Medium Term Outlook for Canadian Agriculture 2011-2021

An Expert's View about Agriculture and Animal Husbandry in Canada

Posted on: 25 Jun 2012

The purpose of this document is to describe the features of the Medium Term Outlook (MTO) covering the period 2011 to 2021. The MTO is a plausible future for the international and domestic agri-food sectors based on current policies in Canada and other countries as of Fall 2011. It serves as a benchmark for discussion and scenario analysis.

Medium Term Outlook for Canadian Agriculture International and Domestic Markets 2012 Medium Term Outlook for Canadian Agriculture International and Domestic Markets 2012 February 2012 For further information, please contact: econ.info@agr.gc.ca Research and Analysis Directorate Strategic Policy Branch Agriculture and Agri-Food Canada (AAFC) IMPORTANT NOTICES Copyright/Permission to Reproduce Materials in this publication were produced and/or compiled by Agriculture and Agri-Food Canada for the purpose of providing Canadians with direct access to information about the programs and services offered by the Government of Canada. The material in this publication is covered by the provisions of the Copyright Act, by Canadian laws, policies, regulations and international agreements. Such provisions serve to identify the information source and, in specific instances, to prohibit reproduction of materials without written permission. 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In such cases, some restrictions on the reproduction of materials or graphical elements may apply and it may be necessary to seek permission from the rights holder prior to reproducing the material. © Her Majesty the Queen in Right of Canada, 2012 Publication: 11700E ISSN: 1923-0478 Catalogue: A38-1/4-2012E-PDF Project: 12-002-r Electronic versions of Research and Analysis publications are available on the Internet at: http://www.agr.gc.ca/pol/pub Aussi disponible en français sous le titre : Les perspectives agricoles canadiennes à moyen terme 2 Table of Contents EXECUTIVE SUMMARY …………………………………………………………………………. 5 INTERNATIONAL MARKETS …………………………………………………………………… 9 Macroeconomic assumptions ……………………………………………………………… 11 Foreign policy assumptions .………………………………………………………………. 14 NATIONAL MARKETS …………………………………………………………………………… 29 National assumptions ………………………………………………………………………. 31 LIST OF ACRONYMS ……………………………………………………………………………. 51 ANNEX OF TABLES ……………………………………………………………………………... 53 3 4 2012 Medium Term Outlook for International and Domestic Markets Executive Summary General Overview ξUnderstanding key trends in global agriculture markets is crucial in order to support a profitable and competitive Canadian agriculture and agri-food sector. As such, this document is an overview of Agriculture and Agri-Food Canada’s (AAFC) Medium Term Outlook (MTO) for international and national agricultural markets from 2011 to 2021.  The document is not a prediction of future events, but rather outlines a plausible future of the international and domestic agri-food sectors, with the intention of serving as a benchmark for discussion and scenario analysis.  Assumes that policies remain unchanged in the future and therefore is an extrapolation of what would occur based on projected macroeconomic variables.  Assumes no outcome of the Doha round of multilateral trade negotiations or future possible bilateral trade agreements in the outlook period; and  Imposes no unusual weather conditions, significant animal disease outbreaks and no meteorological impacts or potential mitigation policies from climate change. Methodology and Data Used ξ The MTO was developed with an updated version of the 2009 AGLINK/COSIMO model of the Organization for Economic Co-operation and Development (OECD) and of the Food and Agriculture Organization (FAO). ξ The MTO reflects short term commodity price forecasts released by the U.S. Department of Agriculture (USDA) in November 2011. ξ The underlying data reflects the slowdown in the global economy as forecast by the OECD and the International Monetary Fund (IMF) in September 2011. Exchange rate data reflect information available as of September 2011. No changes to the euro zone country composition are included in this outlook. ξ The Canadian macro-economic forecast is based on the Conference Board of Canada fall outlook released in September 2011. This outlook covers 2011 to 2016 only, so the yearly growth rate in 2016 was maintained for each year to 2021 for all macro-economic variables in the model. 