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Alberta

Prairie farmers hope for ‘normal’ season after volatile couple of years

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CALGARY — Third-generation farmer Greg Sears is more than ready for a crop year without any curve balls in it.

In 2021, farmers were thrown a big one in the form of the severe drought that withered crops across Western Canada, including on Sears’ farm just north of Grande Prairie, Alta.

Then last year — even as the war in Ukraine drove grain and oilseed prices to record highs — inflationary pressures led to dramatic spikes in the cost of everything from fertilizer to fuel to tractor tires, leading some in the industry to dub 2022 as the most expensive crop year in history.

“Roller coaster ride, is a good way to describe it,” said Sears, of the volatility that has affected Canadian agriculture in the last 24 months.

“I’m kind of hoping (2023) will be, for what it amounts to, a normal year.”

Sears made the comments in a recent interview from his farm, where the weather has only recently changed to what he describes as “spring-ish” conditions.

While it will likely still be a few weeks before his fields dry up enough to start seeding his wheat, barley and canola, Sears said he feels a mix of hope and “nervous anticipation.”

On one hand, crop prices remain high from a historical perspective — though not as high as last year — and Canadian farmers are eager to meet the growing global demand for food.

“Most indications suggest farmers are going to hit the fields hard this year, with planted acreage expected to be a near record,” Edward Jones analyst Steve Hansen wrote in a recent research note, in which he suggested that if everything goes well, Canadian farmers could deliver a “Top 5 harvest” this fall.

But the memory of 2021’s record-breaking heat and drought in Western Canada weighs on many farmers who experienced it.

“We used to have a certain expectation for what our worst-case scenario was, and 2021 really reset that limit,” Sears said.

“We were affected as much as anybody. It wasn’t a very good scene for most people in our area.”

While 2021 was the worst one, western farmers have suffered through multiple drier-than-average growing seasons in the past decade.

And as of the end of February, Agriculture and Agri-Food Canada’s drought monitor map shows vast swathes of B.C., Alberta and Saskatchewan as being “abnormally dry” or already in a drought condition.

That’s a worry, Sears said.

“We haven’t really had good solid rains to build up the subsoil moisture again,” he added.

“And we didn’t get the big, big snows that we typically get in February or March. It was pretty sparse.”

Another concern is inflation, which Farm Credit Canada chief economist J.P Gervais said could impact farm profitability this year. While fertilizer and diesel costs have come down somewhat from last year, they remain historically high. And interest rates are much higher than they were at this point in 2022, which will be an issue for some farmers.

“The financial health of some operations depends on ‘do you own your land, and how much interest payments do you have to pay on that land?’” Gervais said.

“Certainly a concern for producers is that input costs are going to be very high this year overall,” said Bill Prybylski, who farms near the city of Yorkton in southeast Saskatchewan.

But Prybylski, who is heading into his 41st year of farming, said he believes most producers in his area are optimistic in spite of the risks.

“I think we’re looking at having a pretty start to the crop year here,” he said.

“But obviously a lot can happen between now and harvest.”

This report by The Canadian Press was first published April 17, 2023.

Amanda Stephenson, The Canadian Press

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Alberta

Alberta’s fiscal update projects budget surplus, but fiscal fortunes could quickly turn

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From the Fraser Institute

By Tegan Hill

According to the recent mid-year update tabled Thursday, the Smith government projects a $4.6 billion surplus in 2024/25, up from the $2.9 billion surplus projected just a few months ago. Despite the good news, Premier Smith must reduce spending to avoid budget deficits.

The fiscal update projects resource revenue of $20.3 billion in 2024/25. Today’s relatively high—but very volatile—resource revenue (including oil and gas royalties) is helping finance today’s spending and maintain a balanced budget. But it will not last forever.

For perspective, in just the last decade the Alberta government’s annual resource revenue has been as low as $2.8 billion (2015/16) and as high as $25.2 billion (2022/23).

And while the resource revenue rollercoaster is currently in Alberta’s favor, Finance Minister Nate Horner acknowledges that “risks are on the rise” as oil prices have dropped considerably and forecasters are projecting downward pressure on prices—all of which impacts resource revenue.

In fact, the government’s own estimates show a $1 change in oil prices results in an estimated $630 million revenue swing. So while the Smith government plans to maintain a surplus in 2024/25, a small change in oil prices could quickly plunge Alberta back into deficit. Premier Smith has warned that her government may fall into a budget deficit this fiscal year.

