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Trade, weather double whammy to send Canada farm profits lower again

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Canadian farm profitability, already at multi-year lows, is poised to decline further thanks to setbacks from both poor weather and trade disruptions, the country’s biggest grain farmers’ group said.

 

Erin Gowriluk, executive director at Grain Growers Canada, said that the setbacks to growers from a difficult harvest period had been compounded by the threat to prices from trade bars raised against the country by a number of major importers.

 

Besides the high profile ban imposed on its canola exports by China - historically the top customer – Canada faces a curb on exports of barley and wheat to Saudi Arabia, after Ottawa, in a tweet, criticised the arrest by the Middle Eastern country of two human rights activists.

 

Durum exports to Italy have slumped amid concerns over the use by Canadian farmers of glyphosate herbicides, over which some European countries have concerns, while all pulses exporters face the barrier of India’s so-called “temporary” quotas, which after more than two years in place are being challenged at the World Trade Organization.

 

Canada also faces a hurdle to its wheat exports to Peru from a claim of contamination with weed seeds while its soybean exports “everywhere”, and notably Europe, have suffered from competition with US supplies displaced from the Chinese market, Ms Gowriluk told Agrimoney.

 

‘Lowest in six years’

The extent of the disputes means that when Canadian farmers are making plans for planting programmes, they “now think about what they need to do from a trade perspective,” Ms Gowriluk told the Global Grain Geneva conference.

 

“Farmers are thinking about market diversification opportunities,” to spread their exposure to trade risks.

 

She told the conference of one farmers who told her that “of six crops he planted in the spring, only one was not subject to some market challenge”, while another had a lentil stockpile dating back three years.

 

One outcome was that “net farm profitability in Canada is at its lowest in six years.

 

“We expect that to go down again this harvest.”

 

Official data

 

In fact, Statistics Canada data show net cash income for Canadian farms overall for 2018 down 21% at Can$11.61bn – a seven-year low.

 

Net income, which includes also depreciation and adjustment in inventory values, slumped by 65% to Can$3.03bn, the lowest since 2010.

 

The declines came despite a marginal increase in cash receipts to a fresh record high of Can$62.24bn, helped by higher wheat and corn takings, and a tripling in revenues from licensed cannabis output, albeit to a still modest Can$564.1m.

 

Such gains more than offset, just, falls in revenues from the likes of canola, hogs and lentils.

 

Better together?

 

Ms Gowriluk added that while Canada could “exert a certain amount of influence” to resolve trade issues, it was “at a bit of a disadvantage” compared with a bigger player such as the US.

 

Canada even had trade “issues with countries with which we have a free trade agreement” in place.

 

She said that the World Trade Organization “needs support” to help iron out such disputes, while also noting the idea of the “ag five” group of leading ag trading states, comprising also Argentina, Brazil, Mexico and the US, to help create common ground on trade.

 

Ahead of the dispute with China, which followed Canada’s arrest of a Huawei executive in December last year, the two countries had – a month before - pledged to double agriculture trade between them by 2025, she reminded the conference.

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