FCC agriculture outlook for rest of year still strong

The outlook for agriculture during the rest of 2018 looks good even with all the uncertainty caused by trade war rhetoric. That is the picture painted by Farm Credit Canada’s mid-year review of the year’s predictions.

Canola and wheat still look like good bets; however, peas and lentil markets will fare poorly from Indian import tariffs.

Canola prices dropped more than anticipated in the first half of the year but are expected to average $11.30 a bushel for the rest of 2018.

Increases in global oilseed production are expected to be matched by demand increases.

While U.S. wheat production increased by eight per cent, ending stocks in that country will be at a four-year low as global stocks fall from a normal Russian crop.

“As a result, the average 2018-19 price is expected to slowly rise above the 201415 price for the first time. Statistics Canada expects Canadian farmers to have increased the area sown to wheat by 10.4 per cent in 2018, given it might offer a better price and more profitable options than pulse markets,” said FCC.

In the livestock industry, cow-calf profitability of the year is expected to continue into 2019, but negative margins in backgrounding and feedlots are not getting any relief. Prices for fed heifers continue to encourage processing instead of retention for herds with a small decrease for 2018 in the herd size.

Canadian beef production will increase slightly, boosted by a decline in live animal exports to the U.S.

Feed grain prices shouldn’t increase in the year ahead but yields and weather conditions may affect that sector.

A 0.6 per cent decline in beef prices is good for the business as it spurs increased consumption.

The FCC report notes beef and pork prices to consumers could face competition as both frozen pork and beef stocks increased by double digit percentages to May 30.

The 78-cent loonie in U.S. dollar terms has stabilized farm revenues.

The FCC says its outlook in January was close in four of five prediction on benchmarks.

The forecast for overnight interest rates was an increase of 50 to 75 basis points. Actual increase was 25 basis points. The five-year interest rate was forecast at a 75 basis points hike. Actual increase was 35 points.

The forecast 78-cent dollar exchange rate was right on while the two per cent inflation forecast was low by one-half per cent.

The $55 US oil price was way off base, averaging $64.88 US.

Ron Walter can be reached at ronjoy@ sasktel.net