Study forecasts rebound for Canada's ag sector

by Bryan Salvage
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TORONTO, ONTARIO – Over the next few years, agricultural production in Canada is poised to strengthen. While rising prices are expected to provide the boost for increased agricultural production, it is unlikely consumers will have to relive the soaring food prices of 2008, states a new study from BMO Capital Markets and BMO Bank of Montreal.

"The sector should experience growth at annual rates in the 2% to 2.5% range over the next few years," said Kenrick Jordan, senior economist, BMO Capital Markets.

Demand for meat is expected to grow at a brisk rate, as expanding populations in fast-growth developing countries broaden and enrich their diets with increases in income, which is a positive development for the livestock sub-sector. "Agricultural production will be supported by the growing demand by advanced-country consumers for products that incorporate an increasingly diverse set of attributes in agri-food products," Jordan said. "Such attributes, related to nutrition and health, environmental sustainability and food safety, offer scope to boost value-added in the sector."

Although agricultural commodity prices are expected to rise, Jordan does not anticipate this would lead to significantly higher retail food prices. Canadian retail prices are expected to increase by 2.2% next year, which is below the longer-term rates.

"The agri industry has gone through challenges this year, but this report shows brighter days are just ahead," said David Rinneard, national director of agriculture, BMO Bank of Montreal. "This, along with the prediction of low food inflation, represents great news for both the sector and Canadian consumers."

However, the report does warn that despite the positive outlook, farm operators will have to navigate a number of challenges, such as rising input prices and the strong dollar.

"The agricultural sector, by definition, faces challenges like supply and changeable weather," Rinneard said. "With these other potential difficulties, our farmers need to ensure they have strategies in place to cope with whatever problems arise.”
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