Admittedly, the future is hard to predict.
But looking forward is exactly what FCC’s 2014 Ag Outlook offered last week in Moose Jaw, SK. The two overall messages of the conference were that:
- The outlook for agriculture is positive, and
- With knowledge and sound management principles, producers can identify the challenges that lie ahead and prepare accordingly.
I kicked things off in Moose Jaw with an outlook for the world economy.
Here’s The Good News…
I see the Chinese economy continuing to drive the demand for grains and oilseeds. China’s livestock production will also find it increasingly harder to keep up to increases in domestic consumption of meat.
This bodes well for Canadian producers. With global agricultural production increasing, strong demand is critical to sustain profit margins in the agriculture sector.
… And Some Things to Watch
China and other emerging markets offer good opportunities. But they also face uncertainty. Here’s why you should watch them.
As the economic outlook in the U.S. continues to improve, it has, ironically, created the biggest downside risk in the market. In scaling back the program of quantitative easing, the Fed’s aggressive monetary policy, the U.S. dollar has strengthened relative to emerging economies’ currencies. That will create increasing pressure and uncertainty if the capital flows we’ve recently seen into these markets are quickly curtailed. It’s smart to monitor the impact of this policy shift on the health of emerging markets.
Drew Lerner of advised the audience to watch the evolution of the drought in California. His global outlook of 2014 weather patterns suggested the possibility of a drier bias for the Canadian prairies.
Commodity marketing specialist Mike Jubinville ofargued that markets are starting to carve out a bottom for most grains and oilseeds. It’s not a bull market yet; he suggested patience in pricing the new crop given the logistical challenges facing prairie producers.
Mike also provided perspective on the situation in Ukraine. Political crisis currently overhangs the Black Sea region that is the fifth largest global supplier of and third largest exporter of corn. However, with no major supply disruption to date, the market is reacting to the potential development of issues down the road.
How to Succeed?
FCC’s Lyndon Carlson closed the conference with some farm management tips. His emphasis on marketing strategies underscored their value, especially in the current environment. It’s because we can’t always make accurate predictions that producers need to have solid contingency plans for a number of specific situations.
Lyndon’s key message? Knowledge is power. I couldn’t agree more.
PS: After our stops in Chatham ON and Moose Jaw, SK, the 2014 Ag Outlook team heads to Camrose, AB next week. Hope to see you there.
- J.P. Gervais, Chief Agricultural Economist