BMO Report: Canadian Livestock Producers Set for Robust Growth in 2014
Helped by lower feed costs and stronger economic growth on both sides of the border
According to a BMO Economics Agriculture Report, released today, the Canadian livestock industry is set to benefit from a variety of factors this year, including lower feed costs, the weaker loonie and expected stronger economic growth on both sides of the border. Between the bovine spongiform encephalitis (BSE) crisis, fluctuating feed prices, the global recession, and the longer-term appreciation of the loonie, Canadian hog and cattle producers have faced almost every conceivable challenge over the past decade or so, said Aaron Goertzen, Economist, BMO Capital Markets. Fortunately, the pendulum has finally started to swing in the other direction, which has positioned the industry for a long-awaited rebound in margins and profitability.
According to BMO Economics, better growing conditions in the United States and a bumper crop in Canada have yielded a sharp drop in feed prices, providing producers with a much-needed boost to their margins. Livestock producers can likely also look forward to soybean prices retreating further as farmers devote more acreage to the crop.Other feed crops, such as corn, are now relatively well-stockpiled, which should prevent the prices of those crops from rising excessively as farmers shift their acreage toward soybeans. Key feed crop prices have fallen by approximately one-third over the past year (Ontario corn prices were down 35 per cent, and Alberta barley prices were down by 28 per cent), which has helped boost livestock producers' bottom lines. The livestock sector, and agriculture overall, are key drivers of the Canadian economy, said David Rinneard, Vice President, Agribusiness and Agriculture, BMO Bank of Montreal. Based on conversations with clients, we're expecting 2014 to be an improved year for livestock producers. With margins stabilizing at a more favourable level than in previous years, we believe this will help support higher returns for their agricultural products.
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