HomeMy WebLinkAboutThe Lucknow Sentinel, 2014-01-08, Page 5Wednesday, January 8, 2014 • Lucknow Sentinel 5
Farm Credit Canada: What farmers should watch in 2014
In keeping with Farm Credit Canada's
(FCC) commitment to providing timely
and relevant economic analysis to the
Canadian agriculture industry, FCC
Chief Agricultural Economist J. P. Ger-
vais shares five key economic issues in
agriculture to watch in 2014.
"Canadian agriculture is a challeng-
ing and rewarding industry, filled with
professional, forward -thinking, busi-
ness -savvy people who love what they
do," Gervais says. "By building and
sharing agriculture knowledge, produc-
ers benefit, agriculture benefits, rural
Canada benefits and so do all
Canadians:'
FARMLAND VALUES
North American farmland values
have been increasing rapidly over the
past several years, but they could soon
plateau, according to Gervais.
A record-setting harvest in 2013 for
many grain and oilseed producers
means increased world supplies and
prices retreating closer to their average,
compared to above normal prices over
the past fewyears. Reduced commodity
prices could mean many producers will
be less aggressive in expanding their
operations, resulting in lower apprecia-
tion of land values.
"Many producers will be surveying
the landscape to determine if they
should buy more land or pay off some
debt," said Gervais. "A lot of their deci-
sions will be based on commodity price
forecasts, their current profit margin
and how much they have invested in
land in recent years."
TRADE DEALS
The tentative agreement between the
European Union and Canada on the
Comprehensive Economic Trade
Agreement (CETA) may be generating
the headlines, but Canada is also
involved in negotiating other significant
trade deals, including the Trans -Pacific
Partnership (TPP).
Both trade deals represent a con-
certed effort by Canada to become less
dependent on its main trading partner,
the United States, which accounts for
30% of our country's agriculture exports
and two-thirds of agri-food exports.
Over -reliance on a single market makes
the Canadian agriculture sector
vulnerable to dramatic downturns in
the U.S. economy.
CETA, once ratified, will open up a
market of 500 million consumers for
Canadian agriculture products, while
TPP negotiations involve 12 countries,
including New Zealand, Australia, Viet-
nam, Malaysia, Japan and the United
States.
"Between those two agreements,
every sector of Canadian agriculture
will have opportunities and face some
challenges," said Gervais. "We need to
start preparing to manage our business
in a new environment"
U.S. POLITICS AND ECONOMICS
U.S. political infighting promises to
create more uncertainty south of the
border. The dispute resulted in a partial
government shutdown this year and
continues to pose a risk that the U.S.
will default on its debt.
Gervais, however, predicts things will
continue to improve south of the bor-
der. The U.S. Federal Reserve recently
started scaling back its aggressive mon-
etary policy because it is seeing strength
in the labour market and household
finances.
"Rolling back a program of this mag-
nitude is sailing in uncharted waters,"
Gervais said. "This change in the U.S.
monetary direction can have wide
impacts in the financial markets -
mostly on the value of the emerging
markets' currencies - impacting the
competitiveness of Canadian agricul-
tural commodities."
Disputes also distract U.S. legislators
from coming up with a long-term plan
for the Farm Bill, which funds many
important programs aimed at providing
farm support and nutrition assistance
to low income families. Legislators
recently passed a short-term extension
of the 2008 Farm Bill and are confident
a new farm bill will be enacted in early
2014.
"The lack of a five-year farm bill
means the status quo for now," Gervais
says. "The Farm Bill indirectly impacts
Canadian producers by influencing the
crops planted in the US and therefore
world prices:'
CANADIAN BEEF GETS BULLISH
Canadian livestock producers - par-
ticularly beef producers - should expect
healthy returns over the next couple of
years, according to Gervais.
Stronger beef prices are the result of
supply and demand dynamics. Cattle
numbers have been declining for some
years; a result of drought in the U.S. and
financial conditions that forced many
producers to reduce the size of their
herd or leave the sector. The U.S. herd
was reduced by five per cent over the
past two years and will take a couple of
years to recover, while the Canadian
herd is stable and appears ready to
rebound.
"In the short-term, Canadian produc-
ers are in a much better position to
serve the North American market,
which has seen an end to the decline in
per capita red meat consumption. The
demand for animal proteins is also
growing in emerging markets, such as
China," Gervais said. "The European
Union trade deal has the potential to
give Canadian beef the advantage in
other global markets, including
Europe."
Gervais said the U.S. Country of Ori-
gin Labeling (COOL) legislation has
hurt Canadian cattle producers, espe-
cially since new rules were issued by
the U.S. Department of Agriculture. The
coming year will determine if the U.S.
government backpedals or even takes
Purple Grove keeping busy in snow
Purple Grove WI
By Marilyn Reid
The Reid family spent Christmas
day with Marilyn and Don. Maureen
and Roy Collins; Jennifer and Steve
Riley and family; and Angela, Doug
Ward and Brea celebrated Christmas
Dec. 28 with Irene and David Collins
and family.
Tammy and Brad Murray, Damon,
and Dylan visited on Sunday with
Wilma and Cecil Sutton. It was her
mother's birthday.
We wish a speedy recovery to Grace
Eckenswiller who is in hospital. We
are glad to hear Melitta Edwards is
home again from hospital, also glad
to know that Janet Rhody is home
from the hospital.
Arik and Alex MacDonald spent
holidays off and on this week with
Shirley and Doug MacDonald.
Sandra and Brianna Husk spent last
Friday with Marilyn Reid doing acrylic
painting. Later Ed and Ryan came
over for dinner too.
On Saturday Marilyn and Don Reid
traveled to Dorchester for lunch with
Don's sister Wilda Parker. Later Julia
and Jack Parker and Kevin Hodgins
(Pam's husband) joined them for a
visit.
Betty and Art Helm had dinner with
Deanna and Morley Scott on Sunday
evening.
The Janet and Jack Farrell family
held their delayed Christmas get-to-
gether at Carolyn and Rob's at Rock-
wood on Saturday.
Celebrating birthdays early for
Joyce McEwan, Fran and Jim Farrell
were Joyce and John Farrell, Sandy
McEwan and Shirley and Doug Mac-
Donald. They gathered at Mary Anne
Kukoly's on Sunday. And a very happy
Birthday to all our January
celebrants.
apart this legislation, either voluntarily or through pressure
from its trading partners.
EQUIPMENT SALES GEARING DOWN
Like much of the rest of the agriculture economy, equip-
ment sales were on fire for many of the past five years. From
2006 to 2012, an average of 2,100 tractors were sold every
month in Canada, according the Association of Equipment
Manufacturers. Sales are expected to be equally as strong for
2013 when the final numbers are tallied.
With slightly lower crop prices, 2014 could see a retreat in
equipment sales. Sales are likely to move closer to the 2001-
2005 average, when 1,540 tractors were sold monthly; lower
than levels of the past several years. Another factor lowering
sales could be a weaker Canadian dollar in 2014, which will
make buying imported equipment more expensive.
"In the short-term, we will likely see equipment prices
staying steady, but they could soften somewhat if supplies
remain high and producers decide to retain their old equip-
ment or buy used equipment," Gervais said. "Broad eco-
nomic factors may influence how producers use their past
profits, but it really comes down to the unique circumstances
of individual producers:'
By sharing agriculture economic knowledge and forecasts,
FCC provides solid insights and expertise to help those in the
business of agriculture achieve their goals. More information
and insights on this topic can be found in the January 10 edi-
tion of the FCC Express.
For more information, visit www.fcc.ca
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