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Canada Agribusiness Report Q2 2010
Business Monitor International, March 2010, Pages: 62
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.
After a bleak season for most of 2009 whereby the prairie provinces in western Canada where hit by a severe drought and eastern Canada suffered through cool damp weather, a spell of warm, dry weather towards the end of 2009 looks to have marginally improved crop production totals for the 2009/10 season. Nonetheless, we forecast 2009/10 production for Canada's three largest grains by volume to decrease year-on-year (y-o-y).
Specifically, production totals for wheat, corn, and barley declined by 7.3%, 9.7%, and 19.1% respectively. On the other hand, soybean production, which had registered growth for five consecutive years until a 22% drop in 2006/07, is estimated to have had its third straight yearly increase, growing 4.9% in 2009/10 y-o-y.
In the middle of 2009, demand for wheat and barley increased slightly as the dry weather conditions in the prairies led to a decrease in the grazing quality of farm land used by the livestock sector. The farmers requested wheat and barley as a temporary replacement; however, this demand decreased when normal weather returned. For the coming season, we expect demand for feed wheat to decline once again due to a forecast contraction of the livestock sector, although we expect to see rises in corn production (due to increased use of bio-fuels) and could also see increases in barley production if the Canadian government enacts de-regulation legislation.
Canadian pork producers are expected to have a difficult 2009/10 season. The rise in the Canadian dollar was instrumental in hampering the competitiveness of Canadian pork exports on world markets, and pig market prices came under pressure as packers reacted to market forces. Also, increasing US pig inventories, as well as the implementation of country-of-origin labelling (COOL) laws reduced demand for Canadian pork, and thus sharply cut into exports. The government is taking measures to try and mitigate the problems. The Federal Sow Cull Program, announced in February 2008, aims to reduce the total sow herd by 10% and make the sector more competitive. To try and push up domestic consumption and exports, in 2008 the government contributed US$1.4mn to the Pork Marketing Council. Amendments to the Advance Payments Program aspire to give producers of livestock better access to cash advances. Over the long term, we forecast wheat production to bounce back to increase slightly by 7% from 2009/10 to 2013/14. We expect corn to rise sharply by 25% over the same period, as bio-fuels become more widely used. Barley's struggles are expected to continue, and we forecast a drop of 25% over the 5- year forecast period. Finally, we expect decreases in beef and pork production to 2013/14 by 6% and 5% respectively, while poultry production is expected to increase by 10.75%, as government initiatives aimed at tackling obesity within the country push consumers to a leaner, more poultry based diet.
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