Canada’s long-term outlook for agriculture remains positive, according to Farm Credit Canada (FCC) chief economist J.P. Gervais, but there are trends to watch. Here’s what FCC is reporting.
Net cash income plateauing: Price volatility, higher input costs and this past year’s weather-related challenges in many parts of the country took a toll on Canadian net cash income in 2018. Final calculations will likely show it decreased, and it’s forecast to plateau in 2019.
Ripples in trade flows: Despite the volatility of the international trade environment, Canadian agriculture is well-positioned for export growth in 2019 and beyond. Canada has some well-established trade agreements in key markets. Geopolitical tensions resulting in tariffs and other barriers will likely continue to disrupt traditional trade relationships, but it could also open new markets.
Global supply and demand fundamentals shifting: Global production growth in recent years has helped replenish stocks and better equip the markets to absorb potential weather-related supply shocks. “Producers who want to see what’s coming should actively monitor global weather patterns and production updates, as the South American crop year wraps up,” Gervais says. “And keep an eye on China and the U.S. China’s large influence on global agricultural markets and the U.S. supply of commodities will have important impacts on 2019 prices.”
Tighter profit margins mean taking calculated risks: With little chance of real growth in commodity prices this year and possibly higher farm input costs, risk management will become an even more significant component of success. Canadian producers need to find ways of reducing costs while increasing productivity from their existing operations. Adding value to agricultural products is another avenue to grow farm revenues. “Investments in innovation and technology will go a long way in ensuring Canadian agriculture remains competitive,” Gervais says.
Welcome to the golden age of protein: Although 2018 was a tough year for protein production, “Canadian producers of both animal and plant-based protein stand to gain buyers both at home and abroad as markets around the world are embracing a wide variety of protein products,” Gervais says. “This trend will continue in 2019 and beyond, as plant and animal proteins serve different segments of the global market.”
Source: Farm Credit Canada January 7, 2019 news release