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FCC Economist Lists Five Ag Issues for 2014

By Amanda Brodhagen, Farms.com

Farm Credit Canada’s (FCC) Chief Agricultural Economist J.P. Gervais predicts what will be the top agricultural issues in 2014. Gervais lays out five issues, which include farmland values, trade deals, U.S. politics and economics, Canadian beef gets bullish, and equipment sales gearing down. FCC is the leading agriculture lender in the country.

Farmland prices

Gervais forecasts farmland values will soon flatten; adding that record harvests in 2013 for grain and oilseed growers will likely result in increased world supplies, with prices retreating to about average. Farmers may also be less inclined to buy more farmland due to reduced commodity prices, which may result in lower farmland prices.  

Trade

Free trade agreements will offer Canada opportunities and pose some challenges, says Gervais. Opportunities to expand into new markets will help reduce Canada’s dependency on its main trading partner, the United States. Gervais points to the Comprehensive Economic Trade Agreement (CETA) and the Trans-Pacific Partnership (TPP) as good signs that Canada is moving in the right direction. But Gervais warns that some key challenges also lie ahead, noting that with all the changes that come with free trade agreements, Canada needs to start preparing on how to manage a new business environment.

U.S. politics/policy

United States’ politics will continue to affect Canadian agriculture. Gervais says that heighted political infighting, which has resulted in a partial government shutdown last year, and concerns that the U.S. will default on its debt in the future, are all signs that Canada needs to pay attention to what’s happening south of the border. In addition to the day to day politics, the U.S. Farm Bill is also a key issue, as the legislation impacts Canadian farmers. U.S. policy influences crops planted and world commodity prices. Congress is still working on negotiating another five-year bill.  

Canadian beef prices

According to Gervais, livestock prices are predicted to be strong in 2014, especially for beef cattle. Gervais argues that Canadian beef producers are in a better position than the U.S. to supply the North American market (at least in the short term) due to decline of herd numbers, as a result of the U.S. drought. Additionally, there are signs that Canada’s cattle herd is stable and is ready to meet market demands in emerging markets like China. But Gervais says that the U.S. Country of Origin Labeling (COOL) rule has hurt Canadian producers, noting that this year will provide a greater insight into what the U.S. Congress will do to address increased pressures to retreat from its controversial legislation.

Farm equipment sales

Equipment prices won’t be as strong in 2014 compared to the last five years, says Gervais. “In the short-term, we will likely see equipment prices staying steady, but they could soften somewhat if supplies remain high and producers decide to retain their old equipment or buy used equipment,” he said. According to statistics from the Association of Equipment Manufacturers, over the past five years, from 2006 to 2012, an average of 2,100 tractors were sold every month in the country. Gervais predicts that 2014 sales will be closer to the 2005 to 2011 average, when 1,540 tractors were sold monthly. Other factors which will contribute to the slowing of sales will likely be lower crop prices for 2014, and a weaker Canadian dollar, making imported equipment more expensive.
 


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