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Canada Agribusiness Report Q1 2009
Business Monitor International, Jan 2009, Pages: 50
The Canada Agribusiness service provides proprietary medium term price forecasts for key commodities, including corn, wheat, rice, sugar, cocoa, coffee, soy and milk; in addition to newly-researched competitive intelligence on leading agribusiness producers, traders and suppliers; in-depth analysis of latest industry developments; and essential industry context on Canada's agribusiness service.
Some parts of Canada's agriculture industry are facing considerable challenges at present and others have a more positive outlook for the years ahead. This report considers recent developments in the industry's main sectors; considers how production levels and consumption trends are likely to play out in 2009 and assesses the direction Canada's agriculture industry is likely to take to 2012.
The Canadian government's enthusiastic support of the biofuel industry will have an increasing impact on grain production. A bill has been passed this year that will require 5% renewable content in gasoline by 2010 and 2% renewable content in diesel fuel by no later than 2012. Grain producers are being encouraged to provide the materials and are being tempted into supporting the industry by a number of incentives. The government and trade bodies have welcomed the opportunities that will be created for grain growers by the expanding biofuel sector.
Wheat, corn, soybeans and even barley are possible sources of biofuel. Local biofuel production facilities could dictate which crop farmers choose to grow. Ethanol production from corn is one of the most common and domestic corn production and consumption to 2012 is predicted to increase accordingly. Canada's ethanol production capacity is expected to reach 1bn litres by the end of 2008, from an estimated 700mn litres capacity in 2007.
The recent expansion in the global biofuel industry helped elevate grain commodity prices. Other reasons for the increased prices included poor harvests and increased world demand. High grain prices have filtered through to the feed industry, which has in turn brought considerable pressure to bear on Canada's livestock industry.
Poultry production looks set to steadily increase to 2012, but the pig and cattle industries are currently in decline and could continue contracting for several years to come. Both have recently experienced falling inventories, production levels and exports. The degree to which meat exports to the US will be affected by that country's Country of Origin Labelling regulations is not yet clear.
Other important trends to consider when examining the Canadian agricultural industry are changing consumption habits and the possible impact global economic uncertainty will have on domestic and global demand. Changes in consumer preferences towards healthier, ethnic and convenience foods are impacting buying patterns, as is an increasingly immigrant based and aging population.
The recent volatility in financial and commodity markets and prospects of global recession bring a level of uncertainty to all sectors of Canada's agriculture industry. Grain customers are reviewing their buying plans and consumers are tightening their belts. The Canadian economy is not expected to suffer to the same extent as that of the US but economic activity is set to slow in 2008. The author expects full year growth
to come in no higher than 1.4%, before rebounding to 3.3% in 2009.
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