Canadian agriculture producers are facing significant headwinds ranging from the economic impact of the coronavirus to rising farm debt, Craig Klemmer told delegates to the FCC Ignite Conference held in Charlottetown.
It was the first time the event, which is geared to farmers under 40, has been held in the Island capital. The session also included presentations from Stephanie Holmes-Winton of CacheFlo on finances and Dr. Tom Deans on intergenerational wealth transfer. The session was followed by the presentation of the Atlantic Canadian Outstanding Young Farmer award to Phil and Katie Keddy of Wolfville, Nova Scotia.
Klemmer, who is the Principal Agricultural Economist at FCC with experience in agricultural markets and risk, said the coronovirus is the biggest concern for the global economy with over 75,000 cases worldwide and over 2,200 deaths.
He noted household spending accounts for over half of Canadian economic growth and disruptions like the virus have a significant impact on that spending. He added the unemployment rate is low at 5.5 per cent nationally and 7.5 per cent in PEI and the wages are growing at a rate of 4.4 per cent so far this year.
Klemmer told the meeting there is a change in food consumption patterns with more consumers trying gluten free products as part of a trend towards products viewed as healthier eating options. Even in multi-person households, nearly half of all meals are eaten alone.
Restaurant sales are also increasing, accounting for 54 per cent of food sales south of the border in 2018 and 37 per cent in Canada.
"There is downward pressure on farm revenue due to such factors as trade disruptions and the rail blockade," he noted. "Farm cash receipts were essentially flat in 2019 with a slight increase predicted for 2020."
He said the lower net farm income has impacted equipment sales, noting tractor sales took a 35.6 per cent decrease and purchases of self propelled combines were down 19.4 per cent. Klemmer called combine sales a major determinant of the health of the farm economy and noted last year's sales were actually higher than the 2000-2006 period.
"Appreciation in land value softened in 2018 and farmland values have been going down nationally since 2013," he told the audience.
Here in PEI, land values increases by 13.4 per cent in 2016, 5.6 per cent in 2017 and 4.2 per cent in 2018.
Klemmer termed African Swine Fever a major disrupter in the economy, noting China consumes 27 per cent of global meats and 60 per cent of that consumption is pork. Now that restrictions have been removed by the world's most populated country on Canadian pork and beef, expectations are trending upward in terms of exports.
The economist said there is a mixed outlook when it comes to PEI's biggest cash crop. Planted acreage was up three per cent last year with PEI down nearly one per cent, Manitoba up 9.2 per cent and Alberta showing a 10 per cent increase. However, weather challenges actually saw PEI yield climb 11.5 per cent following a drastic drop in 2018 with both Manitoba and Alberta seeing decreases.
"From the demand side, things are looking positive," he explained.
Demand is also strong in the hog sector and producers are now ramping up to take advantage of opportunities in the export market. Likewise, he said beef producers are the seeing very strong returns, especially in the feedlot sector.
Every time the exchange rate moves a penny, Klemmer said there is a impact of one dollar on hogs, $13-$16 on beef cattle and $5 per acre on cash crops. The economist said dairy margins are expected to be tight in 2020 but the poultry sector should remain strong.
"Access of working capital for farms is softening in Canada," he said. "Debts are rising faster than assets and that is significantly more of a concern in PEI than the rest of the country."