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he Federal, Provincial, and Territorial (FPT) Ministers of Agriculture concluded their two-day annual meeting in Quebec City today, co-chaired by Marie-Claude Bibeau, federal Minister of Agriculture and Agri-Food, and André Lamontagne, Minister of Agriculture, Fisheries and Food for Quebec

The Ministers reiterated their commitment to help Canada’s agriculture and agri-food sector seize new opportunities, and tackle important challenges to ensure businesses prosper and create economic growth.

Given the critical importance of exports to Canadian farmers and processors, the Ministers were unanimous in their support of international trade that is based on trade rules and science. Ministers agreed to continue to work together to take advantage of new trade agreements with key markets. Ministers discussed the current trade challenges facing industry, particularly the canola, pork and beef sectors, as well as durum wheat, pulses and soy, and recognized the need for urgent resolution and to work with the sector to support industry’s sustainability, profitability and growth.

“The future is full of promise for Canada’s agriculture and agri-food industry,” Bibeau said. “We have the competitive advantages to sustainably supply the Canadian market and the world’s growing population with our high-quality products.”


“A strong federal-provincial-territorial partnership will help ensure Canadian farmers and food processors are well positioned”


 

“The agri-food sector is booming, and we are responsible for ensuring that our farmers and food processors benefit from all of the opportunities it offers,” Lamontagne stated. “This meeting gave me the opportunity to see that a number of other provinces are facing the same issues we are, to varying degrees.”

In support of Canada’s supply management system, Ministers reiterated the importance of providing compensation to the supply-managed sectors in a full and fair way in response to the Canada-European Union Comprehensive Economic and Trade Agreement (CETA) and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The federal government is taking the appropriate steps to announce details as soon as possible, to ensure that these industries are well positioned to thrive.

The Ministers acknowledged that the growing shortage of labour makes it difficult for agricultural businesses to operate and expand, despite their recruitment activities. The Temporary Foreign Worker Program (TFWP) is a tool used by industry to access much needed labour resources. The Ministers reviewed sector concerns with the program and discussed the progress made. The Ministers emphasized the importance of finding solutions to immediate challenges agriculture and agri-food employers are encountering when recruiting workers through the TFWP, including challenges associated with administrative burden and processing delays. They look forward to continued engagement with Employment and Social Development Canada (ESDC) and Immigration, Refugees and Citizenship Canada (IRCC) on short-term administrative changes to be implemented in a timely fashion. Provinces and territories affirmed the urgency of obtaining short-term administrative changes, acknowledging that labour is a multi-dimensional issue requiring action at all levels of government.

“It was agreed that it is important to urgently restore access to all our pork and beef export markets and to work together to ensure the growth and prosperity of the sector,” Lamontagne said. “I also reiterated the importance of fully compensating supply-managed producers who made sacrifices leading to the signing of various trade agreements. Finally, the provinces and territories agreed that the federal government must urgently make the administrative changes requested in order to respond to the labour issues being faced by our businesses.”

The Ministers underlined that business risk management programs are essential in helping farmers address risks, such as natural disasters, weather events, severe loss or market volatility, acknowledging program challenges raised by industry. The Ministers discussed adjustments that could improve existing programs to address the needs of producers and complement private sector tools. The Ministers directed officials to return with a set of proposed improvements to AgriStability for the Ministers’ consideration before year end. The Ministers committed to working with the industry to promote a modern and competitive sector. The collaboration depends heavily on the Canadian Agricultural Partnership, which is now in its second year and represents a five-year $3 billion investment by the governments to strengthen and grow Canada’s agriculture and agri-food sector. In 2018-2019, governments invested close to $346 million in FPT cost-shared programming and $79 million in federal programs to benefit the sector. The Ministers noted the significant progress made to date under the Canadian Agricultural Partnership and will begin work on the next policy framework.

