Good news for Canadian producers of fruits and vegetables
The 2016 outlook for Canadian agriculture is positive. A low dollar, declining energy costs and better-than-average production helped push Canadian net cash income to record highs in 2015. And this happened despite lower commodity prices in some sectors.
While 2016 net farm income is expected to fall from those highs of one year ago, the outlook remains good - and those who produce fruit and vegetables are expected to bear some of the year’s best prospects (as shown in the graph below).
Here are some highlights from Agriculture and Agri-Food Canada’s 2016 Canadian Agricultural Outlook:
- Farm cash receipts will continue to grow across all four sectors (potato, vegetable, fruits and greenhouses) in the next year. Net income within these sectors is also expected to compare well to the 2010-2014 average.
- The weaker average net operating income for greenhouses reflects anticipated growth in farm cash receipts between 2014 and 2016 of 5.3% and growth in expenses of 7.4%. While overall greenhouse revenues have grown since 2010, the growth rate has slowed since 2014.
- Canadian food will in general cost more to produce in 2016. Each sector’s expenses are likely to grow more in 2016 than in 2015. Canadian producers depend on inputs and equipment from the U.S., which have increased in price because of the drop in the Canadian dollar relative to the USD.
Prices for Canadian fruits and vegetables aren’t Canadian driven
The price of all North American fruits and vegetables is determined primarily in the U.S. market and is based on the value of the USD.
When a U.S. commodity price increases, as prices for fresh food have most recently as a result of the California drought, it raises the prices Canadian producers get – even for production that will remain in Canada. Because Canadian producers can sell to both U.S. and Canadian buyers (given free trade between the two countries) and the U.S. buyer will pay the going – and higher – U.S. price, the Canadian producer will try to sell as much as possible into that market. The Canadian buyer is likely to pay the higher price in order to ensure the product is available for their consumers.
As well, when the loonie falls relative to the USD, as has also been the most recent case, the price Canadian producers receive jumps higher both for produce exported to the U.S. and for produce sold in Canada. And the U.S. demand for Canadian fruits and vegetables should be higher because Canadian products are more affordable to U.S. buyers.
The upshot is, when you’re buying fresh food this year, whether local or imported, you can expect to pay more as a consumer. If you’re a producer, 2016 may prove to be another very good year.