5 2012 Medium Term Outlook for International and Domestic Markets Executive Summary International Outlook ξRecovery from the recent recession is being led by key emerging economies, with OECD countries generally recovering more slowly than expected. High crude oil prices and a relatively weak U.S. dollar support a stronger Canadian dollar. ξWorld prices for many agricultural commodities reached record highs in 2011. In the absence of unfavourable weather events, a strong global supply response is expected to moderate cereals and oilseeds prices in 2012. However, the higher price plateau is expected to stay, as a result of: declining yield growth in world cereals; strong global demand; high energy prices; a relatively weak U.S. dollar; and growing demand for cereals and oilseeds from relatively new sources including biofuels and aquaculture. ξ The influence of biofuels on agricultural markets will continue to strengthen. The elimination of the U.S. Volumetric Ethanol Excise Tax Credit (VEETC) and the ethanol import tariff in December 2011 will further integrate the American and Brazilian ethanol markets. With the removal of these U.S. policies, it is anticipated that the Renewable Fuels Standard (RFS) mandates will be the key driver determining U.S. biofuels consumption. ξWorld red meat markets will remain segmented based on internationally recognized animal disease status. Cattle and hog prices are expected to increase, but high feed prices will limit sector expansion. Changes in livestock feeding practices are expected to improve productivity and partially mitigate higher feed costs. ξDairy products are also expected to remain on a higher price plateau, partly driven by increased demand from developing countries. Expansion in milk production in Australia and New Zealand is expected to slow, putting further upward pressure on prices. At higher dairy prices, the protected European Union (EU) and the U.S. dairy industries are both expected to integrate into world markets for some dairy products. 6 2012 Medium Term Outlook for International and Domestic Markets Executive Summary Canadian Outlook ξ The outlook is underpinned by a strong and stable Canadian dollar averaging $1.01 U.S. over the projection period. Canadian Gross Domestic Product (GDP) is projected to grow annually by 2.6% and inflation is expected to remain relatively low, averaging 1.9% over the outlook period. ξDomestic demand for grains and oilseeds continues to be driven by world prices, the strength of the Canadian dollar and modest growth in the domestic red meat industry. The 2011-12 crop year has shown some recovery after a very challenging spring for many Western Canadian producers. Cool, wet weather and excess soil moisture in some regions delayed seeding. Fortunately, a late fall frost in many regions extended the opportunity to harvest late seeded crops. ξ For the medium term, prices of grains, oilseeds and special crops are expected to decline from the recent price peaks, but remain well above historical levels. In response to these higher prices, total harvested area is projected to increase by 4% in 2021 compared to historical average (2006-2010). The largest area increases are expected for canola in Western Canada, and corn and soybeans in Eastern Canada. Summer fallow area in the west will continue to decline, despite its temporary increase due to excess moisture in 2010-2011. ξCanola crushing capacity is expected to expand given relatively high vegetable oil prices and continued expansion in protein meal demand in developing countries. In addition to the domestic crushing demand, it is also anticipated that expansion in canola production will also be able to satisfy rising export demand for canola seed. ξAlthough there is some expansion of canola oil use for domestic biodiesel production, the bulk of rising demand for Canadian vegetable oil is expected to come from export markets. Domestic biofuel production will likely continue to expand; however, it is expected that imports of both ethanol and biodiesel will be necessary to meet the domestic consumption mandates. 7 2012 Medium Term Outlook for International and Domestic Markets Executive Summary Canadian Outlook, continued ξAfter several years of high feed prices and declining breeding herds, the projected increase in cattle prices is expected to stimulate rebuilding of Canadian cattle breeding herds. Beginning in 2013, cattle exports should benefit from an expected revision of the U.S. Country of Origin Labelling (COOL). Canadian beef net exports are projected to increase as cattle slaughter and average carcass weight are both expected to increase over the medium term. Canadian per capita consumption of beef has decreased by 14% over the past decade, and no substantial domestic demand growth is expected for the future. ξHog prices are expected to increase but the relatively high feed prices will continue to put