Agriculture and Agri-Food Canada reports a lower Canadian dollar and lower fuel prices are resulting in strong farm cash receipts.
This past week, Agriculture and Agri-Food Canada released its 2016 Canadian Agricultural Outlook. Rodney Meyer, the Director of the Farm Economic Analysis Division, says 2015 and 2016 should be among the most successful years in the history of Canadian Agriculture.
We expect that net cash income in 2015 will reach 15 billion dollars which is about 6 percent above the record set in 2014. In 2016 we forecast the sector will register a modest decline from the record level of 2015 but income will still remain historically high at a level of 13,6 billion dollars. While the bottom line performance of the Canadian agriculture sector is expected to improve again in 2015 and 2016 it should be noted that we have seen signs of weakness in major world commodity markets.
Fundamentals in world commodity markets deteriorated considerably during 2015 driven by stronger supplies of most major commodities. Prices in U.S. dollars for most grains and oilseeds, beef, pork and milk weakened over the course of 2015 and are expected to register modest declines in 2016. In Canada producers have been largely insulated from this weakness as the Canadian dollar has declined and lower crude oil prices have translated into lower machinery fuel and heating fuel expenses.
The significant depreciation in the Canadian dollar, from an average value of 91 cents U.S. in 2014 to 77 cents in 2015 and a forecast of 75 cent in 2016, is expected to provide considerable support to farm cash receipts. Most the major commodities produced in Canada are traded in international markets where they are priced in U.S. dollars. When the currency depreciates Canadian producers receive a higher price in Canadian dollars for commodities which are traded in international markets.
Meyer says the anticipated continued decline in crude oil prices will provide a significant benefit to Canadian producers by reducing their machinery fuel expense.