The Ministers highlighted their commitment to building a diverse agriculture sector by encouraging the full participation of youth, women and Indigenous Peoples. The Ministers welcomed a panel of young farmers, who shared their views on a range of topics from technology, to business management, to mental health.

The Ministers agreed to continue collaborating with industry representatives on a pan-Canadian action plan and implementing the plan to help proactively mitigate the potential impacts of African swine fever (ASF). Continued efforts in preparedness planning, biosecurity for small-scale farms and the strategic management of wild pigs were part of the discussion. The Ministers heard an update on the Animal Health Canada initiative and agreed to continue this work.

The Ministers also recognized the need to reduce regulatory red tape, and to put in place effective and responsive regulations that support innovation, growth and competitiveness, and protect health and environment. They endorsed a set of regulatory guiding principles, and committed to continuing their focus on traceability and surveillance activities.

“A strong federal-provincial-territorial partnership will help ensure Canadian farmers and food processors are well positioned to meet the important challenges and pursue opportunities for continued success at home and abroad,” Bibeau added.

The Ministers agreed to build on the progress made at the meeting over the upcoming year. The next annual meeting of FPT Ministers is in Guelph, Ontario, in July 2020.


Source: AAFC

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Meat Business by Meatbusiness - 2d ago



Debt isn’t necessarily a bad word. In fact, experts say there are numerous reasons why your business may need it

by Richard Kamchen – Farm Credit Canada (FCC)

Debt is part of what’s necessary for a healthy, thriving industry, says Farm Credit Canada’s vice-president and chief agricultural economist J.P. Gervais.

“Every farm is different, based on their needs and capacity to service the debt,” says Heather Watson, Farm Management Canada’s executive director.
The age and stage of a farmer and farm are factors, as are a producer’s tolerance for risk, Watson says.


“Stress test the financial position of the farm through good, bad and ugly scenarios to validate the ability of the business to assume the increased financial obligations”


 

In the experience of Sharon Ardron, Manitoba Agriculture’s farm management specialist, producers use a combination of operating or trade credit for transactions such as input financing, and term debt to purchase equipment or land.

New debt

Before bringing on additional debt, farmers need to assess their financial situation, Gervais says.

That involves assessing current debt versus equity in the business, as well as current ability to meet debt obligations, he says.

Then, forecast factors like future revenues, costs and possible higher interest rates, and their impact on servicing a larger debt.

“Stress test the financial position of the farm through good, bad and ugly scenarios to validate the ability of the business to assume the increased financial obligations that pursuing new debts will bring,” Ardron says.

Some farmers may want to consider insurance to mitigate the increased financial risk.

Producers should also consider whether there’s a business decision behind taking out debt – will it move the business forward?

“Does it reduce costs or increase income?” Ardron asks. “Do these benefits outweigh the costs associated with the new debt and the increased risk from further leveraging?”

Having a trusted source review a business plan can highlight options the business owner may not have noticed or point out what hasn’t been considered.

Too much debt

Farms can become overleveraged and farmers’ ability to service the debt can be compromised if too much is borrowed or if borrowing conditions aren’t compatible with the situation on the farm, Watson says.

Financial institutions normally use a debt service coverage ratio to evaluate the ability of farm operations to meet their debt obligations, Gervais notes.

Challenging times can change behaviour by increasing caution about incurring new debts. For example, some farmers may opt to run current equipment for a longer term rather than replace it, Ardron says.

But even with the challenges of 2018 and 2019, Gervais says there are opportunities to invest – and take on more debt – for businesses that are in a good financial situation and looking to increase productivity.

Bottom line

Before taking on new debt, experts say producers should consider whether the new debt is a sound business decision and draw in the farm management team for advice. In the right circumstances, debt can increase productivity on a farm and move the farm business forward.


Source: AAFC

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A new sensor designed to track parameters related to animal welfare during swine transport and monitor the trailer temperatures during disinfection are expected to be ready for use by 2020

by Bruce Cochrane – FarmScape Online

Transport Genie is one of the partners in a Swine Innovation Porc initiative intended to improve the efficiency of washing and disinfecting swine transport trailers.

