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Canada Agribusiness Report Q1 2012
Business Monitor International, Jan 2012, Pages: 59
Business Monitor International's 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.
- Use BMI's independent 5-year industry forecasts to test other views - a key input for successful planning in dynamic agribusiness markets.
- Apply BMI's medium term commodity price forecasts to assist with budgetary planning and the identification of investment opportunities and potential risks
* Exploit latest competitive intelligence on your competitors and peers in Asia, Europe, Latin America, the Middle East and Africa through BMIs company rankings and analysis.
BMI View: Despite the recent move to put an end to the Canadian Wheat Board's monopoly on grains trading, BMI believe the country's agricultural sector will remain a relatively regulated industry, as BMI do not expect the milk supply chain management system to be changed, even in the context of the Trans- Pacific Partnership (TPP) negotiations. Corn output will remain strong over the forecast period as ethanol plants are expected to come online in the coming years. Elsewhere, BMI continue to see poor growth prospects for Canada's livestock sector (excluding poultry) even though high prices and government support have led to an unexpected increase in output in 2010/11.
Key Trends
- Corn Production growth to 2015/16: 10.7% to 13.0mn tonnes. This will come from large domestic demand increases, owing to the Canadian government's decision to raise the renewable biofuel content mandated for gasoline. Demand will also come from the livestock sector.
- Poultry consumption growth to 2016: 13.6% to 1.5mn tonnes. This will come as consumers continue to consume poultry for its health benefits despite the fact that poultry products are relatively expensive because of Canada's quota system.
?? Cheese production growth to 2015/16: 25.7% 527,900 tonnes. This will come from increased domestic consumption as the economy recovers, as well as from population growth. Economic growth should also increase credit access for farmers and allow for production growth.
- 2012 Real GDP Growth: 1.8% (down from 2.3% in 2011; predicted to average 2.3% from 2011 until 2016).
- Consumer Price Inflation: 2.0% year-on-year in 2012 (down from 2.8% in 2011; predicted to average 2.3% from 2011 until 2016).
Industry Developments
Even with a recent lower court ruling against it, BMI still expects the Canadian Federal government to end the monopoly of the country's wheat board in the coming year, if not months. The decision, posted on the federal court website on December 7, states that the government acted improperly by failing to adequately consult farmers regarding its intentions. The government plans to appeal. At most, the ruling will delay the process and the wheat board's monopoly will continue longer than BMI currently anticipate, but with farmer income strong and the government's parliamentary majority, BMI believe the monopoly will still be removed.
The performance of livestock equities in the Americas has diverged significantly and BMI expect this trend to remain in place. BMI believe that the large divergence between equity returns in the year-to-date can be explained by the amount of leverage that companies have taken on in recent years and differences in profitability. Indeed, US-based livestock companies such as Tyson Foods (up 24%) and Smithfields (up 36%) as well as Brasil Foods (up 46%), which have much lower levels of debt and superior profit margins have outperformed Brazilian based Marfrig (down 54%), Minerva (down 18%), JBS (down 14%) and Canadian Maple Leaf (down 12%).
The Canadian dairy sector, which currently functions under a supply chain management system, could be in for significant reform in the coming years if the Canadian government remains intent on joining the current Trans-Pacific Partnership (TPP) negotiations. With the ruling Conservative party's interest in liberalisation of the agriculture sector and at least four years before another election, there is potential, if only some, for the dairy sector to be liberalised.
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