Hog and cattle prices buoy farm product price index

Statistics Canada’s Farm Product Price Index (FPPI) increased 1.4 per cent in December compared with the same month a year earlier, mainly due to higher hog and cattle prices. This was the first increase after three consecutive monthly year-over-year decreases.

The FPPI measures the changes in prices that farmers receive for the agriculture commodities they produce and sell. The index compares, in percentage terms, current farm prices to prices in the time base period, 2007=100.

In December, the livestock and animal products index posted its ninth monthly year-over-year increase (+5.7 per cent) during 2019, as prices were higher for most livestock commodities.

The hog index recorded the largest increase (+13.7 per cent) from December 2018, largely influenced by the outbreak of African swine fever in several countries, namely China. The outbreak has increased global demand for Canadian pork and live hogs, boosting hog prices.

Year-over-year, the cattle and calves index was up 4.4 per cent. Cattle prices were higher, supported by strong global demand for beef and tighter supplies. The cattle inventory in the United States on January 1, 2020 declined for the first time since 2014, while Canadian inventory continued its downward trend.

Higher production costs increased prices of supply-managed livestock commodities, contributing, to a lesser extent, to the overall increase of the livestock and animal products index.

In contrast to the livestock commodities, the prices of many oilseeds and grains were lower, prompting a 1.6 per cent decline of the crops index.

The oilseeds index fell 6.7 per cent, continuing a monthly year-over-year decline that began in November 2018, mainly because of the weakness of canola and soybean prices. China’s import restrictions on Canadian canola, the United States-China trade dispute and the higher value of the Canadian dollar in December negatively impacted canola and soybean prices. In the first five months of the 2019/2020 crop year, the total exports of Canadian canola fell 20.4 per cent, as exports to China dropped 71.8 per cent compared with the same period in 2018.

The grains index declined 2.0 per cent as higher world supplies of wheat and barley for the 2019/2020 crop year put downward pressure on prices. The world supply of barley reached its highest level since the 1994/1995 crop year. Despite import duties, Canadian lentil exports to India were up 63.0 per cent due to insufficient domestic supply.

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