The top economist with Export Development Canada is painting a rosy picture of the global economic outlook and the future of Saskatchewan’s agri-food sector.
EDC vice-president and chief economist Peter Hall told members of the Saskatchewan Trade and Export Partnership May 29 in Saskatoon that key economic indicators are pointing to strong economic growth, increasing consumer confidence and generally good times ahead for the global economy.
It bodes well for agricultural producers in Western Canada and related sectors such as potash and manufacturing, he added.
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The demand for food, particularly meat, will continue to grow as the global economy gains steam, especially in emerging economies.
“The emerging market middle class is not going to be kinder to any other province than Saskatchewan,” Hall said.
“When emerging market citizens get into the middle class, studies show … that they consume more and they consume higher quality. And you know where they start? They start with food, and they start eating more meat.”
Hall said demand for meat-based protein will grow significantly, adding further support to markets for forages, feed grains, fertilizer and fuel.
It will also support prices for other agricultural crops grown in Western Canada.
He said increased meat production will require more grain and increased productivity on marginal land.
“This new meat consumption will put exponential pressure on the world’s crops … and that’s a great news story for the long-term future of this province, not only for foodstuffs but for fertilizer and also for agricultural machinery,” Hall said.
“The long-term future for these sectors is absolutely rosy. I couldn’t be more bullish about it.”
Hall cautioned that it could take a year or so for potash prices to rebound.
Global demand for potash is soft, but he expects prices to strengthen as global supplies are drawn down.
Hall said the global economy is still adjusting from the economic meltdown that occurred in 2008-09.
Capital investments have been constrained for the past four years and many companies are only now beginning to see signs of economic recovery and sustained growth.
He said bond rates have returned to pre-crisis levels in Europe.
As well, banks are lending more money, and the mountain of surplus goods produced before the economic crisis has been drawn down.
Investors who had been reluctant to enter the market since 2009 are now reassessing the landscape and seeing an economy with more upside potential and less risk.
Hall pointed to the American housing market as a key bellwether.
Home prices bottomed out in many major American markets during the post-crisis period, and U.S. housing starts slumped.
Low consumer confidence, rising unemployment and reduced lending meant many new families were unable or unwilling to buy homes and take on extra debt.
After four years of constraint and adjustment, an historically high proportion of young U.S. families do not own their own homes.
He said debt to income ratios have also improved, and overextension of personal credit is no longer an ominous concern.
The demand for new homes will increase and housing starts will rebound as investor and consumer confidence returns and fundamental demand for North American goods is restored, he added.
Retail spending on home furnishings and appliances will follow.
Hall said Saskatchewan should be gearing up for growth and asking important questions about its productive capacity.
“We have significant constraints to our growth going forward,” he said.
“We may not actually have the capacity to facilitate all the growth that’s coming our way.”
Labour, capital and additional infrastructure capacity will be needed.
“Have we got enough capital to facilitate all of the projects that are on the table?” he said.
“Do we have enough warm bodies inside the province to do the work that’s actually coming our way? And even if we can do all of those things, do we have enough transportation infrastructure to take the stuff that we have generated inside the province and get it to market?”
