Greener pastures ahead

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This article was published 30/10/2011 (2155 days ago), so information in it may no longer be current.

OTTAWA — The appetite in emerging markets for a broader range of food is growing and Canadian agricultural producers stand ready to feed it, according to a report released Monday by BMO Capital Markets.

Canada's agricultural sector has struggled this year and should grow by about two per cent next year, but beyond 2012 growth should exceed the national trend of the last several years, says senior economist Kenrick Jordan, who notes that demand for grains and oilseeds from developing countries will help keep prices high.

"Meat demand is also projected to grow briskly, as expanding populations in fast-growth developing countries broaden their diets, which would be positive for both livestock and crop producers," Jordan says. "Agricultural production should also be promoted by the growing demand by advanced-country consumers for products embodying a range of attributes — related, for instance, to health, environmental sustainability and food safety — that offer scope for increased value-added, as well as by the development of niche markets (e.g., greenhouse vegetables, organics and specialty crops)."

Canada's total agricultural output dropped 1.2 per cent in 2010, despite a one per cent increase in animal production, as weather reduced crop yields and low prices removed the incentive for production. Crop farmers have struggled again in 2011 due to bad weather conditions, higher prices of inputs such as fertilizer and fuel, and a strong loonie, which has weighed on trade.

As a result, output will edge forward "a meagre 0.2 per cent, with crop production slipping one per cent while the relatively smaller livestock segment grows around 4.5 per cent."

Livestock farmers have fared better than their crop-growing counterparts because of a strong demand for meat exports, particularly in South Korea and China, where disease has caused shortfalls in supply.

"As a result, Canadian pork exports to those countries are growing by leaps and bounds this year," he said, adding that next year South Korea will reopen its borders to Canadian beef, which will boost that sector.

After 2012, Jordan projects annual growth in agricultural production of two to three per cent as prices support increased production. In addition to growth in exports to emerging- market countries, expanding biofuel production and increasing scarcity of resources, such as arable land and water, will play a role in the expected growth.

Challenges to that positive scenario, Jordan says, include rising input prices, a strong dollar, trade restrictions in other countries, food safety concerns and increasing competition.

If Canada's producers are to overcome those challenges, he adds, they'll have to continue to cut costs through economies of scale and technological advances and continue to add value to their products by catering to consumers' demand for organic, local products, as well as a growing desire to know the sources of their food.

"This sector has shown remarkable adaptability, evident in superior productivity growth, rising export orientation, a shift in output mix toward value-added products, and the launch of new enterprises (e.g., greenhouse vegetables production, speciality crops)," Jordan said in the report, adding that producers can't rest on these laurels, but must continue to improve.

"Specifically, it is critical for farmers to further boost productivity. Competition is intensifying as 'non-traditional' producers (e.g., Brazil, Argentina and Russia) make inroads into global markets. In addition, sophisticated risk management strategies will be needed to address volatility in input and output prices, production and profits."

— Postmedia News