Sensors, originally designed by Transport Genie to monitor parameters related to animal welfare are being modified to track temperatures achieved during the baking or disinfection of those trailers.

Transport Genie President and CEO Joel Sotomayer says, in terms of the disinfection of these trailers, it’s important be sure the temperatures required to kill pathogens are reached.


“Stress test the financial position of the farm through good, bad and ugly scenarios to validate the ability of the business to assume the increased financial obligations”


 



“In terms of the SIP project, as you know there is a need to find out if every compartment of that trailer is actually reaching the temperature that is required to be considered clean.

“So by putting our sensors in various parts of the container we can validate it to make sure that that section of that trailer actually got to the temperature that was required.

“Presently we can record the GPS coordinates that the driver is using in terms of how they get from point A to point B and we also measure accelerometer.

“In the event that there is an event where braking had to be done in a manner that may have caused some of the payload or animals to be hurt, because there was a hard breaking event, we would also have the ability to record when that happened and, in the near future, have cameras installed and then view what actually happened during that incident.”



Sotomayer says prototype sensors are now being tested to ensure they are able to withstand the rigors of transport and the wide range of temperatures they’ll encounter during disinfection.

He expects a more robust product to be ready within the next year.


Source: FarmScape Online

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When the Canadian Space Agency (CSA) launched its first Synthetic Aperture Radar (SAR) satellite in 1995, RADARSAT-1, agriculture wasn’t top-of-mind

But scientists at Agriculture and Agri-Food Canada (AAFC) saw earth-orbiting satellites as an opportunity to look at agriculture from a stellar new vantage point. Soon, they were using satellite data streams to run crop models and evaluate the drainability of fields.

Fast forward to June 2019 when the CSA launched its third generation of SAR satellites, RADARSAT-Constellation; agriculture is now one of CSA’s primary clients and end-users.


“Satellites provide imagery that farmers and agronomists can access online through various AAFC web portals”


 

Using Satellite Technology for Agriculture

RADARSAT-Constellation is a series of three SAR satellites. They will orbit the earth in tandem, providing more frequent coverage and more advanced imaging of our agricultural resources.

Dr. Andrew Davidson, manager of the Earth Observation group at AAFC, explains that there is no better way to obtain information on the state and trends of agriculture than from space. “Satellites cover way more ground at a much faster pace than humans and the data can be used to measure things like crop type, vegetation density, and field tillage.”

Satellites provide the kind of timely, reliable, and scientifically validated information that helps scientists, farmers, and policy-makers make good evidence-based decisions.

What’s in it for you?

“Satellites provide imagery; scientists on the ground turn it into something useful,” says Dr. Davidson. His team generates data sets, maps, and forecasting tools that farmers and agronomists can access online through various AAFC web portals.

For example, AAFC’s Annual Space-Based Crop Inventory maps the crop type of every field in Canada and is used to detect trends in crop planting practices. It can warn growers of threats, like crop diseases, and help evaluate agriculture’s impact on surrounding environments, such as lake water quality and honeybee populations.

All in all, Earth Observation research is helping the Canadian agricultural sector thrive and the launch of Canada’s new RADARSAT-Constellation satellites continues to benefit future generations of Canadians by protecting food production systems and the environment.

Find out more by visiting CSA’s RADARSAT-Constellation Mission Web Page.


Source: AAFC

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The 2019 Chef’s Series, held in conjunction with Taste of Saskatchewan, kicks off today and wraps up on Sunday

by Bruce Cochrane – FarmScape Online

Taste of Saskatchewan, underway until Sunday at Kiwanis Park in Saskatoon allows visitors to sample food from over 31 of the city’s finest restaurants.

Among the highlights again this year is the Chef’s Series.

