TORONTO—Real agricultural output has been on the upswing in Canada and is on track to increase 7.5 per cent this year, according to a new report from BMO Economics.
“Canadian agricultural producers have seen an impressive rebound in 2012,” BMO national manager of agriculture David Rinneard said in a statement. “While challenges remain, continued demand and favourable prices, together with a return to better growing conditions, have been a clear boon to the industry.”
BMO Capital Markets economist Aaron Goertzen said output has increased in each of the past 15 months, with crop production leading the charge.
“Crop production, which accounts for more than three quarters of the sector’s output, drove the increase after lower output prices and poor growing conditions hindered production over the previous several years,” Goertzen said.
He said livestock production has remained relatively steady despite an increase in commodity prices.
The report says exports have been in decline this year.
From a financial standpoint, though, the report says agricultural producers remain in solid condition.
“Gross farm receipts have picked up over the past year in line with expanding production and rising prices, and industry debt remains low relative to equity,” Goertzen said. “Borrowing has also become less expensive, and only four per cent of industry revenue is required to service debt.
“On the other side of the balance sheet, agricultural assets continue to grow in value, and buyers for assets like farmland should be readily available in an industry where consolidation remains a key feature.”
Looking ahead, the report predicts a strong Canadian dollar will remain an important challenge to the industry.
“Since the Canadian dollar began its ascent in 2002, the volume of agri-food imports has soared 64 per cent, while export volumes have increased a meager 14 per cent,” Goertzen said. “Moreover, agricultural exporters are facing increasingly stiff competition from players in emerging market countries like China and Brazil, which compounds the challenge of a high-loonie environment.”