BMO FORECASTS STEADY GROWTH FOR CANADIAN AG

on April 19 | in Ag News | by | with No Comments

From a release

The Canadian agriculture industry is expected to show steady production growth following a good harvest last year, with exports to emerging markets providing a growing source of revenue in 2013, according to BMO Economics.

“Rapid economic expansion in emerging markets and lagging demand growth from south of the border has resulted in increasing export market diversification,” said Aaron Goertzen, Economist, BMO Capital Markets. “Although global competition is stiff, Canadian producers’ productivity edge has contributed to a large and growing trade surplus.”

Mr. Goertzen noted the potential impact of a stronger U.S. crop this year. “As drought conditions in the U.S. subside, increased production there could lead to lower agricultural prices. Export demand growth will, as a result, be even more crucial for industry prices and profitability.”

“While some Canadian producers in central Canada faced challenges due to drought, improved demand and increased production led the sector to solid revenue growth in 2012,” said Karl McLaren, Manager, Agriculture, BMO Bank of Montreal. “These factors, along with ongoing technological improvements, continue to have a positive impact on the agricultural sector. We look forward to working with our farm customers to support their growth and success.”

BMO Economics noted the following regarding the positives for the industry:

Innovation

Advances in technology, improvements in management practices and industry consolidation have resulted in sustained productivity growth.

Innovation has consistently and significantly expanded the industry’s productive capacity, with gross output per hectare having more than quadrupled over the past half-century. There are few signs that innovation is slowing – with private spending on research and development in the agriculture sector having grown at roughly twice the pace of the Canadian total over the past decade.

Global Demand

Rapid global demand growth has significantly increased agricultural product prices over the past decade. The strong export growth is being driven largely by rapid population and income growth in emerging markets, which has increased food demand in these countries. This effect is being compounded as emerging-market consumers shift their diets toward higher-value products, such as meat. Long-term demand growth is virtually guaranteed by domestic and global population growth as well as rapidly increasing incomes in emerging market economies. Although imports from emerging markets are growing quickly, Canada continues to run a large and growing agricultural trade surplus with these economies. Emerging market development represents a large positive for the Canadian agriculture industry.

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