pressure on hog producers. As a result, slaughter hog marketings are expected to increase only modestly, while maintaining the cyclical pattern. The revision of the U.S. COOL will benefit the Canadian hog industry, but it is not anticipated that slaughter hog and weanling exports will return to their historically high levels. The decline in per capita pork consumption continues to place added importance on export markets. ξOver the medium term, per capita consumption of most dairy products is expected to either be stable or continue to fall, largely due to the fact that Canada has a mature market with an aging population. Yogurt is an exception, having shown continuous growth for more than 20 years. This is expected to continue into the future. ξDomestic prices for butter and skim milk power are expected to increase moderately. World prices are also expected to remain relatively high, and tariffs should continue to prevent the occurrence of over-quota imports and to offset the impact of a relatively strong Canadian dollar. ξGiven the maturity of the domestic market and higher prices for poultry relative to other meats, growth in Canadian poultry consumption is expected to continue to slow on a per capita basis, limiting expansion of the industry. 8 INTERNATIONAL MARKETS 9 10 The underlying macro-economic conditions are key for the outlook, affecting both supply and demand for agricultural commodities. ξPopulation  World population is expected to grow by approximately 1% per year over the outlook period.  Growth in developing countries is anticipated to be nearly three times the rate of OECD countries. ξGross Domestic Product  OECD countries posted an average economic growth rate of only 1.8% in 2011, and are in general, recovering more slowly from the recession than anticipated in the outlook last year. An average annual growth rate of 2.5% is expected for the OECD member countries over the outlook period (2011-2021).  Brazil, Russia, India and China (BRIC) countries are still expected to grow rapidly, with an average of 8.1% in 2011 and an annual mean of 7.6% over the remaining years.  The average growth rate for other key countries is 1.6% in 2011 and 2.3% for the rest of the outlook period. ξ Inflation rates  Rates are expected to remain relatively low over the outlook, averaging 2.5% and 3.9% per annum for the OECD and BRIC countries, respectively. ξExchange Rates  Most major currencies experienced a significant appreciation in real terms (adjusted for inflation) against the U.S. dollar in 2011. The outlook maintains projections for a relatively weak U.S. dollar.  The outlook does not assume any changes to the country composition of the Euro zone. ξCrude Oil  Price is expected to hover around $100 U.S./barrel in 2012.  Over the medium term, crude oil prices are assumed to reach $130 U.S./barrel. This maintains the view of past outlooks that the era of inexpensive energy is over. 11 Movement in Exchange Rates Adjusted for the Differential in Inflation Rates 14 2011 12 Annual Average 2012-2021 10 8 6 4 2 0 -2 Over the outlook, most foreign currencies are not expected to make additional major gains against the American dollar in real terms. -4 a l o a i a a n a a d a d o a e a n i i z c d i n a e n r i n c i i i r s n l t a a d p a a s i i u r x l r h o e a s a n n n l r f e aI i t a E ru e B a C J K n a e k A o s g M C R h Z r d u U h T t A n A w u I e o N S ξ Most major currencies experienced a significant appreciation in real terms against the U.S. dollar in 2011. Considering the size of the structural budget deficits and the negative trade balance, the U.S. dollar is expected to remain weak over the medium term. ξ The above graph shows the projected exchange rate forecasts for various countries, taking into account the difference in the inflation rates between the U.S. and the country of comparison. In 2011, the Canadian dollar appreciated approximately 5% relative to the U.S. dollar in real terms. Over the projection period, a very modest depreciation is anticipated. ξ The U.S. dollar is expected to continue depreciating in real terms against the currencies of Argentina, Brazil, China and Korea. Appreciation is expected against the currencies of Mexico, Japan, Ukraine and South Africa. 12 % C hange R el ati ve to $U . S . (A dj usted for I nfl ati on) Relationship between the Crude Oil Price and the Value of the Canadian Dollar 140 1.20 120 1.00 100 0.80 80 0.60 60 0.40 40 Energy prices are expected to remain high over the medium term. This supports a strong Canadian dollar. 