A rosy year ahead for Canadian agriculture

Tuesday, February 18, 2014

by SUSAN MANN

Last year was a very good year for Canadian agriculture with most sectors doing well and that will continue into this year, says a senior federal agriculture department official.

The official made the comments during a technical briefing held Wednesday by telephone in conjunction with the federal agriculture department’s release of its annual medium term outlook and farm income forecast publications.

At the start of the briefing, Patrick Girard, Agriculture and Agri-Food Canada spokesperson, said reporters were only permitted to paraphrase the information and attribute it to a senior agriculture department official. Broadcasting the briefing was prohibited.

The senior official says the farm income forecast represents an estimate of farm receipts, operating expenses and net incomes for both 2013 and 2014.

Net cash incomes in both 2013 and 2014 will reach $13 billion, declining only slightly from the record level reached in 2012, he says. In today’s dollars, 2013 and 2014 income levels are a continuation of the trend of historically high income levels in recent years and when adjusted for inflation are among the highest levels since the mid 1970s.

Net cash income, which is how much money farmers have available for debt repayment, investment in their farm businesses or for personal expenditures, is being driven by strong grain and oilseed seeds, record livestock prices and lower input costs, such as fertilizer, he says.

Other numbers Agriculture and Agri-Food reported include:

• Program payments declined by 25 per cent due to favourable conditions in 2013.
• Average farm level net operating income is forecasted to increase to $68,498.
• Average net worth per farm is projected to hit an all-time high of $2 million in 2014.
• Average total farm family income will hit $132,579 in 2014.

Ontario Federation of Agriculture president Mark Wales says Agriculture and Agri-Food Canada’s rosy picture of how farmers are doing is accurate “for the most part but it will be tempered because we haven’t gone through 2014 yet and we have porcine epidemic diarrhea in the hog industry.”

The impact of PED isn’t known yet “although pork prices are up. So for those who are not affected by the disease, prices are up and feed costs are down,” Wales says, noting lower feed costs helps the entire livestock sector.

In his comments on the medium term outlook report, the senior federal agriculture department official says significant increases in grains and oilseeds production last year in major crop-producing countries led to a decline in key U.S. prices for 2013. But higher crop prices will return as a result of growing demand and a return to more normal harvests.

Rising energy costs over the next 10 years will continue strengthening the links between global agriculture and non-food use markets, the official says, noting the west Texas intermediate crude oil prices could hit US$140 a barrel by 2023.

The Canada-United States dollar exchange rate will remain below par but the Canadian dollar will continue to be relatively strong compared to its long-term historical level.

Domestic feed grain demand will mainly be satisfied by domestic production. Feed grain prices have moderated recently but feed grain will continue being the most significant cost for the livestock sector.

For livestock farmers, feed grain prices won’t be as high as they were in 2012 and farmers will also benefit from higher cattle and hog prices over the medium term, the official says.

Very low U.S. cattle inventories and the slow pace of breeding herd rebuilding in America will continue to keep prices high in the future, while hogs prices will remain relatively high due to lower than anticipated inventories.

For supply-managed commodities, such as dairy, poultry and eggs, the federal agriculture department is projecting stable growth in its medium term outlook report.

The projections in the medium term outlook are obtained by using the current market and policy conditions, such as world population growth, rising incomes in emerging economies and increasing non-food uses of farm crops, for officials to estimate how the sector will evolve over the next 10 years. Macro-economic forecasts and other economic data are also used. The medium term outlook is based on several factors projected to shape global demand and supply for farming commodities over the next 10 years.

The farm income forecast outlines the outlook for the industry as a whole and each sector. It’s the federal agriculture department’s short-term measure of the financial strength of the agricultural sector. The two reports together provide a snap shot of the state of the farming sector, he says. BF