Clinton Monchuk, the Executive Director of Farm and Food Care Saskatchewan, explains the Chef’s series is a cooking competition that highlights the food products produced in Saskatchewan.


“It give us an opportunity to engage with consumers and also answer questions that they may have”


 

“The Chef Series is kind of like the TV series called Chopped.

“What it is is some of the best chefs from Saskatchewan go together in a head to head cooking competition.

“What makes this competition a little bit different is you come to the stage, you have no idea what you’re going to be preparing that day.

“You open the black box and what ever is in there, you have to use all of those ingredients to actually make a meal.

“Then we have judges that judge that plate that is prepared from each of the chefs that are up on stage.

“On top of that what ends up happening is, while the chefs are preparing the different meals, we will make sure that the audience has an opportunity to understand how that canola was produced here in Saskatchewan or how the beef is raised on Saskatchewan ranches or in the feedlots here in the province.

“It give us an opportunity to engage with consumers and also answer questions that they may have.”

Monchuk says this is a really informative way of leaning more about your food and how to cook your food.

For more information on Taste of Saskatchewan or on the Chef’s Series visit Farm and Food Care Saskatchewan’s web site at farmfoodcaresk.org or visit the Taste of Saskatchewan web site at tasteofsaskatchewan.ca.


Source: FarmScape Online

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This morning in Charlottetown, the Standing Senate Committee on Agriculture and Forestry released its report entitled, Made in Canada: Growing Canada’s value-added food sector

The Honourable Robert Black, independent senator for Ontario and member of the committee believes that the report presents an opportunity for Canada to become more competitive in global markets.

Black has worked in the agricultural industry for over 30 years and upon his appointment to the Senate in February 2018, he was keen to get to work on agriculture issues. “Canada is known for quality agricultural products and processes,” said Black. “No one is disputing that. However, there absolutely is room for improvement in terms of adding value to those products in order to make Canadian exports the envy of countries around the world. That’s what we want to address in our report.”


“Canadian farmers, processors, and others in the agricultural industry are already doing fantastic work”


The committee heard from witnesses from all areas of the industry across Canada, informing the nine recommendations that the senators are now proposing to the government.

According to Black, the report’s fifth recommendation, which suggests ways for the government to “support innovation, growth, and competitiveness in the value-added sector,” is among the most important proposals of the report. Additionally, he believes that recommendations related to support of the supply management sector and the development of a global marketing program will be crucial to the continued success of Canadian agriculture.

Other recommendations include reviewing the Temporary Foreign Worker Program, addressing issues related to transportation of agricultural products, and reforming mandates of regulatory agencies.

“Canadian farmers, processors, and others in the agricultural industry are already doing fantastic work,” added Black, “but the industry needs the government behind it to implement policies that help us meet and surpass the high standards set by other countries.”

Read the report: Made in Canada: Growing Canada’s value-added food sector


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Canada should expand the value-added food sector by improving regulations to allow for the expansion of international trade of processed food products, investing in innovation, and reducing the barriers to growth inside its borders, a Senate committee said

The value-added food sector takes raw agricultural products, like apples or hemp fibre, and transforms them into something else, like cider or cat litter. Currently, only about half of the food grown in Canada is processed here, demonstrating a gap the committee believes should be closed.

The Senate Committee on Agriculture and Forestry is recommending regulatory changes that maintain Canada’s brand of quality and safety while expanding its reach to international markets. It recommends updates for the Canada Food Inspection Agency and Canada Border Services.

“This is a sector where we’re already seeing incredible ingenuity in the development of products that meet both national and international demand,” said Senator Diane Griffin, Chair of the committee. “With support from the federal government to break down regulatory barriers and foster further innovation, Canada’s value-added sector could become an essential component of the Canadian economy.”


“There is an appetite for made-in-Canada food and products, both within our borders and internationally”


It also recommends investing in research and development and using existing mechanisms to support innovation in the sector, including grants, rebates and superclusters, to encourage the launch or growth of businesses that manufacture value-added products.

