Abstract
In BMI' s new Canada Agribusiness Report for Q3 2009, we begin to look at the
outlook for the 2010
harvest. Next year we expect production of grain to
fall back from the high levels estimated for 2009.
This year a bumper
wheat crop in Canada and its southern neighbour the US has put pressure on
prices.
Prices were already suffering from flagging demand owing to the
poor state of the livestock industry in
the two countries and sluggish
demand on the export market. In 2010, we expect only a small recovery in
prices despite a forecast large fall in production on both sides of the
border.
The 2009 wheat crop is estimated to be up 42.87% year-on-year
(y-o-y) at 28.61mn tonnes. This was due
to excellent growing conditions
causing yields to rise and a 15% increase in the planted area in response
to the high wheat prices at planting time in H108. For the 2010 crop, despite
an expected similar area
planted to wheat, production will fall owing to a
drop in yields to more normal levels.
Barley and soybean production also
benefited from the good growing conditions in the 2009 crop year.
Barley
production grew an estimated 7.3% y-o-y despite a 14% fall in the area
planted. Soybean
production rose by 23.8% y-o-y to an estimated 3.34mn
tonnes. Exports of soybeans rose by a far smaller
amount, however, owing
to low beginning stocks. As with wheat, we expect production in 2010 to
fall
back again as yields drop.
In the coming years, we expect to see
demand for grain and oilseeds in Canada to be boosted by biofuel
production. Production capacity for both ethanol and biodiesel has been rising
rapidly over the past few
years. Increases in capacity have been slowed
this year by tight credit conditions and the fall in the price
of oil.
Towards the end of our forecast period in 2013, however, we expect biodiesel
to become a more
significant driver of growth in demand for crops.
As
in the US, Canada' s livestock and dairy sectors are still struggling. We
expect production of poultry,
pork and beef to fall. We also forecast a
fall in production of dairy products. Canada' s hog sector had
already been
struggling before the rocketing feed costs of 2008 and the fall in demand this
year. The
outbreak of H1N1 ' swine flu' has been a further blow to the
sector at a time when it looked like hog prices
could begin to rise again
owing to lower supply. Hog inventories continued to fall through the first
half of
2009 as more operators left the business. We do not see the
situation improving through the second half
of the year. Assuming growth
returns to the economies of Canada and the US next year, rising demand
and
lower supply could see prices rise again and profitability return to the
sector. It will take time,
however, for herds to be built back up and we
see production falling for some years to come.
| 
View Cart
