Agriculture remains strong: FCC

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March 17, 2015 8:15 AM

Around 200 people filled the Vic Juba Community Theatre on Thursday for Farm Credit Canada’s (FCC) Ag Outlook workshop.

The event had several industry experts on-hand to discuss prospects for the upcoming agriculture season. Among the experts involved was FCC chief agricultural economist J.P. Gervais, who delivered good news to producers in attendance.

“The economy itself - because of oil, because of different things - is sluggish. But the ag economy is actually doing very well because global drivers are pointing in the right direction for us,” he said.

Those drivers, Gervais said, involve emerging world markets like China that have the economic power to continue importing products from Canada. “Think global, act local,” he said, referring to the idea that the strength of worldwide markets has a greater effect on the agriculture industry than local ones.

“There’s a bunch of different things that do matter, that do have an impact on your business,” he said. “You have to capture all of that and make decisions as to what to seed, what kind of equipment do you buy this year, do you lease (farmland), do you rent? So you have many different decisions that are the local part that have an impact on what’s left in (your) pocket at the end of the day, but you have all these global drivers that have an impact on that.”

Gervais also pointed to the value of the Canadian dollar and the federal interest rates, both of which have decreased in recent times, as wildcard factors. A lower loonie allows producers to capitalize on the exchange rate, as their goods are priced in American dollars. Meanwhile, lower bank interest rates help make better equipment more affordable, thereby increasing production potential.

Gervais said he expects the Bank of Canada to continue dropping interest rates in the foreseeable future. As for the dollar, it’s hovering around 80 cents, and fell to its lowest value in six years as recently as last week. “I do believe that we’re going to have a good year with the dollar at 80 cents, and anything less than 80 cents is going to be a bonus for the ag sector,” Gervais said.

It isn’t all good news for the prairies, though. Gervais said he doesn’t see oil prices rising any time soon, in large part because of the drastic increase in oil production in the United States. However, as the oil industry leaves creates an over-saturated workforce in the prairies, agribusiness wages should begin to settle down. According to Gervais, that’s important because wages have been increasing at a faster rate than inflation, which is not conducive to sustaining success economically.

“Sometimes, the salary expectations that these workers have don’t really match what farms are able to pay. I think now, there’s going to be more of a match in terms of expectations of workers as well as businesses, which is good.”

Of course, there’s one thing not even Gervais can’t predict, and that’s the weather.

“Let’s just hope for a good crop,” he said.

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