Cana­dian pro­duc­ers weath­er­ing mar­ket volatil­ity, FCC trade re­port

The Southwest Booster - - FRONT PAGE - FARM CREDIT CANADA

Cana­dian pro­duc­ers are ex­pe­ri­enc­ing com­mod­ity price volatil­ity due to an evolv­ing and un­cer­tain in­ter­na­tional trade en­vi­ron­ment, but that shouldn’t sig­nif­i­cantly im­pact Canada’s long-term ex­port growth po­ten­tial, ac­cord­ing to a new Farm Credit Canada (FCC) trade re­port.

“The past has shown that as mar­ket volatil­ity di­min­ishes, Cana­dian com­mod­ity prices re­vert to lev­els more in line with their av­er­ages and growth in Cana­dian ex­ports flour­ishes,” said JP Ger­vais, FCC’S chief agri­cul­tural econ­o­mist in re­leas­ing the re­port, Nav­i­gat­ing Trade Dis­rup­tions and Volatil­ity.

As sev­eral of the world’s largest trad­ing na­tions re­de­fine their trade re­la­tion­ships through the ne­go­ti­a­tions or the im­po­si­tion of tar­iffs, many smaller ex­port­ing coun­tries are get­ting caught in the cross­fire.

Canada has ranked as the world’s fifth-largest ex­porter of agri­cul­ture com­modi­ties since 2011. Be­tween 2007 and 2014, Canada also ranked 12th or 13th in world ex­ports of food prod­ucts, a rank­ing that has since im­proved to 11th.

The re­port looks at five com­modi­ties within three ma­jor ex­port cat­e­gories: oilseeds, ce­re­als and meats. These cat­e­gories rep­re­sented 41 per cent of Canada’s agri­cul­tural com­mod­ity and food prod­uct ex­ports, worth a to­tal of US$46.2 bil­lion in 2017.

By an­a­lyz­ing pe­ri­ods of high volatil­ity, the re­port shows that most large im­porters of Cana­dian canola and wheat tend to make smaller changes to their pur­chases than do im­porters of our soy, pork and beef.

“We found that short-term price volatil­ity cuts both ways,” Ger­vais said. “While trade un­cer­tainty pro­duces hes­i­ta­tion among some buy­ers, it also opens new mar­kets and causes buy­ing sprees among coun­tries hedg­ing against higher prices in the fu­ture.”

Price volatil­ity can also cause buy­ers to seek al­ter­na­tive sources for var­i­ous com­modi­ties that may re­main in place even af­ter prices have nor­mal­ized, so Canada needs to be aware of these op­por­tu­ni­ties and pre­pared to take ad­van­tage of them.

“Our large ex­port mar­kets – the U.S., China and Ja­pan – will al­ways be cen­tral to our suc­cess, but de­vel­op­ing new mar­kets can help di­ver­sify our trade per­for­mance when dis­rup­tions oc­cur,” Ger­vais said.

Mar­ket volatil­ity has an over­all detri­men­tal im­pact on the world econ­omy, with the In­ter­na­tional Mon­e­tary Fund re­cently down­grad­ing its world Gross Do­mes­tic Prod­uct pro­jec­tion from 3.9 per cent to 3.7 per cent ex­pan­sion for 2018. De­spite that re­duc­tion, the world’s ap­petite for Cana­dian agri­cul­tural com­modi­ties and food con­tin­ues to grow, the re­port con­cludes.

By shar­ing agri­cul­ture eco­nomic knowl­edge and fore­casts, FCC pro­vides solid in­sights and ex­per­tise to help those in the busi­ness of agri­cul­ture achieve their goals. For more in­for­ma­tion and in­sights on trade and its im­pact on Cana­dian agri­cul­ture, visit the FCC Ag Eco­nom­ics blog post at fcc.ca/age­co­nomics.

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