the Commons. "There are a number of different venues open to farmers who have made use of those management tools."

Fruit growers in the province are "poised to lose tens of millions of dollars" to this spring’s frost, and apple growers alone are expected to lose about 80 per cent of their crop, Allen said.

Apple orchards in the Georgian Bay region and southwestern Ontario are expected to suffer the greatest damage, the provincial agriculture ministry said Thursday. Pear, cherry, peach, nectarine, apricot and plum growers are also reporting "significant damage" to their crops, the province said.

"The full extent of the province-wide impact will be known in coming weeks," the province said in a release.

"I know how much this loss means to the farmers involved, and not just in economic terms," provincial Agriculture Minister Ted McMeekin said in a statement Thursday after touring an orchard at Beamsville, between Hamilton and St. Catharines.

"I will continue to closely monitor the situation as we work to assess the damage and develop strategies that will best support the industry."

Federal ag department officials have also been touring the area and looking over the crops, Ritz noted Monday.

In a typical year, Ontario accounts for 40 per cent of all the apples grown in Canada and the Ontario apple crop has an annual farm gate value of $63 million, with other tender fruits valued at about $40 million, the province said.

Allen, whose Welland riding is in the Niagara region, suggested in the Commons Monday that programs exist to deal with "minor losses" such as when a single farmer is hit with a bad season.

"However, when an entire sector is hit, like it is now in Ontario, special measures should be taken to ensure its future is not put at risk."

The company processes conjugated estrogen from pregnant mares’ urine (PMU) at Brandon to make the hormone replacement therapy Premarin, used to treat menopausal symptoms in women.

Pfizer said Tuesday it plans to cut about 50 of 130 positions at the plant "gradually through to the end of 2013."

The company said it "operates in a very competitive and challenging environment which requires a continual review of its operations to look for efficiencies and cost reductions by using our resources and technology more effectively."

Changes at the Brandon plant "will enhance the site’s competitiveness and best position it for the future," the company said.

However, this decision "will not impact the site’s rancher network who support the plant’s production," Pfizer said. The company sources raw PMU from a network of 26 equine ranchers across Manitoba and Saskatchewan.

The Brandon facility was set up in the mid-1960s and became a Pfizer plant when the company bought fellow drugmarker Wyeth in 2009.

Wyeth substantially downsized its PMU ranch network in the first half of the last decade, as hormone therapy study data came forward from the U.S. government-backed Women’s Health Initiative and Premarin use and dosages were reduced.

The plant still distributes conjugated estrogens to markets worldwide including Europe, the Middle East, the Orient and North and South America.

Expectations for a large U.S. corn crop have led to ideas that the resulting decline in feed costs would encourage an expansion in the U.S. hog herd, according to some analysts.

However, "we haven’t experienced the same sustained level of profitability that our American counterparts have," said Tyler Fulton, director of risk management with H@ms Marketing Services in Winnipeg.

As a result, Canada would see a much more muted reaction to any expansion ideas, and likely hold steady overall. "It will take a little bit more to fill the optimism fuel tank, so to speak," he said.

The prospect of lower feed costs in the fall was making the outlook for the hog sector look a little better, but he added that any opportunities for expansion in Western Canada are pretty limited right now.

Fulton said the seasonal rally that would typically be seen at this time of year was not materializing, leaving the market relatively flat over the past month and a half. At this time in a typical year, the hog sector would see a 10 per cent rally.

Slower export sales, and concerns over domestic demand as consumers are not buying as much pork as they have in recent years, were accounting for the lack of a seasonal rise in pork and hog prices, said Fulton.

A larger-than-expected increase in the U.S. hog slaughter was also weighing on values from the supply side, he said.

Overall, Fulton said the western Canadian hog sector was still performing reasonably well, but it was not living up to the higher expectations seen a year ago when China was buying more pork.

Tom Halpenny, CEO of Mustard Capital Inc. at Gravelbourg, Sask., announced on the company’s website that MCI has "discontinued operations" as of May 4.

MCI announced in early February this year that it had filed a notice of intention to make a proposal to its creditors for restructuring of its debt.

The company, which at its peak was sourcing crops from about 250 Saskatchewan mustard growers, began work in 2010 on expansion into a second facility at Vanguard, Sask., about 55 km west of Gravelbourg.

The company had pledged $1 million to the project and also picked up just under $1 million in grants and repayable support from the federal government.

However, the company said in February, it soon suffered from a combination of "expansion cost overruns and operational losses from delayed development of its new capacity."

According to an April 5 affidavit from Halpenny, MCI got $250,000 in court-approved interim financing in February from one of its customers, Granosa AG — and since then MCI had "operated at a profit."

