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Canada Agribusiness Report Q4 2010
Business Monitor International, Sep 2010, Pages: 64
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.
Corn and poultry will be the main out-performers in Canadian agriculture, both over the short and long term. Despite rising prices, Canadian wheat production will continue to stagnate, along with the pork and beef sectors. However, corn producers will see incentives to increase production, buoyed by rising prices in the short term and increasing poultry production in the long term. Moreover, we forecast poultry production to increase over the long term driven by rising domestic demand. However, the rest of the industry should see either stagnant growth or even decreasing production due to greater export competition or low domestic demand growth.
Key Forecasts:
- Soybean production growth to 2013/14: 18%. This will come from strong domestic demand, namely the livestock sector, and improved yields. we expect exports to rise as well, particularly to China and other increasingly affluent Asian markets.
- Corn consumption growth to 2013/14: 25%. This will result from production increases in the poultry sector (which uses corn and soybeans as feed), as well as the government's continued support for corn-based biofuel.
- Sugar production growth to 2013/14: 47%. After reaching a high in the 1950s, the area planted to sugar production has fallen dramatically. Production is expected to increase by another 7% to touch 103,000 tonnes in 2010/11. Out to 2013/14, we expect production to grow to 128,000 tonnes, but this growth will be mainly due to base effects.
- 2010 Real GDP Growth: 3.3% (up from -2.6% in 2009; predicted to average 2.8% from 2010 until 2014).
- Consumer Price Inflation: 1.8% year-on-year in July 2010 (up from -0.9% y-o-y in July 2009). Industry Developments
Canada's pork sector continues to struggle, with production having shrunk to its lowest levels since 2000/01. This has largely resulted from an industry goal of cutting production by 18% by 2014, with the government paying farmers to cease raising hogs. Exports have particularly suffered in the wake of the rising Canadian dollar and recent restrictions on pork imports into the US. Consequently, many pig farmers have gone out of business. Out to 2013/14, we see output decreasing by 5% to 1.85mn tonnes. This will result from government culling programmes and decreased exports, which will continue to suffer in the wake of stricter US labelling laws.
Barley is a major feed grain in Canada, so its fortunes are linked in part to those of the pig and cattle industries, currently undergoing restructuring and downsizing. Another problem is that exports are facing greater competition. Improved prospects for the Australian feed barley crop and the competitive impacts in important Japanese and Middle Eastern markets have weakened the tradable export feed barley outlook. Furthermore, intervention subsidies have lowered the prices of Canada's competitors' barley. Consequently, Canadian barley exports in 2010/11 are forecast to be one of the lowest in the last 40 years, despite the fact that Chinese demand for malting barley is approximately 385,000 tonnes per year. On top of Canada's existing markets, other markets for Canadian cattle exports are opening as well. Following a concerted effort by government and industry, the Philippine government has agreed to allow Canadian animal by-products such as fats blood meal, poultry meal effective immediately. The move, which the Canada Beef Export Federation estimates could eventually see CAD20mn in revenues for Canadian exporters. Furthermore, Canadian cattle producers and exporters are expected to benefit from full market access from Panama, which announced the re-introduction of Canadian breeding cattle to its market. The deal will certainly help increase the value of Canadian agriculture and food exports to Panama, which in 2009 was US$23.5mn.
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