Top economic trends of 2019: Why production matters so much to Canadian ag
What do you anticipate is coming in 2019? Throughout January, we’ll feature five blog posts examining the top economic trends likely to affect Canadian agri-food this year.
With global supply shifting and demand uncertain as new trade flows and patterns develop, prices won’t likely drive Canadian producer revenue growth in 2019. Growth in production will have to do the trick.
The problem is that some of the crops with recent histories of the highest production growth are also the crops with some of the most complicated, or uncertain, demand outlooks this year. Here are several commodities that I think may see some good production growth in 2019 (assuming a year of favourable weather). The question is whether these will be in demand in a year of expected trade turmoil.
Looking at the largest gains in average production from the 2013-14 to 2017-18 crop years, compared to the average production of the 2008-09 to 2012-13 crop years:
|Commodity||Average production growth
(2008-09 – 2012-13) – (2013-14 – 2017-18)
Source: Agriculture and Agri-Food Canada, G003 Supply and Dispositions Table Report
Productivity gains drove production growth of most crops, including wheat and dry beans. Growth in acres harvested also played a role, especially for lentils. Growth in durum, canola, dry peas, chickpeas and corn production was equally from both acres and yields.
Soybeans saw no significant increase in average yields, largely due to expanded acres in areas where little soybean production existed as recently as 5 years ago. Barley acres declined over the 10 years. Production might have fallen further, had it not been for growth in average yields.
What's the bottom line?
Whether these trends will appear in 2019-20 plantings depends on domestic supplies and, in large part, on what happens before spring to reduce much of the uncertainty clouding current global markets. India’s rabi (winter) pulse crops may be limited by drought; if so, 2019 may be the year when tariffs are reduced on Canadian pulse exports. If not, there’s little need for production to further expand Canada’s swollen inventories.
Soybean prices have most recently risen on new Chinese imports of U.S. soy but, between the two superpowers to date, there has been more signalling of good intentions than actual concrete moves to define a new trade relationship. Canadian inventories of both soybeans and canola are likely to fall year-over-year, but will still end the year at historically high levels.
Canadian inventories are also expected to reflect trends and patterns in shifts of global inventories. Having fallen for the last two years, Canada’s supplies of wheat at the end of the 2018-19 marketing year are expected to fall further. However, Chinese supplies account for more than half of all wheat inventories, which suggests non-Chinese supplies may not be enough to meet growing global demand.
Barley inventories aren’t likely to rise this year, either domestically or globally, after poor growing conditions hampered crops everywhere in 2018-19. As barley prices should stay strong, corn supplies will also shrink with growing feed demand.
Martha is a Research Specialist with a focus on economic performance and success factors for agricultural producers and agri-businesses. Martha has 20 years’ experience conducting and communicating quantitative and qualitative research results to a number of different audiences. She holds a Master of Sociology degree from Queen’s University in Kingston, Ontario.