Agriculture bright spot in Canadian economy

Canada’s agriculture exports will be down in 2020 but nowhere near as bad as other sectors of the economy, says Export Development Canada.

Overall exports are forecast to fall 20 percent year-on-year as COVID-19 continues to decimate outbound shipments for every major sector of the economy.

During the trough of the crisis, sales were down 38 percent, which is the exact same as it was in the 2008-09 global financial crisis.

“The difference between then and now is this has happened at a blinding speed,” said EDC chief economist Peter Hall.

“It has taken everybody by surprise. We have run out of superlatives to really describe it.”

EDC was initially forecasting a rebound by the end of 2020 but it now believes the economy won’t approach pre-COVID levels until the end of 2021.

It is forecasting a 19 percent increase in exports in 2021 but that is off of a smaller base so the recovery will look more like a reverse checkmark than a V.

Agriculture and consumer goods are the only two sectors of the economy experiencing single-digit declines in 2020.

Agriculture exports are forecast to drop by eight percent this year and rise by six percent in 2021.

“To put that in context, back on Jan. 1 something that was declining eight percent this year would have been the absolute disaster area of Canadian exports,” said Hall.

But in the current environment, agriculture is the gold standard of the economy due to panic buying and stockpiling of food products around the world.

Grain shipments are the real champion as meat and livestock sales have been hampered by processing capacity problems more than slumping demand.

Bulk shipments of grain, oilseed and pulse products totalled 38.5 million tonnes through week 46 of the 2019-20 crop year, according to the Canadian Grain Commission.

That is down a mere 3.3 percent from the same time last year.

Mark Hemmes, president of Quorum Corporation, recently told The Western Producer that in week 28 it looked as though it would be the worst shipping season in six years due to labour disruptions and rail blockades.

But with the way grain has been flowing the last couple of months it now appears that Canada may set a grain shipping record. Grain companies are having no problems getting the rail cars and vessel space they need.

Sean Finn, executive vice-president of corporate services with Canadian National Railways, said the company has been “shipping grain like there’s no tomorrow.”

Hall doesn’t think grain shippers will face stiff competition from other rail customers like the oil and gas sector anytime soon.

“There’s an industry that is in a tailspin at the moment,” he said.

Energy sector exports are forecast to be down a whopping 33 percent in 2020. Aerospace is the only sector expected to fare worse with a 35 percent drop.

Hall said the one big positive is that the many people around the world who are still drawing an income are accumulating savings due to reduced expenditures on dining out, going to shows and sporting events and on vacations.

He anticipates a lot of that pent-up demand to materialize in the coming months with consumers binging on things like restaurant meals as COVID restrictions subside, unless a second wave of infections brings another halt to the global economy.

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