However, he said at the time, since February, MCI hadn’t come up with "any reasonable offers" from any interested party to buy, restructure or recapitalize the business, and the prospects of a new proposal for its creditors "have grown more remote."

The company had pledged in February to continue "business as usual" until the May 4 deadline for a new restructuring proposal.

MCI, which was a Canadian Grain Commission licensee until February, had said at the time it would provide security to farmers either by dealing through another CGC licensee or by paying cash for purchases.

Growers who’d delivered to MCI until the end of October last year were expected to get full compensation for payments they were owed, through the CGC’s payment protection program.

"Dedicated"

MCI’s Gravelbourg plant had used a "unique" milling process to produce yellow, oriental and brown mustard ingredients, mainly for use in prepared mustards, flavour enhancers, binders and extenders.

At Vanguard, MCI had planned to process "new and novel" products such as a "de-oiled and de-heated" yellow mustard.
"The shareholders’ belief in the company helped MCI establish a global reputation and build the business," Halpenny said on the company’s website last week. "The staff remained dedicated to the very last day of operation."

Mustard growers who supplied the plant "never wavered despite the public disclosure of MCI’s financial difficulties," he added.
Anyone with an interest in MCI’s assets or other details was asked to contact Ian Schofield, senior vice-president with Meyers Norris Penny’s (MNP) insolvency and corporate recovery practice in Regina.

Schofield was not immediately available for comment Tuesday.

Related story:
Insolvent Sask. mustard miller’s suppliers paid: CGC, April 23, 2012

Some canola-growing areas of southern Alberta logged temperatures as low as -8 C over the weekend, the council said, leaving growers wondering whether the crop could survive, whether they need to reseed and when or if they should resume weed control.

It may take a few days to accurately gauge a frost-touched crop’s survival rate, the council said.

Where the risk of crop damage would be "minimal" through a light frost of 0 C to -2 C, it would take time for new leaves to start emerging from the growing point between the plant’s cotyledons.

"If no growth occurs within this time, the plant is likely dead," the council said. "Also, if the stem is pinched off or the plant flops over, the plant will likely die. The pinched-off or broken stem cannot provide nutrients to the growing point."

Check the whole crop the day after a frost and three to four days after a frost to assess the situation, the council recommended.

If many plants have been killed, it takes a few days to determine the kill rate, which would inform a grower’s decision on whether to reseed a field.

"If one or two plants per square foot have survived and if that stand is fairly consistent throughout the field, the best choice is probably to leave it alone," the council said.

"A thin stand is not optimal for yield but a thin stand in mid-May may have better yield and quality potential than a reseeded field, particularly in southern Alberta."

If large parts of a field are lost, reseeding or fallow may be the only alternative for those areas, the council said.

After a light frost, spraying could resume after at least one night with minimum temperatures of 5 C — the minimum for biological activity to occur — and at least one day of warm and sunny growing conditions have passed. Warm and sunny conditions must also be present at spraying.

Growers also need to see no evidence of frost damage (such as blackening and water-soaked appearance) on the crop or the weeds before resuming spraying.

The crop’s condition must also be considered, because even a herbicide-tolerant canola requires that a plant’s metabolism work at full capacity to be able to effectively process the herbicide and prevent injury, the council said.

Growers will also want to consult their local product reps to see how or if a company will support the use of its product following a frost or cool temperatures.

However, some analysts are confident the fundamentals remain solid enough that any push lower in the cash market will only be temporary.

One farm source said he sold a good chunk of his new-crop canola on the weekend and was still able to get roughly $12 a bushel for that canola.

The reasoning given for the sale now was that the producer did not want to take a chance on new-crop values for canola dropping to $7 a bushel or lower in the fall.

"My thoughts are that farmers should not worry too much about new-crop bids," said Ron Frost, an analyst with Frost Forecast Consulting of Calgary.

He was certain that the market will be able to transition the focus back to the oilseed fundamentals instead of the macroeconomic issues currently generating the downward price slide in values.

"With basis levels remaining quite high and the strong usage pace of canola (both old- and new-crop) there is just not enough of a cushion within the oilseed complex (that is including the large U.S. soybean area) to allow the market to see bids drop much from where they currently sit," Frost said, noting this comes despite the possibility of a summer weather scare.

Frost acknowledged there probably still is a further $20-$40 per tonne downside risk in canola futures in the short term, based on the funds continuing to bail out of long positions.

"There will be plenty of opportunities to sell canola at the $12 per bushel or better level in the cash market, so I think it is time to ignore this washout in value by the funds," he said.

Frost added the tug-of-war between pretty tight, pretty positive fundamentals, against the recurrence of a bearish macroeconomic influence and the funds willing to sell, will continue for some time yet.

