2017 livestock farm receipts? I like what I’m seeing

Livestock producers had mixed results last year, according to StatsCan. Dairy and poultry both saw increased cash receipts (2.4% and 2.5%, respectively), thanks to strong production. But hog revenues dipped 3.2% and cattle producers recorded a dispiriting 17.7% drop in receipts.

What a Danish physicist once famously quipped – “It is exceedingly difficult to make predictions, particularly about the future” – is true. But that doesn’t stop me from making forecasts, or at the very least, to look at market prospects using logic, statistics, and yes, a little intuition.

Cattle producers will face better prospects in 2017

Canadian cattle production isn’t likely to increase, so any decent rebound in livestock receipts will have to come from prices. An unexpected series of events has already raised fed steer prices this year, likely enough to trigger a significant rebound. Livestock receipts are projected to grow at an average annual rate of 4% in 2017 and 2018. The 2017 projection is likely conservative and is likely to be surpassed if the current price rally lasts well into the summer.

Hard start to the hog year

I expect hog revenues to climb 6% in 2017, even though the year got off to a rough start with hog prices stubbornly staying below their 5-year average. North American hog production is climbing, which has pressured prices, but demand will be strong enough to pull prices higher, perhaps even continuing into 2018 at the same pace.

Demand will sustain dairy revenues

Dairy cash receipts will continue growing. I’m projecting an average annual increase of 4% in 2017 and 2018. Milk production growth is certainly one big reason behind this optimistic forecast as Canadians’ appetite for dairy products continues to expand. Farm prices should also slightly improve following the small 1% decline in 2016.

Chicken farm revenues could offer a pleasant surprise

Chicken farm cash receipts should grow 4% in 2017 and 3% in 2018. I forecast the farm price to remain stable as feed costs flatten; the increase then will really be driven by projected increases in production. In fact, our projection remains conservative given the current limited availability of chicken in the Canadian marketplace.

What do these projections mean for you?

Industry-wide forecasts such as these can help you build possible scenarios to evaluate how ready you are for both opportunities and challenges that may lie ahead. From those scenarios, you can determine your risk appetite and construct the risk management plans that suit your style and operation.

Jean-Philippe Gervais
Vice-président et économiste agricole en chef

Jean‑Philippe Gervais est vice-président et économiste agricole en chef à Financement agricole Canada. Avant de se joindre à FAC en 2010, M. Gervais était professeur d’économie agricole à la North Carolina State University et à l’Université Laval. Il était aussi titulaire de la Chaire de recherche du Canada en agroindustrie et commerce international à l’Université Laval. M. Gervais est l’ancien président de la Société canadienne d’agroéconomie. Il a obtenu son doctorat en économie de l’Université d’Iowa State en 1999.