Canada’s agriculture and food sector can safely be labeled Old Faithful for its contribution to Canada’s export-based economy. While not a flashy industry, it remains among the most dependable and consistent in terms of foreign sales year in-year out.
And Export Development Canada’s (EDC) latest forecast for the sector is no exception, calling for foreign shipments, which totaled over $50 billion in 2013 and represented 9.5 per cent of all Canadian exports, to increase 10 per cent in 2014 and another 5 per cent in 2015, both all-time nominal highs.
Daniel Benatuil, an economist at EDC specializing in agri-food exports, notes that the sector outperformed many others during the recession and has bounced back strongly since. The outlook going forward remains positive for most agri-foods Canada exports, including oilseeds and pulses, wheat, manufactured food and beverages, meats, live animals and seafood.
“We are at the mercy of global trends in terms of exports because Canada is a significant agri-food producer that consumes less than it produces, but fortunately most of those trends are positive for Canada,” he says.
For instance, Benatuil notes that in the near term, global prices appear to be on a down cycle for Canada’s principal field crops, but the outlook for exports still remains positive because global demand is high and Canadian producers have plenty of product left in the pipeline to sell to the world. Producers are also benefitting from the soft loonie.
“Also putting pressure on prices is that there seems to be an oversupply of product in the world,” Benatuil said.
The International Grains Council has estimated that production of corn in the U.S., soybeans in Argentina, Brazil and the U.S., and wheat in China, the European Union and Russia will all be at record or near record levels in 2014-15.
Canadian farmers experienced their bumper crop in the 2013-14 season when growing conditions were ideal, leading to the build-up in inventories. Yields are expected to return to more normal levels this year, but there is still plenty of inventory to sell.
The situation is reversed in Canada’s meat industry. Prices are elevated, in part because of the improving global economy and Asia’s growing appetite for “western” foods, but Canadian sales volumes have been adversely affected by the E. coli outbreak in Alberta and the fact producers are still in the process of rebuilding stocks. Still, EDC expects nominal exports in the sector to be positive in 2014 and 2015.
The medium and longer-term outlook for meat producers looks promising. The growing middle class in emerging economies, particularly China, holds great promise for sales of high-protein food. Meanwhile, the free trade deals with South Korea and Europe, once fully implemented, create the potential for even greater sales in those rich markets.
“The same logic holds true for Canadian fish and seafood exporters,” said Benatuil. In the near term, EDC is forecasting exports in this sub-sector will grow close to 11 per cent this year and another 7 per cent in 2015, mostly on the strength of higher prices and increased demand. But with emerging Asia fast becoming an increasingly important market for Canadian fish and seafood, the longer-term outlook is also bright provided producers can supply the demand.