Canada is on pace to increase farm exports for the first time in three years.
According to a July forecast prepared by Export Development Canada, exports of agri-food products will rise 8.5 percent in 2004, which represents a dramatic turnaround from last year’s 11.7 percent decline in the trade of Canadian crops and livestock.
However, it could have been better.
This spring the agency was predicting an 11 percent surge in agri-food exports, based on the expectation that shipments of live cattle to the United States would resume in the summer.
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“It doesn’t look like that’s going to happen anytime soon, so we’ve actually pulled back our forecast to reflect that,” said Todd Evans, EDC’s director of economic analysis and forecasting.
The agency, which provides finance and risk management services to Canadian traders, isn’t offering a revised prediction on when the border will reopen.
“That’s a very hard call to make,” Evans said.
While U.S. president George Bush has gone on record calling for a resumption of live cattle and beef imports from Canada, lobby groups have successfully halted a plan to recommence trade of ground and bone-in beef.
The EDC report states that as long as the Japanese market remains closed to the U.S. beef industry, American cattle groups will continue to pressure their government to delay lifting the Canadian cattle ban.
“At this point it doesn’t look too, too promising,” Evans said.
Beef cattle ranching exports are down 99.7 percent for the first five months of 2004 compared to the same period last year. By contrast, wheat exports are up nearly 64 percent during that time frame, rising to $1.4 billion from $858 million.
Offsetting the decline
The rise in cereal, oilseed and pulse sales has more than offset the decline in beef, sheep and goat sales, resulting in a food export surplus of $434 million over 2003 levels.
A return to normal growing conditions in 2003 fuelled the growth in grain exports.
“That allowed producers to build up their inventories. They’re shipping more in 2004 because of that,” Evans said.
However, he added it is important to remember why the increases, such as a 28 percent rise in oilseed-related sales, look so impressive.
“They are big numbers but you have to remember it is coming off a smaller base where we had the drought in 2001 and 2002.”
While the vastly improved 2003 crop played a significant role in creating a rosier agriculture export forecast, there is also a broader factor at work.
“The global economy has hit high tide,” Evans said.
All facets of that economy have shown improvement in 2004, something that hasn’t happened since the mid-1990s. World gross domestic product is forecast to increase by 4.2 percent in 2004.
That is the primary reason why total Canadian exports are expected to expand by seven percent this year and 2.5 percent in 2005.
The global gross domestic product growth rate is projected to taper off to 3.7 percent in 2005. Rising interest rates will likely accompany that slight slowdown in economic activity, Evans said.
