Producers endure volatile commodity prices due to unpredictable international trade situations, but Canada’s exports are in good shape long-term
By Kate Ayers
While Canadian farmers face market volatility, this trade uncertainty shouldn’t significantly affect the country’s long-term export growth potential, Farm Credit Canada (FCC) says.
“The past has shown that, as market volatility diminishes, Canadian commodity prices revert to levels more in line with their averages and growth in Canadian export flourishes,” JP Gervais, FCC’s chief ag economist, said in a company release today.
Globally, Canada has ranked as the fifth-largest exporter of agricultural commodities since 2011, the release said.
Since 2014, the country has moved up to the 11th spot in the world for exports of food products.
Three major export categories (oilseeds, cereals and meats) accounted for 41 per cent of Canada’s ag commodity and food product exports, the release said.
Last year, these categories were valued at a total of US$46.2 billion.
As large trading countries reshape their trade partnerships and impose tariffs, smaller exporting countries may get caught in the crossfire, the release said.
“For the majority of commodities, when we see a lot of market volatility, we noticed that buyers often sit on the sidelines and it’s having a negative impact for more commodities than not,” Craig Klemmer, FCC’s principal agricultural economist, said to Farms.com today.
Most of the large importers of Canadian wheat and canola tend to make smaller changes to their purchases than importers of soy, pork and beef, the release said.
Industry experts reached these findings by examining periods of high volatility.
“We found that short-term price volatility cuts both ways,” Gervais said.
“While trade uncertainty produces hesitation among some buyers, it also opens new markets and causes buying sprees among countries hedging against higher prices in the future.”
Large importing countries may maintain alternative trade relationships after prices have normalized, so Canada needs to be prepared to take advantage of these opportunities, the report said.
Farmers also need to be ready for such opportunities and have strategies to protect themselves against these volatile conditions.
“It is not the most volatile time we have had,” Klemmer said. “I think (being prepared) really goes back to being a good farm manager and (knowing) that these things come into play; (volatility) is something that has impacted farmers for a long time.
“Have a good strategic plan, have a good marketing plan and be (ready) to take advantage of opportunities that may exist. … Know what that long-term goal is for your business.”
For more information, see Gervais’s recently released report titled 2018 Trade Ranking Report: Navigating trade disruptions and volatility.
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