“There is an appetite for made-in-Canada food and products, both within our borders and internationally,” added Senator Don Plett, Deputy Chair of the committee. “We need to encourage growth in the food manufacturing industry by improving our transport systems and making regulations clearer and easier to follow.”

Barriers to growth within Canada’s borders should also be resolved. The government should look to harmonize trucking regulations and reduce trade barriers between provinces and territories, improve transportation networks across the country and rectify the industry-wide labour shortage. There are 59,000 positions currently vacant in the industry. To help fill them, the committee recommends expediting the path of temporary foreign workers to permanent residency when they comply with the program.

The food processing sector is one of the country’s largest employers, representing 17.3% of manufacturing employment. Of all value-added food companies in Canada, 94.1% have fewer than 100 employees. Companies with more than 500 employees make up only 0.5% of the total. The average job vacancy rate in the agriculture sector varied between 4.5% and 6.3% in 2017, while the average for all Canadian industries was only 2.8% that year.


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Butchers are essential to our food supply and yet, often overlooked. The federal government recognized butchers and the huge labour shortage in meat processing by officially announcing an Agri-Food Immigration Pilot, that will provide 2,750 spots for Temporary Foreign Workers (TFW)

“A year ago, we met with Minister Hussen, Hajdu and MacAulay, industry members, and the union. Our labour shortage and message to help Canada’s food supply became clear to the government. Today, we are thankful for their hard work, their recognition of our labour shortage, and their appreciation for our butchers and Agri-Food sector by announcing this labour pilot” says Chris White, President of the Canadian Meat Council (CMC).

With more than 1,700 empty butcher workstations across the country, this pilot will allow members to gain access to TFW that are desperately needed to fill the labour gap and more importantly, allow them to transition to permanent resident status.


“Meat Processing remains Canada’s largest food and beverage manufacturing employer with 64,500 workers in rural and urban areas across Canada”


CMC has been advocating for almost a decade the need for government to create a program that would help the sector to deal with the high employment shortage and issues with the current TFW Program.

“This pilot is vital to our sector,” adds White. “Our members provide year-round, permanent jobs. There’s nothing temporary about our need for a workforce, and the TFW program didn’t work for our members – this pilot gives them a solution.”

Last fall, Industry Canada’s Agri-Food Economic Strategy Table report highlighted the need to address the immediate labour shortages facing the sector and to modernize Canada’s immigration and temporary foreign worker programs to access the global labour force across all skill levels.

“It’s important to remember that our members always hire Canadians first,” added White. “Allowing entry-level butchers means creating more middle-class jobs – which is what this government is all about – for everyone one temporary foreign worker. We also create four jobs for Canadians.”

Over the last 14 years, meat processing wages have increased by over 50% with research showing that entry-level and experienced butcher positions having increased the most with nearly 1,700 empty butcher stations at meat processing plants across Canada.

Research findings also indicate that beef meat processing capacity in Canada is less today than it was 20 years ago, with pork capacity stagnant and lamb not enough to keep up with domestic demand. However, the labour shortage is having critical impacts of lost sales for meat processors of $750 million annually, plus $396 million lost sales for its value chain producers. This is due to labour shortage which brings the total economic impacts to the red meat sector to approximately $1.15 billion.

Meat Processing remains Canada’s largest food and beverage manufacturing employer with 64,500 workers in rural and urban areas across Canada, while red meat consumption and exports support 288,000 jobs in Canada, generating $6 billion in annual revenues. Over 90% of TFWs who are allowed to stay, remain working in the rural meatpacking plants.


Source: Canadian Meat Council (CMC)

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Farm business planning experts and farmers themselves agree: a business vision is a critical element to success

by Trudy Kelly Forsythe – Farm Credit Canada (FCC)

Michelle Painchaud, president and CEO of the consulting firm, Painchaud Performance Group, is a firm believer in vision.