"However, I also think that this will sort itself out and once that $20 or $40 per tonne drop occurs, I am going to be ready to be a buyer again," Frost said.

Current cash bids for old-crop canola, delivered to the elevator in Saskatchewan, range from $12.14 to $14.13 a bushel, in Manitoba from $13.30 to $14.20 and in Alberta from $13.62 to $14.29, according to Prairie Ag Hotwire data.

New-crop bids in Saskatchewan, delivered to the elevator, range from $11.94 to $12.30 per bushel, in Manitoba from $12.05 to $12.68 and in Alberta from $11.94 to $12.45.

The company said in a release that it presented its relocation plan, involving five other Olymel plants within a 100-km radius, to its Princeville bacon plant’s 180-odd staff and their unions on Monday.

"While some of the facilities were spared by the disaster, the extent of the damage is such that a resumption of operations in the short-term is not feasible," the company, which operates a separate primary pork slaughter plant at Princeville, said Monday.

The cause of the May 6 fire "is not yet known, and Olymel still awaits damage assessment reports."

The Montreal Gazette on May 7 quoted company spokesman Richard Vigneault as saying the fire took over 24 hours to extinguish after it was reported in the early hours of May 6. About 100 homes in the area were evacuated for most of that day.

The newspaper also quoted Surete du Quebec officials as saying the cause of the fire was under investigation.

Olymel said Monday it’s "not excluding any scenarios for the future" and added it’s "too early to make a decision as to whether to rebuild" at Princeville, about 80 km southeast of Trois-Rivieres.

St-Hyacinthe-based Olymel said it would take "exceptional measures" to offer to relocate Princeville staff members to its bacon plant at Drummondville, processing plant at Trois-Rivieres, hog slaughter plant at Vallee-Jonction, cutting and processing plant at Ste-Rosalie and ham boning plant at St-Hyacinthe, "all on a voluntary basis."

Staff who want to take part in the relocation plan, which "should be in effect until September," would get "hiring priority," Olymel said.

Staff who accept Olymel’s relocation offer would work under the employment conditions and labour agreements in effect in those plants, and would get transportation services between Princeville and the other facilities "where numbers warrant."

"Analysis"

Given the cost of rebuilding at Princeville, Olymel said it "must first conduct an in-depth analysis of market conditions" in the bacon business.

"Lower production costs in the United States have enabled U.S. manufacturers to offer fierce competition for domestic products both in Canada and south of the border," Olymel CEO Rejean Nadeau said in a release. "The parity of the Canadian dollar with the U.S. currency also has an impact on our exports."

Thus, he said, "our analysis should enable us to evaluate the possibility of combining the bacon production which was previously done at Princeville with other operations," or "changing the mix of operations at the plant" before making a final decision on the Princeville site.

Alliance Grain Traders (AGT) said Thursday that its pasta plant, which attracted Prime Minister Stephen Harper and federal Agriculture Minister Gerry Ritz to its announcement last October, "is now planned to begin in 2013 in order to allow us to monitor developments in the North American grain industry."

AGT announced the deferral in its first-quarter financial report on Thursday, in which it booked net earnings of $2.77 million on revenues of $197.4 million for the period ending March 31, down from $7.18 million profit on $168.1 million in revenues in the year-earlier period.

"Capital programs in 2012 are being scaled back and some projects and expenditures are being deferred to 2013 and beyond, as we are focused and committed to ensuring that the business returns to a more normalized profitability and margin," AGT CEO Murad Al-Katib said Thursday.

"Pending developments, such as the de-monopolization of the Canadian Wheat Board and the proposed sale of Viterra to Glencore, as well as the free trade negotiations between Canada and the (European Union), will continue to reshape the landscape of the industry.

"Accordingly, management believes it is prudent to focus on our balance sheet at this time and improve our business metrics."
AGT, which already runs 12 pulse processing plants in Western Canada, is optimistic about the "opportunities presented by our current asset footprint," he said.

The planning and design work for "larger projects" such as the pasta and pulse plant, a project valued at up to $50 million, "will continue so that they are ready for implementation when we feel it is the right time to do so," Al-Katib said.

The AGT complex in Regina was envisioned as a milling facility to process durum for the production of its Arbella pasta brand in Canada, and to process pulse crops into pulse flours, starches, proteins and fibres. Arbella is a brand owned by the Arbel Group, an AGT subsidiary and pasta processor based in Turkey.

A distribution centre at the same site was expected to tie into the planned Global Transportation Hub (GTH), a Regina industrial zone devoted to transportation and logistics facilities needing road, rail and intermodal access.

