HomeMy WebLinkAboutFarming '88, 1988-03-30, Page 50Farm Forecast
Experts expect incomes
to remain steady this year
Bank of Montreal expects gross
farm income in Ontario to remain at
current record levels in 1988 and
1989 and then to rise again in 1990
and 1991. Net farm income which
also reached record levels in 1987,
is expected to decline slightly, in
real terms, in 1988 and 1989 and
hold steady until commodity prices
begin to improve in 1991, the Bank
said at its annual Ontario Agricul
tural Outlook Conference in Lon
don last month.
In their presentation to the
conference Lindsay Barfoot, Vice-
President, Agriculture, and Jim
Darlington, Manager, Agriculture
for Ontario, said agriculture’s
difficulties can be overcome, but a
concerted effort will be required by
farmers, agri-businesses, govern
ment and farm lenders working
together to find effective long-term
solutions.
The next four years will present
serious challenges to Ontario
farmers. Crop prices will stabilize
and start to improve, but only
gradually, and the livestock sector
will expand dramatically, bringing
lower prices and smaller profit
UTLER
HOULE
B.S.M
margins. However, the Bank is
confident that the period of tough
transition of the 1980s will provide
a foundation for a viable and
competitive agriculture industry in
1990s.
The debt-to-asset ratio in the
Ontario farming sector has deter
iorated since 1976 from 14 per cent
to 22 per cent. However, farmers
are paying off their loans and are
cautious about new borrowings.
The currently high debt-to-asset
ratio will improve - but only slowly -
to about 20 per cent by 1991.
With grain prices not yet
recovered, falling land prices,
downward pressure on pork prices
and beef feedlot customers facing
tight profit margins, Simon Kou-
wenhoven, Senior Vice-President
of the Bank’s Ontario Commercial
Banking Division, said in a separ
ate presentation:
“We are all being challenged to
respond to the same realities that
face the agriculture sector in 1988.
The same issues and concerns that
affect the business of farming also
impact on the farm banking
business. Our main challenge is to
ensure that we do not paint the
entire industry with one brush, or
treat all producers within each
commodity sector in a blanket
manner. Each producer is unique
... and our commitment to the
agricultural industry is to indivi
dually assess each client’s situa
tion and requirements on its own
merits.”
“We will be working closely to
assist each of our clients to
realistically assess expected cash
flow. Our objective is to develop
the most reasonable financial
package possible for each situation
... to ensure the economic viability
of the business.”
The support from government
stabilization programs “will be
thoroughly considered in each
client’s credit application’’ and
“will remain critically important to
sustaining cash flow, especially in
the crop sector.”
As for the overall economic
outlook for the Ontario economy,
Lloyd Atkinson, the Bank’s Chief
economist, estimated only margi
nal growth and that, for the first
time in six years, it would be less
than the national average.
COMMODITY FORECAST
HIGHLIGHTS
Beef:
• Producers in the livestock
sector, which generates more than
half Canada’s farm income, im
proved their financial position in
1987. A combination of strong
prices and low feed cost has raised
livestock-to-feed price ratios to
very profitable levels throughout
North America. Since 1985, price
of 100 lbs. of beef or hogs relative to
price of a bushel of barley or corn
improved more than lOOper cent at
Calgary, 89 per cent at Omaha and
67 per cent at Toronto.
• Good profit margins in feedlot
operations have resulted in a
strong market for replacement
cattle -- and record high prices.
With North American cattle sector
clearly in initial expansion phase,
cow slaughter numbers have de
clined and more heifers are being
put into breeding herd. But by
fourth quarter 1987 pork and
poultry output increases had meat
prices under pressure.
• A1-A2 steers atToronto, up
sevenpercentin 1987 averaged
$89 per cwt., - are expected to
average $90 per cwt. this year and
gradually decline thereafter to $87
by 1991 due to pork and poultry
competition and growing beef
production.
• Feeder calf prices in Calgary,
up over 20 per cent in 1987 at an
Serving The Farmers
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Over 20 Years.
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Grain bins
Aeration equipment for
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feed carts, straw choppers, liquid
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Hog equipment - farrowing crates,
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WIC-
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average $121 per cwt., should hold
there in 1988.
•Canadian cattle herd antici-
patedtoincreasetoll.l million
headby 1989andatslightly less
than two per cent per year
thereafter to peak at 12.5 million
head in 1994, but still well under
record numbers in mid-70s.
Growth in the American cattle herd
is likely to lag the Canadian trend
and, therefore, will support price
levels here.
•The Canadian cattle herd is
shifting westward as more than 65
per cent of Canada’s cattle are
estimated to reside in western
Canada by mid-1990s compared to
60 per cent as recently as 1984.
Main reasons are lower feed costs
inthe west; ready accesstobeef
deficit region of U.S. west coast,
and downsizing of the large dairy
Continued on page 27