Farm income falls in 2018, but holding for now

Canadian farm income fell on market volatility, but export growth is still likely, says FCC

Wheat fields being harvested
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Final figures aren’t available yet but all signs suggest farm income in 2018 was clipped by several factors and will likely stay at that level through this year, said Farm Credit Canada’s chief economist.

“Price volatility, higher input costs and weather-related challenges in many parts of the country over the past year took a toll on Canadian net cash income in 2018,” said J.P. Gervais.

“With little chance of real growth in commodity prices this year and possibly higher farm input costs, Canadian farmers will need to properly evaluate the outlook for profitability along with the associated risks.

“Risk management will become an even more significant component of success.”

Even with the uncertainty, Gervais remains upbeat.

“If there’s a silver lining to the cloud of uncertainty that hung over the sector last year, it’s that this coming year may be the start of something bigger and better.”

The long-term outlook for Canadian agriculture remains positive since consumer demand for food at home and abroad is still robust, he said. The European, North American and Pacific trade agreements should help while ongoing trade disruptions between the U.S. and China could possibly open new markets at the same time.

“Disruptions can pave the way for new trade flows, which could be positive,” he said. “But global trade tensions also have the potential to slow growth in the world economy. They can upset the status quo, and potentially impact the demand for Canadian ag commodities and food, and that’s never comfortable.”

While the world is better positioned than a decade ago to absorb potential weather-related supply shocks, higher production is still needed to meet rising food demands, he said.

“Canadian producers of both animal and plant-based protein stand to gain buyers both at home and abroad as markets around the world are embracing a wide variety of protein products. This trend will continue in 2019 and beyond, as plant and animal proteins serve different segments of the global market.”

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