"Due diligence"

Last October’s announcement was hailed by the federal government and assorted groups supporting the deregulation of the CWB’s single marketing desk as proof that the planned end of the monopoly in August this year would open up processing opportunities on the Prairies.

"This significant investment in Regina is positive proof that the government’s commitment to opening Canada’s grain markets is attracting investors that are generating new jobs and economic growth," Harper said at the announcement, which did not include any federal funding for the facility.

"Obviously the management of (AGT) has now done its due diligence and discovered what grain farmers have known for decades: any kind of enterprise in the West faces brutal transportation economics simply because we are so far from any significant markets," Bill Gehl, chair of the pro-single-desk Canadian Wheat Board Alliance, said in a release Monday.

"They may have even discovered that with the loss of the Wheat Board’s single desk, small processors face an even bigger challenge."

The CWB, he said, "had a policy of treating all processors equally so large processors could not obtain volume discounts from farmers and push out smaller operations… and now that fairness will end with the single desk."

AGT "has learned (Harper) has no magic wand that can change the fact we produce grain behind a wall of mountain ranges and huge land distances to ocean ports," said Gehl, a Regina-area producer.

"The global economic conditions that have affected staple food markets are not over. However, we remain optimistic that we will see conditions return to normal in the near term," Al-Katib said Thursday.

"Importer hesitation brought on by decreased credit liquidity and currency devaluations, which has affected export demand, is beginning to turn around, which is good news for us. Consumption has remained strong for our products, and we expect that importers will need to refill their depleted local market stocks in the near term."

Related story:
Regina to host new pulse, durum processing plant, Oct. 8, 2011
Regina processor buys unfinished N.D. pulse plant, Nov. 4, 2011

An uptrending channel develops during a period of rising prices and support is determined by a line drawn across the lows of the reactions. Once a trend begins in earnest, it has a very high tendency to persist. When rallies begin to fall short of the upper channel boundary, this could prove to be an important first indication that the current trend is running out of steam.

There’s the old adage, "The trend is your friend," so when prices break below the lower boundary (A), of the uptrending channel, this changes the trend and selling increases. As soon as sell-stops are triggered — prices plunge.

After a valid penetration of the channel’s lower boundary, prices will move with an initial thrust in that direction, but then will often turn back to approach the trendline (B), which invariably provides a selling opportunity.

We’ve all heard the expression, "What goes up, must come down." This is especially true in commodity markets. It is only a matter of time before a fully entrenched bull market, like live cattle, dies under its own weight.

The news is always bullish at the top, so tops are often elusive and difficult to predict. The outlook for higher prices attracts more willing buyers, who jump in at any price and this propel prices higher. Then, without any fundamental change — prices suddenly reverse back down on long liquidation.

I find that the best way to cut through all the positive, market-driving "news," often associated with the top of bull markets, is to have the discipline to rely on well-defined chart patterns.

Reversal patterns that appear on the daily, weekly and monthly charts are reliable tools for identifying a change in trend, especially when they emerge at the height of a bull market.

The first indication that cattle prices were about to turn down was when a two-day reversal provided a sell signal on March 2. This reversal pattern occurred on the April 2012 futures contract, as prices were challenging the contract high ($131.50).

Further verification of the impending downturn occurred when a two-week reversal materialized on the weekly nearby chart on March 9, which was followed by the development of a two-month reversal on the monthly nearby chart on March 30.

It is not all that uncommon to see a reversal pattern at the top of a rally on the daily charts, but when it is followed by reversal patterns on the weekly and monthly nearby charts, it adds all the more probability of an ensuing downturn.

I’ve illustrated the two-week reversal in the accompanying chart. On the first week, the market advances to new highs, and closes very strong at or near the high of the day.

During the following week, prices open unchanged to slightly higher, but fail to have follow through strength. Selling picks up, which stalls the advance and prices begin to erode. By week’s end, the market drops to around the preceding week’s low and closes at or near that level.

Market psychology: The two-week reversal is a snapshot of a 180-degree turn in sentiment. On the first week, the longs are comfortable and confident. The market’s performance provides encouragement and reinforces the expectation for greater profits.

The second week’s activity is psychologically damaging. It is a complete turnaround from the preceding week and shakes the confidence of those who are still long the market. The longs respond to weakening prices by exiting (selling) the market.

Keeping a watchful eye for reversal patterns in a bull market can provide insight and an opportunity to hedge prices before a market’s trend changes.

Send your questions or comments about this article and chart.

– David Drozd is president and senior market analyst for Winnipeg-based Ag-Chieve Corp. The opinions expressed are those of the writer and are solely intended to assist readers with a better understanding of technical analysis. Visit Ag-Chieve online for information about grain marketing advisory services, or call us toll-free at 1-888-274-3138 for a free consultation.