Trade flows, income plateaus, and protein possibilities: The top ag economic trends ahead

Price fluctuations, higher input costs, and weather-related challenges over the past year took a toll on Canadian net cash income in 2018, and that lower to flat income is projected to continue into 2019, says agriculture economist J.P. Gervais.

The chief agricultural economist for Farm Credit Canada says that, even so, the overall the long-term outlook for Canadian agriculture remains positive, since consumer demand for food at home and abroad is still robust. Canadian agriculture and agri-food sectors have shown resilience in the face of adversity, too, he says.

We are likely to see some fast-changing circumstances in the year ahead, including those that are both beneficial or potentially negative to Canadian agriculture, Gervais says, including ripples in trade patterns.

Canada already has some well-established trade agreements in key markets, including the Canada-European Trade Agreement (CETA), the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the yet-to-be-ratified Canada-United States-Mexico trade agreement, however, geopolitical tensions resulting in tariffs and other trade barriers will likely continue to disrupt traditional trade relationships and could possibly open new markets at the same time, he says.

“While the markets generally don’t react well to trade uncertainty, it also opens the door to opportunities for new trade relationships,” Gervais says. Disruptions can pave the way for new trade flows, which could be positive. But global trade tensions also have the potential to slow growth in the world economy. They can upset the status quo, and potentially impact the demand for Canadian ag commodities and food, and that’s never comfortable.

Despite the volatility of the international trade environment, Canadian agriculture is well-positioned for export growth in 2019 and beyond, Gervais says.

Global production growth in recent years has helped replenish stocks and better equip the markets to absorb potential weather-related supply shocks, too. With world demand for food still robust, higher production has been needed to meet the pace of increase, but this is having lasting repercussions on prices and revenues for Canadian farmers in a range of sectors, and this trend is expected to continue in 2019.

It is difficult to anticipate with much precision the domestic supply of various commodities in 2019. With little chance of real growth in commodity prices this year and possibly higher farm input costs, Canadian farmers will need to properly evaluate the outlook for profitability along with the associated risks. Risk management will become an even more significant component of success.

Adding value to our agricultural products is another avenue to grow farm revenues, as consumers continue to look for healthy and convenient food products, he says. Investments in innovation and technology will go a long way in ensuring Canadian agriculture remains competitive.

Canadian producers of both animal and plant-based protein stand to gain buyers both at home and abroad as markets around the world are embracing a wide variety of protein products, Gervais says.  This trend will continue in 2019 and beyond, as plant and animal proteins serve different segments of the global market.

So much happened last year to impact producers bottom lines, Gervais says.  If there’s a silver lining to the cloud of uncertainty that hung over the sector last year, it’s that this coming year may be the start of something bigger and better.

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