0.20 20 0 0.00 Dollar Brent 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 Crude Oil ξ After increasing by roughly 37% between 2010 and 2011, crude oil prices are assumed to reach $130 U.S./barrel - a 32% increase in real terms relative to the 2008-2010 average. ξ This high crude oil price is part of a more general phenomenon affecting most commodities and primary products sold on international markets. Since Canada is a large exporter of many of these commodities, the increasing trade balance puts upward pressure on the value of the Canadian dollar. ξ For agriculture, a strong and appreciating Canadian dollar increases pressure on export competitiveness for domestic producers of both bulk commodities and value-added agri- food products. This also makes imported goods relatively cheaper for Canadian consumers. 13 Cru d e O i l Pri c e ( $ U. S. p e r Ba rre l ) Ex c h a n g e Ra t e ( $ U. S. / $ CAN) Foreign Policy Assumptions Crops and Sugar ξUnited States  No assumptions are made about any new programs resulting from the 2012 U.S. Farm Bill, nor about potential changes to existing programs.  Average Crop Revenue Election (ACRE) program remains in place, but the participation rate is expected to continue to be low.  Sugar policy remains unchanged. ξChina  Wheat and rice imports are expected to remain below tariff rate quotas (TRQ), while oilseed imports will likely continue to expand rapidly.  Coarse grain imports are expected to average approximately 4 million metric tonnes (MMT) over the outlook.  Sugar imports are expected to be above the TRQ in most years of the outlook. ξArgentina  Oilseeds are expected to remain subject to a 35% export tax for the duration of the outlook. ξRussia  No further export controls will be imposed over the outlook, after the grain export ban was lifted in July 2011.  World Trade Organization (WTO) entry is not included in the outlook. ξEuropean Union  Elimination of the mandatory 10% set-aside of arable land is maintained over the outlook. ξMexico  Direct payments including those of PROCAMPO are assumed to be stable in real terms. 14 Foreign Policy Assumptions Biofuels ξUnited States  RFS mandates will be reached, with the exception of cellulosic biofuels. By 2021, it is expected that 17% of the cellulosic biofuel mandate will be filled, mostly with ethanol production from crop residue.  VEETC and the specific import tariff were eliminated as of January 1, 2012.  Biodiesel consumption will remain at 3.78 billion litres, under the assumption that the biomass-based diesel mandate will be held at 2012 levels. The mandate will be filled mainly by domestic production sourced from vegetable oils.  The price of cellulosic ethanol will be higher than conventional ethanol, in spite of technological progress.  The outlook includes the U.S. Environmental Protection Agency (EPA) decision to increase the maximum ethanol blend level to 15% in non-flex fuel cars built after 2001. ξEuropean Union  Ethanol consumption increases to implement the Renewable Energy Directive (RED), which calls for a 10% share of renewable energy (on an energy basis) in the transport fuel mix by 2020.  Only the ethanol objective is expected to be achieved, since biodiesel should only reach 8% of diesel consumption. ξBrazil  Given the elimination of the U.S. import tariff, it is assumed that Brazil will continue to allow tariff-free ethanol imports, following temporary measures enacted in 2010. 15 U.S. Farm Prices - Corn and Wheat 300 250 200 150 100 Over the medium term, the higher world price plateau for cereals is here to stay. 50 Wheat 0 Corn 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 ξ A strong global supply response to high prices is expected to contribute to lower cereals prices in 2012. For Canadian producers, the degree of price transmission depends on several factors, including the strength of the Canadian dollar and transportation costs. ξ Over the medium term, several factors contribute to the higher than historical price forecast:  Reduced growth in world cereals yields, due in part to increasing costs for energy- based inputs such as fertilizer.  Increased purchasing power of developing countries due to income growth and a weak projected U.S. dollar, which leads to higher demand for food, including products such as meat and dairy that require more grains and oilseeds to produce.  Large increase in cereal-based ethanol production and oilseed-based biodiesel production driven by high crude oil prices and/or government mandates.  Larger projected share of global fish production coming from aquaculture, also leading to increased demand for cereals as a feedstock. ξ The possibility of new price peaks is significant due to the unpredictability of weather events (although no such events are assumed in the outlook). 