Despite trade tensions – Demand for food will continue

By Harry Siemens [Siemens Says] – Trade issues and resulting tensions combined with people in Canada and the United States alike who’d like to see trade issues dominate the media airwaves for whatever reasons continue to demand outcomes on profitability for farmers.

There are countries and segments of each industry that like to float non-monetary trade barriers and irritants, to I think support faltering segments and sectors hoping the local demand picks up to bolster local prices.

In my opinion, one thing that won’t go away – the demand for food whether in Canada, China or Timbuktu will not lessen but increase. So we isolate certain pockets and those price rise or drop, the amount of food the world continues to consume will increase.   

However, at the same time, specific sectors of the economy will hurt, and profitability may drop depending on which side you are on. In that light Farm Credit, Canada said trade tensions between the U.S.. and China are going to be a net negative for Canadian farmers in 2018.

J.P. Gervais, FCC’s Chief Agricultural Economist, said one of the most significant factors affecting profitability is some of the global trade tensions that people had not anticipated earlier in the year.

“For example, on the crop side, a lot of the price declines taking soybeans for example and even some of the grains and corn, a lot of that is the result of how the U.S. relationship with China has evolved,” said Gervais. “On that front, the pricing we get here on this side of the border is a function of the trend in the U.S. price but, overall, I think we have a decent outlook for Canadian crops in 2018.”

He said for livestock; he thinks the second half of 2018 is going to be a little more difficult than the first six months.

“One of the positive are feed prices coming down for livestock producers but overall. If you’re looking at margins for hogs, for instance, we’re looking at some negative margins or barely break even on average for the remainder of the year. That’s mostly the result of increasing supply,” said J.P. “If there is an overall theme in the entire ag industry, I’d say this is a trend of growing supply. The most positive thing we have going for the Canadian agricultural  sector in 2018 and into 2019 is that demand for the commodities that we sell remain extremely strong both domestically and in foreign markets and I think that will allow us to have a decent year in 2018 overall.”

 

Gervais said where these trade tensions are taking us concerning profitability need to be monitored because we’ve seen margins come down going into 2018.

As is always the case, farmers do what they do best, and that produces food for the other 98.5 per cent of the people in the world. One can develop all kinds of scenarios, but the bottom line is farmers will continue to produce and provide, especially here in Manitoba the healthiest, safest, and least expensive food compared to anywhere else in the world.