A new era for Canada’s farmers
ROMA LUCIW
Globe and Mail Update
November 28, 2007 at 1:12 PM EST
A new era of high agricultural prices is at long last brightening the outlook for Canada’s farmers, says a Toronto-Dominion Bank report released Wednesday.
After years of adversity, the stars are aligning for Canada’s agricultural sector. Rising income levels in China and India have increased demand for Canadian food products, at the same time as burgeoning investment in biofuels such as corn-based ethanol are contributing to the improved outlook for many agricultural prices.
“Expectations have begun to rise that the sector has entered a new era of high prices, supported by rising food consumption and the prospects of competing demand for crops as a source of biofuels,” Derek Burleton, TD’s director of economic studies, said in the report. “For Canadian farmers, it is about time.”
Canada’s agricultural sector has struggled in the last five years, TD said. Crop farmers have faced difficult growing conditions, while the outbreak of the avian flu and bovine spongiform encephalopathy have hurt Canada’s chicken, cattle and beef industries.
Farmers’ input costs have risen drastically in recent years as higher energy prices had them digging deeper for diesel and gasoline. The price tag for fertilizer has also climbed. Tight labour conditions, especially in the West, forced them to hike wages.
Since most agricultural products are priced in U.S. dollars, the soaring loonie has reduced Canadian farmers’ sales and left their crop and livestock prices at depressed levels. The TD report noted that in 2005, for every dollar farmers earned in gross sales, they paid out between 83 and 91 cents (U.S.) in operating expenses.
To make things worse, from 2002 to 2006, agricultural prices were excluded from a commodity price rally that swept up crude oil, bullion and other precious and base metals. This year, however, prices for various agricultural products, as measured by the TD commodity price index, have soared by 40 per cent from a year ago, outperforming the loonie’s 20 per cent surge.
The U.S. push to develop ethanol and biodiesel has boosted corn prices, TD said. Other crop prices, including wheat, barley and canola have also risen in recent years, some from drought-related supply shortfalls.
“Beyond 2008, the picture is bright, as some of the trends that have captured attention this year are expected to remain in force,” Mr. Burleton said.
Rising populations and increased wealth in China, India and other emerging markets are expected to elevate demand for food in the next decade, while global efforts to derive energy from food products are forecast to pick up.
“Looking beyond some of the shifts taking place in pricing and costs, the farming sector – and the overall value chain – appears to be charting through a period of unprecedented change and potential to become an even bigger driver of Canadian economic growth down the road,” Mr. Burleton said.
The increased public concern about the environment, food safety and health has many farmers exploring areas such as bioproducts and organics. The movement towards healthy, local eating suggests Canadians may be willing to pay more for niche, fresh and high-quality products.
In addition, Mr. Burleton said that Canadian farmers have shown they can adapt and innovate, improving their efficiencies, raising their economies of scale and cutting costs.
http://www.reportonbusiness.com/servlet/story/RTGAM.20071128.wagriculture1128/BNStory/robNews/home