16 $ U. S. p e r T o n n e U.S. Farm Price Ratios - Corn : Wheat and Corn : Soybeans 1.0 0.8 0.5 0.3 A structural shift in the corn-wheat price ratio is expected, while the corn- soybean price ratio is expected to remain relatively stable. Corn : Wheat 0.0 Corn : Soybeans 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 ξ Examining price ratios provides indications as to the relative value of the crops under comparison. Significant movement in ratios suggests shifts in cropping patterns or structural changes in demand, such as the changing composition of livestock rations. ξ For example, corn production requires more intensive use of energy and fertilizer than wheat. Given that energy-intensive input prices are expected to remain relatively high and that further growth in corn-based ethanol production is expected, a structural shift in the corn : wheat price ratio is anticipated. ξ Strong growth in vegetable oil demand is putting sufficient upward pressure on soybean prices (due to soybean oil content), preventing a similar realignment in the corn : soybean price ratio. 17 U . S . Farm P ri ce R ati o Level of World Vegetable Oil Consumption Compared to US Soybean Farm Price 180,000 500 450 160,000 400 140,000 350 120,000 300 100,000 250 80,000 200 Soybe 60,000an prices are also expected to remain at a very high level due to both supply and demand-side 150 factors. 40,000 100 20,000 50 U.S. Soybean Farm Price 0 0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 ξ The growing use of vegetable oil for food in developing countries, as well as for biodiesel production worldwide, puts further upward pressure on the price of soybeans. ξ In many countries, corn and soybeans strongly compete for the same land. The anticipated strength of the corn price is expected to support continued shifting of land into corn, reducing soybean supply, and pushing soybean prices higher. ξ Domestically, this land shift occurs to a certain extent in Eastern Canada, but in Western Canada, little corn is grown; therefore, the expansion of canola production comes at the expense of other crops. 18 Thous a nd Tonne s $ U. S . pe r Tonne U.S. Midwest Prices for Soybean Oil and Meal 1,400 1,200 1,000 800 600 400 The vegetable oil market will show the strongest price growth in the oilseed complex. 200 Soybean Oil 0 Soybean Meal 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 ξ Strong vegetable oil prices will be supported by income growth in developing countries, high crude oil prices and biodiesel mandates in many countries. ξ The strength of U.S. soybean oil prices also encourages expansion in other oils, including palm and canola. The high oil content in canola provides incentives for further expansion in Canadian crushing capacity. ξ Growth in the price of oilseed meal is expected to be more limited partly due to the growing competition in the feed market from distiller’s grain (DG), a significant by-product of expanding ethanol production. 19 $ U .S. p e r T o n n e Selected Sugar Prices 1,400 1,200 1,000 800 600 After the current peak, sugar prices a4re e0xpe0cted to fall but remain above historical levels, due to the strong link with the fuel market through ethanol. 200 U.S. Refined World Refined 0 World Raw 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 ξ Several factors have contributed to the concurrent short-term price peaks in the world and U.S. sugar markets:  Adverse weather conditions in Brazil and India limited growth in the world sugar cane yield.  A reduction in EU sugar price support has led to an elimination of the domestic sugar surplus and a reduction in subsidized exports.  High world prices for grains and oilseeds have pressured sugar cane and sugar beet area in regions where they compete for land.  In relation to the U.S. anti-obesity campaign, there has been a drastic reduction in high fructose corn syrup consumption and an increased in demand for sugar.  In an attempt to mitigate rising prices for consumers, U.S. authorities have substantially increased the TRQ, leading to a significant increase in U.S. sugar imports from the world market. ξ Canada has limited access to the U.S. refined sugar market through a small TRQ; however, the confectionary industry has tariff-free access for sugar-containing products through the North American Free Trade Agreement (NAFTA). 20 $ U .S. p e r T o n n e Comparison of US and Brazilan Ethanol Prices 90 80 70 60 50 40 30 20 High short-term sugar prices pushed the Brazilian ethanol price above that of the United States. In the medium term, the American ethanol price will be determined by the Renewable Fuels Standard mandate. 