“It is motivating, inspiring and aligns everyone to one common goal or destination,” Painchaud says, explaining a farm vision is the desired destination where a farm wants to be. “It is like a travel destination when one is planning a special trip.”


“If you don’t have a long-term goal, you won’t do it”


 

The value of vision

A clear vision provides focus and helps farms make better decisions, Painchaud says. That’s because choices are made to ensure they align with the farm vision.

It’s also valuable when a farm is transitioning management or ownership. Painchaud says whether a farm consists of three, 25 or 300 people, a vision gets – and keeps – everyone on the same path.

“The older generation has been doing this for a long time, so they know what they are thinking,” Painchaud says. “A son or daughter may wonder, ‘what’s my role? How am I going to be involved?’ Without vision, they will be scattered and doing different things,” Painchaud explains. “Vision brings alignment.”


Strong vision, strong farm

When Wayne Rempel became the CEO of Kroeker Farms in Manitoba in 2002, he knew the importance of having a strong vision for the farm.

“Vision is the long-term goal of where you want to be some day,” Rempel says. “If you don’t have a long-term goal, you won’t do it.”

He developed a vision statement for the farm when he started in his role, and when the farm rebranded a few years ago, a marketing firm was brought in to assist, in part with development of a new vision. The new vision captures the same goals as the first and maintains the company’s commitment to healthy food and the environment.

But Kroeker Farms’ vision statement does more than guide the farm’s strategic plan.

“The marketing company really felt our vision statement could help do the marketing of our story that we could tell the rest of the world,” Rempel says. “Before it was internal for our employees; now it’s external as well.”


Bottom line

A clear farm vision provides focus and helps guide daily decisions, no matter the size of the operation. Experts recommend making the time to create a farm vision and ensuring it’s used once it is created.


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Growth in Canadian broiler production slowed in the first five months of 2019, falling under the 3% pace we’d anticipated in our January outlook. Even with the farm price increasing at a slightly faster pace than input costs, broiler operations recorded positive profitability. We expect positive profit margins for the remainder of 2019 along with stronger growth in broiler production

by J.P. Gervais – Farm Credit Canada (FCC)

Broiler production (measured in eviscerated weight) climbed 1.6% year-over-year (YoY) in the first 5 months of 2019. Canadian stocks of frozen chicken meat averaged 54,000 tonnes over the first five months of 2019, representing a 14.2% YoY increase. Despite such high stocks, broiler quota allocation will continue to grow to meet anticipated strength in consumption.

Chicken remained competitively priced at the retail level between January and April. Despite a retail price increase of 2.5% YoY in May, competing animal protein retail prices climbed on average at similar rates: 1.4% for pork and 2.5% for beef. During this period, Canadian overall food prices climbed 3.5% YoY, higher than overall inflation at 2.4%.


“Interest rates and the value of the Canadian dollar have had an impact on the profitability of Canadian broiler producers in the first half of 2019”


 

Trends for broiler operations to watch

  • Strength in retail demand for chicken
  • High chicken meat inventories
  • Rising feed costs
  • African Swine Fever in China and the balance in global demand and supply of meat
  • Expansion in plant-based protein consumption
  • Higher interest expenses despite no change in the Bank of Canada policy rate
     

    Broiler production (measured in eviscerated weight) climbed 1.6% year-over-year (YoY) in the first 5 months of 2019. Canadian stocks of frozen chicken meat averaged 54,000 tonnes over the first five months of 2019, representing a 14.2% YoY increase. Despite such high stocks, broiler quota allocation will continue to grow to meet anticipated strength in consumption.

    Chicken remained competitively priced at the retail level between January and April. Despite a retail price increase of 2.5% YoY in May, competing animal protein retail prices climbed on average at similar rates: 1.4% for pork and 2.5% for beef. During this period, Canadian overall food prices climbed 3.5% YoY, higher than overall inflation at 2.4%.

