Outlook 'cautiously optimistic'

By Geoff Lee

February 23, 2016 11:10 AM

Agricultural economist Craig Klemmer spoke about economic trends affecting farming during the Agri-Visions conference and trade show at the Lloydminster Exhibition Grounds Feb. 17-18.

Agricultural economist Craig Klemmer from Farm Credit Canada in Regina spoke to the Lloydminster Source about economic trends shaping Canada’s agriculture industry at Agri-Vision 2016 at the Lloydminster Exhibition Grounds Feb. 17-18.
Klemmer provided a snapshot of his economic outlook in a Q and A interview.

Q: What is FCC’s economic area of expertise?
Klemmer: We try to monitor all the trends that are impacting agriculture across Canada. We focus a lot of the risk side of things and the potential risk to our company and the industry overall.
We focus a lot on grains and oil seeds and livestock. They are major contributors to agriculture.

Q: What is the economic outlook for agriculture in Canada in 2016?
Klemmer: Overall, we’re cautiously optimistic.
We have seen declines in world commodity prices, but we’ve also seen a large decline in the Canadian dollar. As a result, those are offsetting each other.
When we look at margins and the ootential profitability in Canadian agriculture for 2016, things look relatively good.
There are quite a few sensitivities to changes in the dollar or movement in commodity prices a little bit further.

Q: What is the forecast for exports for pulse crops like beans, lentils and peas?
Klemmer: I think generally exports are going to be fairly strong. When we think about Western Canada especially, demand seems very strong for pulse crops with 2016 being the (UN) International Year of Pulses.
It looks like it will be the year of the pulse in Western Canada so we expect quite a few exports of peas and lentils.
Canola still looks to be pretty favourable and we see quite a few acres of canola at least holding last year’s acres.

Q: How about wheat and grain exports?
Klemmer: The world supply of wheat has been increasing so there is going to be a little bit more competition in terms of getting our product into the market.
That being said, things seem quite favourable.
The decline in the Canadian dollar gives us an advantage over the United States and that should help support Canadian agriculture.

Q: Is livestock still a strong export commodity?
Klemmer: It’s much of the same story. We’re seeing commodity prices come down. The demand for beef remains relatively strong in Canada and the United States.
Overall things look to be fairly good —  not as good as they have been in the last couple of years.
We’ve come off some extremely high prices, but the decline in the Canadian dollar has given us a bit of a competitive advantage and should continue to support margins for cattle producers.

Q: Do you see any economic trends pertaining to weather?
Klemmer: Weather is going to be very interesting going forward.
They are talking about this El Nino weakening and maybe switching to La Nina and when does that transition occur?
And what are the impacts in terms of weather? We are in a global market so it’s not always what’s happening in Canada that we need to be focusing on.
We also need to be focusing on the some of the events happening elsewhere.
So with the Canola market we are interested in thinking about what’s happening in palm production for palm oil in Malaysia in Indonesia and that’s going to have an impact on what canola’s worth.
We need to be following some of the trends and impact of weather in other parts of the world because those will have some implications about the competitiveness of Canadian agriculture and the opportunities.
A smaller pulse crop in India over the last couple of years is creating a real opportunity, and I think that’s why you’re going to see a trend toward more pulses in Western Canada.

Q: Is weather influencing the trend to grow pulse crops in Saskatchewan?
Klemmer:  Pulse crops are a market opportunity and the market signals what’s really showing it. In Canada and around the world we are seeing an increasing demand for pulse crops because of population growth.

Q: Are you excited to be speaking to farmers and suppliers in Lloydminster?
Klemmer: Talking to a few people so far there’s some optimism in the industry, and I think it’s justified.
Things are looking fairly good as we head into 2016, but there’s a lot of things that can change so we are cautiously optimistic going forward.

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