This should come as no surprise. Alberta’s been on the resource revenue rollercoaster for decades. Successive governments have increased spending during the good times of high resource revenue, but failed to rein in spending when resource revenues fell.

Previous research has shown that, in Alberta, a $1 increase in resource revenue is associated with an estimated 56-cent increase in program spending the following fiscal year (on a per-person, inflation-adjusted basis). However, a decline in resource revenue is not similarly associated with a reduction in program spending. This pattern has led to historically high levels of government spending—and budget deficits—even in more recent years.

Consider this: If this fiscal year the Smith government received an average level of resource revenue (based on levels over the last 10 years), it would receive approximately $13,000 per Albertan. Yet the government plans to spend nearly $15,000 per Albertan this fiscal year (after adjusting for inflation). That’s a huge gap of roughly $2,000—and it means the government is continuing to take big risks with the provincial budget.

Of course, if the government falls back into deficit there are implications for everyday Albertans.

When the government runs a deficit, it accumulates debt, which Albertans must pay to service. In 2024/25, the government’s debt interest payments will cost each Albertan nearly $650. That’s largely because, despite running surpluses over the last few years, Albertans are still paying for debt accumulated during the most recent string of deficits from 2008/09 to 2020/21 (excluding 2014/15), which only ended when the government enjoyed an unexpected windfall in resource revenue in 2021/22.

According to Thursday’s mid-year fiscal update, Alberta’s finances continue to be at risk. To avoid deficits, the Smith government should meaningfully reduce spending so that it’s aligned with more reliable, stable levels of revenue.

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Alberta

Premier Smith says Auto Insurance reforms may still result in a publicly owned system

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Better, faster, more affordable auto insurance

Alberta’s government is introducing a new auto insurance system that will provide better and faster services to Albertans while reducing auto insurance premiums.

After hearing from more than 16,000 Albertans through an online survey about their priorities for auto insurance policies, Alberta’s government is introducing a new privately delivered, care-focused auto insurance system.

Right now, insurance in the province is not affordable or care focused. Despite high premiums, Albertans injured in collisions do not get the timely medical care and income support they need in a system that is complex to navigate. When fully implemented, Alberta’s new auto insurance system will deliver better and faster care for those involved in collisions, and Albertans will see cost savings up to $400 per year.

“Albertans have been clear they need an auto insurance system that provides better, faster care and is more affordable. When it’s implemented, our new privately delivered, care-centred insurance system will put the focus on Albertans’ recovery, providing more effective support and will deliver lower rates.”

Danielle Smith, Premier

“High auto insurance rates put strain on Albertans. By shifting to a system that offers improved benefits and support, we are providing better and faster care to Albertans, with lower costs.”

Nate Horner, President of Treasury Board and Minister of Finance

Albertans who suffer injuries due to a collision currently wait months for a simple claim to be resolved and can wait years for claims related to more serious and life-changing injuries to addressed. Additionally, the medical and financial benefits they receive often expire before they’re fully recovered.

Under the new system, Albertans who suffer catastrophic injuries will receive treatment and care for the rest of their lives. Those who sustain serious injuries will receive treatment until they are fully recovered. These changes mirror and build upon the Saskatchewan insurance model, where at-fault drivers can be sued for pain and suffering damages if they are convicted of a criminal offence, such as impaired driving or dangerous driving, or conviction of certain offenses under the Traffic Safety Act.

Work on this new auto insurance system will require legislation in the spring of 2025. In order to reconfigure auto insurance policies for 3.4 million Albertans, auto insurance companies need time to create and implement the new system. Alberta’s government expects the new system to be fully implemented by January 2027.

In the interim, starting in January 2025, the good driver rate cap will be adjusted to a 7.5% increase due to high legal costs, increasing vehicle damage repair costs and natural disaster costs. This protects good drivers from significant rate increases while ensuring that auto insurance providers remain financially viable in Alberta.

Albertans have been clear that they still want premiums to be based on risk. Bad drivers will continue to pay higher premiums than good drivers.

By providing significantly enhanced medical, rehabilitation and income support benefits, this system supports Albertans injured in collisions while reducing the impact of litigation costs on the amount that Albertans pay for their insurance.

“Keeping more money in Albertans’ pockets is one of the best ways to address the rising cost of living. This shift to a care-first automobile insurance system will do just that by helping lower premiums for people across the province.”

Nathan Neudorf, Minister of Affordability and Utilities

Quick facts

  • Alberta’s government commissioned two auto insurance reports, which showed that legal fees and litigation costs tied to the province’s current system significantly increase premiums.
  • A 2023 report by MNP shows
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