    Disposable income is also a major driver of animal protein consumption. Canada’s unemployment rate fell to 5.4% in May 2019 (the lowest level since 1976) and average hourly earnings grew at a 2.8% annual pace. One potential downside to monitor: plant-based proteins represent an increasing risk to continued growth in retail demand for chicken.

    We estimate that feed costs declined 1.8% YoY in the first six months while chick costs rose 0.8% YoY. Energy and interest expenses also climbed. The average farm price climbed on average 4.5% YoY in the first four months of 2019, pushing cash receipts 5.8% higher in the first quarter of 2019 relative to 2018 Q1.

    Feed costs are projected higher for the second half of 2019. Unfavourable seeding conditions in the U.S. have lowered 2019 seeded acres and corn yields. The USDA projects an average 2019-20 corn price of US$3.80, higher than the 2018-19 average of US$3.60. Futures markets are currently signaling that this price projection is too low. Dry conditions in Prairie provinces and an excessively wet Eastern Canada could also lower the available supply/quality of feed. Projections are for feed costs to climb 7.3% YoY in the second half of 2019. Chick costs are expected to climb at the relatively slower pace of 2.2%.

    The spread of African Swine Fever (ASF) through the Chinese hog herd will cause significant disruption in the global animal protein market. China’s meat consumption represents 27% of global meat consumption, around 60% of which is pork. The USDA expects China to import a record amount of pork (+41% YoY), beef (+15% YoY) and chicken (+68% YoY) this year. These projections are based on a 10% projected decline in Chinese 2019 pork production.

    ASF may have an even larger impact. Some credible estimates suggest a possible, and staggering, 35% decline in 2019 Chinese pork production. Because major producers in North America and Europe can’t scale up production to meet this anticipated growth in import demand from China, animal protein prices at the farm and retail levels will need to jump significantly to re-establish a balance between anticipated global supply and demand.

    Early 2019 slowdown pauses rate hikes – loonie hovers at US$0.75

    Interest rates and the value of the Canadian dollar have had an impact on the profitability of Canadian broiler producers in the first half of 2019.

    The Canadian economy recorded a 0.4% increase in real GDP in the first quarter of 2019, following a 2018 fourth-quarter 0.3% increase. The Bank of Canada (BoC) expects the pace of economic growth to pick up in the second half of 2019, with inflation expected to trend around the bank’s 2% mid-point target.

    A slower pace for economic growth has significantly changed the January outlook for interest rates. We don’t expect the BoC to lift its policy interest rate for the remainder of 2019, yet financial markets believe a rate cut is possible. Recent investments and the five previous increases in the BoC policy rate (dating back to July 2017) are expected to continue pushing interest expenses of broiler operations higher.

    Our January forecast of a US$0.75 loonie was right on the money up to mid-June. The future path of interest rates in Canada and the U.S. as well as the strength of the oil market matter for the exchange rate outlook.

    The U.S. economy has shown some strength with a 3.2% increase in real GDP for the first quarter of 2019, in line with the 2018 economic performance. But in March the U.S. Fed chairman slashed the forecast for 2019 rate hikes from two to zero. And the most recent statement of the U.S. Fed now suggests at least one rate cut before the end of the year. Lower U.S. rates could lift the loonie up slightly.

    Conversely, potentially lower oil prices weaken the outlook for the loonie. Supply disruptions and production controls resulted in the West Texas Intermediate (WTI) crude oil price averaging US$57. The Canadian oil price benchmark also rebounded following production cuts in Alberta earlier this year. Yet, world economic growth has slowed (in line with early 2019 expectations) due to trade tensions, weakening global oil demand.

    FCC Ag Economics forecasts the CAD to trend around US$0.745 for the remainder of 2019. A low loonie implies a slightly higher price for feed.


    J.P. Gervais is Vice-President and Chief Agricultural Economist at Farm Credit Canada (FCC)

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