Declining Cattle Prices Sink Farm Product Price Index

on July 9 | in Ag News | by | with No Comments

From Statistics Canada

The Farm Product Price Index (FPPI) decreased 0.8% in March compared with the same month a year earlier, largely because of falling cattle prices. This was the second year-over-year decrease in the index in four months, following a growth trend that started in August 2014.

The livestock and animal products index fell 7.5% in March compared with the same month a year earlier, the sixth consecutive year-over-year decline. Prior to these decreases, this index had been mostly increasing on a year-over-year basis since April 2013, supported by rising cattle and hog prices.

The decline in the livestock and animal products index was led by lower prices for cattle and calves (-16.6%). Supply-managed commodities also decreased, with prices for eggs (-4.2%), dairy products (-3.7%) and poultry (-2.4%) all falling. Higher prices for hogs moderated the decline.

Cattle and calf prices began increasing in early 2013 because of tight supply concerns in North America. However, pressure appears to be easing as Canadian cattle inventories as of January 1, 2016, rose for the first time since January 2013. Likewise, the US cattle inventory as of January 1, 2016, increased 3% over the previous year, the second consecutive increase.

The hog index rose 10.2% in March compared with the same month a year earlier, following a 7.7% gain in February. These were the first year-over-year increases since January 2015. Strong demand helped support prices. Exports of hogs in the first quarter were at their highest level since 2009, while the number of hogs processed was at its highest level since 2010.

The crops index rose 6.5% in March compared with the same month a year earlier, with all crops posting year-over-year gains. The specialty crops index (+45.5%) recorded the largest increase. The year-over-year increases in the specialty crop index began in November 2014, driven mainly by higher lentil and pea prices. Prices continued to be bolstered by strong demand, primarily from India, as producers there faced a second consecutive drought.

Also contributing to the increase were the grains (+3.0%), oilseeds (+2.4%), fruit (+7.2%), vegetables (+3.1%) and potatoes (+2.4%) indexes.

The depreciation of the Canadian dollar relative to the US dollar has supported Canadian farm-gate prices for some grains and oilseeds.

Compared with February 2016, the FPPI was down 0.7%, as both the crops index and livestock and animal products index declined slightly.

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