Canada Agribusiness Report Q4 2012Published by: Business Monitor International Published: Oct. 17, 2012 - 77 Pages Table of Contents
AbstractBMI View: Canada’s involvement in the Trans-Pacific Partnership negotiations has the potential tobegin a process that could ultimately see the country’s dairy and poultry supply management systemdismantled. After the abolition of the Canadian Wheat Board’s monopoly on grain trading, dairy andpoultry could be the next industries to be shaken up. For now, we expect milk, poultry and porkproduction growth to be mild in 2011/12. We forecast corn output to decline in 2011/12 but to remainstrong in the coming years as higher renewable fuel content requirements encourage the construction ofnew ethanol plants.Plummeting Prices CME Front-Month Lean Hogs (USc/lb, weekly) & RSI (below) Source: BMI, Bloomberg Corn production growth to 2015/16: 10.7% to 13.0mn tonnes. Large domestic demand growthcoming from the livestock sector and higher renewable fuel content requirements will driveoutput growth. Milk production growth to 2015/16: 6.8% to 9.0 tonnes. Output will increase on the back ofcontinued yield increases and investment in the sector. The recent signs of reconsideration of thesupply management system could be beneficial to the industry in the medium term. Poultry consumption growth to 2015/16: 13.7% to 1.1mn tonnes. The perceived healthiernature of poultry, as well as increasing export opportunities, will support consumption growth. 2012 real GDP growth: 2.0% year-on-year (y-o-y). Down from 2.5% in 2011 and predicted toaverage 2.4% over 2011-2016. Consumer price inflation: 1.8% y-o-y in 2012. Down from 2.9% in 2011 and predicted toaverage 2.2% over 2011-2016. BMI universe agribusiness market value: 3.9% y-o-y decline to US$23.6bn in 2011/12.Forecast to average US$23.8bn a year between 2010/11 and 2015/16. Industry Outlook Owing to favourable weather and higher global prices in 2011, we expect improved output for Canadianwheat in 2012/13. There was much speculation about the end of the CWB as the sole marketing authorityfor Western Canada’s wheat on August 1 2012 and its effect on future production. We believe the end ofthe monopoly is likely to have broader and positive effects for farmers in the coming years, as they couldreceive higher prices in a more competitive market with several purchasing entities. The industry is alsolikely to benefit from Canada’s free trade agreement (FTA) with Morocco, which is set to offer Canadianwheat unrestricted access to one of the world’s largest wheat importers. In 2011/12, we forecast poultry production to increase slightly, driven by demand from the retail sectorand as more consumers switch away from beef. The Canadian government will invest more thanCAD600,000 into the Atlantic Poultry Institute to improve feed and health research. The investment isaimed at increasing the region’s poultry producers’ competitiveness, enabling them to increase quality oftheir products to meet demand from the more health-conscious consumer. This is expected to supportproduction in the longer term, as will increasing export opportunities and high poultry prices. In 2011/12, we forecast mild milk production growth. The number of milk cows in Canada has fallen by17% over the last decade but this has been countered by a increases in yields and greater consolidation atfarm level. BMI believes Canada’s involvement in the TPP has the potential to begin a process that couldultimately see the country’s dairy and poultry supply management system dismantled. In our view, thiscould be the catalyst that leads the system to the same fate as the CWB. Over the short term, thisdevelopment could reduce Canada’s dairy production but it presents upside risks to our long-termproduction outlook. Get full details about this report >> |
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