Black Rock, one of the largest investment management companies in the world, publicly announced about two years ago that they would be less bullish on Oil & Gas investments because of carbon issues and surrounding concerns.

Last week they had a complete turn around in their strategy and this is a quote from their transcript, “We will not survive with the society that we are custom to without hydrocarbons right now. We need to rapidly admit to that.”

So, what they’re saying is we have to keep hydrocarbons alive because there isn’t enough technology to compensate for the needs that oil and gas can fill. Not only as an energy source but as part of the supply chain.

That, to me, is a big turn around.

This thinking is impacting everyone around us. The price of oil today and energy costs in the agriculture industry are huge! Farmers spend a lot of money on diesel and natural gas. The ag industry is a big consumer of hydrocarbon. Not to mention that 90% of the fertilizer comes from natural gas.

That was a major announcement made by Blackrock.

The good news is because of this announcement, the agricultural industry won’t be restricted to solar energy and wind power and maybe, technology can catch up to the horsepower needed in the fields.

We are concerned about having to use electric tractors. I’m not sure they can create lasting and efficient horsepower for pulling 60 plus foot drills and other heavy equipment.

Fuel costs will continue to rise, fertilizer input costs will continue to go up, and it’s all going to come back to; what are farmers going to do in the future? Are they going to put less fertilizer on the fields, which means that yields will be cut back?

It’s an impact that keeps snow balling and going downhill.

Some interesting news in the last week:

Regina, SK is starting to be looked at as the canola capital of the world. That’s probably because more companies are building more plants for canola crushing. The good news here is that Canada is starting to wake up and do further processing or ‘value add’. We should be exporting Canola oil and not the seed.

In Edmonton Alberta, at Strathcona's Refinery Row, Imperial Oil is planning on producing renewable diesel from canola. Renewable diesel production or biofuel is a large part of their discussions for future planning and reducing CO2 emissions. Are we over building these facilities in Canada…can we produce a steady uninterrupted supply of canola…who will survive if we have less yields because of weather and high input costs???

The other news - inflation is about 7% in the US and about 5% in Canada. We don’t know where it’s going to go, but people are having disagreements about whether or not it’s transitory or here to last, but we do know that borrowing costs will rise.

And lastly, could carbon be the new asset class? Can you believe this? I never thought that carbon could be both harmful and profitable. Talk about a double edge sword or a zero sum game. At the end of the day what are we trying to optimize? That’s not for me to decide. I’m just asking.

Take care

Fred Mertz
Fred@thevoiceofagriculture.ca