RSSAgriculture is an Often Overlooked Sector in Canada’s Economy
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The following are some of the farm income highlights from 2007, as reported by Statistics Canada. Agricultural revenues can have a direct impact on construction through investment in meat packing plants, ethanol plants, grain silos and transportation infrastructure. There are also local impacts on farm equipment dealers and spillover effects in retail areas. Finally, there can be upstream investments on such engineering projects as potash and other fertilizer facilities (e.g., ammonia and urea plants).
Output from two of the major crops in Canada in 2007 moved in opposite directions. There was a 21% decline in wheat production. As a result, total Canadian wheat stocks at the end of 2007 were 30% below their level at year-end 2006. They were also well below their five-year average. Weather-related issues in some other countries also caused supplies to tighten. At the same time, strong world demand helped drive wheat prices higher.
Moving in the other direction, corn production was at record levels in Ontario and Québec last year. The corn stock in Ontario rose 14% in 2007 and in Québec, it jumped 42%. The nation’s total corn stock moved up by 15%. Furthermore, the increasing use of corn to produce ethanol drove prices 30% higher than in 2006.
The major feed crops for livestock are corn, soybeans (specifically soy meal, which is produced after the oil is extracted) and barley. The prices of all feed crops moved up smartly in the year. Traditionally, higher feed crop prices adversely affect livestock prices. When faced with higher costs, producers downsize their herds. Also, feedlots (where cattle are fattened up before slaughter) pay lower prices.
Livestock producers (cattle and hogs) are being squeezed by higher feed crop prices, but also by the 17% appreciation in the value of the Canadian dollar last year versus the U.S. dollar. Prices for livestock in Canada are determined by U.S. prices. The higher-valued dollar means a significant cut in prices for producers in this country.
The final agricultural category to review is supply-managed commodities, comprised of dairy, poultry and egg products. The dollar revenue from this segment of the market rose 9% in 2007 versus 2006, the largest percentage gain in 10 years.
Alex Carrick
