By Connor Lynch
REGINA — Increasing production is the name of the game for farmers in 2018, according to the latest report from Farm Credit Canada (FCC), an ag-lender based in Saskatchewan.
According to the March 5 report, “It’s becoming more and more evident that it’s mostly about volume and value added,” said FCC chief agronomist J.P. Gervais.
Here’s the broad breakdown of what to expect and what to watch for by sector:
Don’t expect commodity prices to increase. Opportunities for prices to go up are going to be limited, because end stocks for 2018 are expected to match the growth in demand. China is a potentially promising market for corn and soybean growers, its authoritarian reputation notwithstanding. China wants more soybeans, and demand is expected to grow by 7.5 per cent in 2018.
FCC is expecting interest to increase again but they should stay comparatively low, and the loonie likely won’t go above US $0.80. Both are good news for Ontario grain farmers. Farmland value increases are expected to slow, though they didn’t in southwestern Ontario last year (see story on page 3).
Low oil and gas prices would both encourage more ethanol production, alongside Ontario’s boost to the ethanol mandate.
NAFTA is the thing to watch. The trade deal was thrown into disarray when U.S. President Donald Trump called for renegotiation six months after taking office. How NAFTA shakes out could affect exchange rates, trade taxes, market access, and more for grain farmers.
It’s going to be another tough year for beef farmers, particularly for feedlot operators. FCC is expecting more pressure on profitability, with the margin between feed costs and sale price expected to shrink. Futures prices are down, and slaughter rates are expected to fall. China is again a possible bright spot. Demand there is expected to increase, and the FCC expects China to meet that demand with non-U.S. sources.
Dairy producers should make a bit more money this year, although it’s going to come entirely from a growth in production. Competing retailers have pushed down consumer prices for milk products, and if the trend continues into 2018, it’ll be good news for dairy farmers, FCC said. Production costs were expected to grow slightly, though be well-outstripped by consumer demand growth. Investments in processing at home and abroad will help the market handle the increased supply.