Bullishness must be tempered with realism

The expectations for ever-growing Chinese demand could begin to fail in a few years when that country’s population begins to fall and go grey. In Shanghai, above, residents’ average age is now 41, but it will age steadily going forward.  | Reuters/Aly Song photo

Analysts warn producers there is no guarantee that the good times they have seen this year will continue into the future

Farmers shouldn’t indulge in sanctimonious values-signalling about their contributions to humanity when most are just trying to make a buck, says Neil Townsend of FarmLink Marketing.

Growing and exporting agricultural commodities is a cutthroat business and there’s no place for lazy assumptions.

Western Canadian farmers like to talk about how they feed people around the world, but “there’s a lot of places that that little kid (overseas) can get his breakfast cereal from,” Townsend said during a presentation at Fields on Wheels, the University of Manitoba Transport Institute’s grain logistics conference.

Farmers in countries with rapidly modernizing agriculture industries like Ukraine, Russia, Argentina and Brazil would also like to feed that kid.

Ensuring that Canadian farmers can profitably supply crops to world markets will demand a combination of farmer skill, national infrastructure and a legal/regulatory framework that supports peak competitiveness.

“It takes real leadership, real governance, to battle in a very competitive landscape,” said Townsend.

2020 has been a banner year for western Canadian grain farmers. The COVID-19 pandemic did not weaken world demand for what prairie farmers grow, and they were rewarded with an impressive late-year rally.

However, 2020 isn’t likely a sign of the times to come.

“We can’t isolate any one year and make wide-ranging assumptions that that’s how it’s going to be in the future,” said Townsend.

In fact, when good years visit farmers in traditional exporters like Canada, newer players are likely to be drawn to the sector.

“We’re going to see not just the traditional competitors, but potentially even more competitors enter the fray … because we’ve shown them that you can make money doing this,” said Townsend.

Farmers will need to keep boosting yields, staying on top of trends like the growth of demand for plant proteins, adapting to climate change and investing in their operations if they want to remain competitive and in business.

While farmers might be bullish about the future after this year’s results, they need to temper that bullishness with realism, Townsend said.

All the expectations for ever-growing Chinese demand could begin to fail in a few years when that country’s population begins to fall and go grey.

“The demographics of China are going to pose an enormous challenge, I think, to Western Canada and probably to the United States and other exporting countries,” said Townsend.

“Some of the demand bases that have grown there are going to be unsustainable and we’re going to see a shift, maybe not in the next two to three years, but certainly more of an impact in five to 10 years.”

That means Canadian farmers will have to stay on top of their game at home and to keep searching for new markets offshore. 2020 was a good year, but it isn’t like a sign of things to come.

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