10 U.S. Brazil 0 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 ξ Given that sugar cane is a perennial crop, the short term supply response to prices is limited by the agronomic characteristics of production. Processing plants in Brazil however, can quickly alter the relative share of sugar cane being transformed into ethanol or sugar, depending on comparative prices. In 2010/2011, Brazil increased the amount of sugar cane dedicated to sugar production at the expense of ethanol. ξ To mitigate the effects of the domestic ethanol shortage, the Brazilian authorities temporarily removed the ethanol tariff, allowing the U.S. to export ethanol to Brazil in both 2010 and 2011. As new land gradually moves into sugar cane production, the Brazilian ethanol price is eventually expected to return to a level below the U.S. price, due to its lower production costs. ξ With the elimination of VEETC, the U.S. ethanol market will be driven by the RFS mandate; therefore, higher crude oil prices will be needed for consumption to rise above mandated levels. The elimination of the import tariff removes the advantage for Canada and other countries that previously had tariff-free access to the U.S. ethanol market through bilateral or other preferential trade agreements. 21 $U . S . per H ectol i tre World Biofuels Production 250,000 200,000 150,000 100,000 The influence of biofuels on agricultural markets will continue to 50,000 strengthen, given projections for biofuel production growth over the medium term. Biodiesel 0 Ethanol 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 ξ By 2021, it is expected that roughly 37.5% of world sugar cane production and 13% of coarse grain production will be used to produce ethanol.  Brazil, Colombia and Thailand are expected to have the largest increases in sugar cane-based ethanol production, while the U.S. and the EU are expected to lead the growth in grains-based ethanol production. ξ By 2021, roughly 24% of world vegetable oil production is expected to be used to produce biodiesel.  Argentina, Brazil, the EU, Indonesia, Malaysia, Thailand and the U.S. are expected to lead growth in global vegetable oil-based biodiesel production. ξ The expiration of the U.S. VEETC weakened the link with the energy market. This will likely have a limited impact on corn prices because the ethanol market will be largely driven by the RFS mandate. 22 Thousand Li tres Foreign Policy Assumptions Livestock and Dairy Products ξAtlantic and Pacific Markets  Red meat markets remain segmented based on internationally-recognized animal disease status. ξUnited States  COOL was implemented on September 30, 2008. It is assumed that in 2013, the U.S. will modify the regulation in a way that will no longer be detrimental to the cattle and hog industries in Canada and Mexico.  The U.S. and South Korea bilateral trade agreement is included in the outlook, assuming 2012 as the implementation year. The pork and beef tariffs will fall to zero in 2016 and 2026, respectively. This, combined with the actual bilateral trade agreements with Chile and the EU, will eventually lead to a de facto liberalization of the Korean pork market. ξEuropean Union  Milk production quota is eliminated in 2015 in line with Common Agricultural Policy (CAP) reform commitments. ξChina  In spite of projected domestic demand growth, China is expected to remain mostly self-sufficient in beef and pork. 23 U.S. Livestock Prices 450 400 350 300 250 200 150 100 Cattle and hog prices are expected to increase over the medium term as producers adjust to high feed prices which will limit sector expansion. 50 Steers 0 Hogs 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 ξ Despite feed prices increasing substantially in 2006, North American beef and pork production did not significantly decrease until 2009. This coincided with the 2008 recession, preventing an adjustment of cattle and hog prices to the new feed price situation. ξ Further reductions in overall red meat production took place in 2010 and 2011, leading to an increase in the price of steers and hogs; however, this also coincided with another peak in grain prices. ξ Weak livestock to feed price ratios and very dry conditions in some parts of the U.S. in 2011 are expected to contribute to another reduction in red meat production in 2012. This is expected to support high and increasing prices. ξ Over the medium term, prices are expected to remain cyclical, albeit at a higher plateau, partially reflecting higher feed prices. 24 $U . S . per H undred K i l ogram s (D ressed Wei ght) U.S. Livestock to Conventional Feed Price Ratio 3.0 2.8 2.5 2.3 2.0 1.8 1.5 1.3 It is anticipated that productivity gains and changes in feeding practices 1.0 will allow livestock to feed price ratios to remain at relatively low levels. 0.8 0.5 Steers 19Hog8s 1 1984 1987 1990 1993 1996 1999 2002 2005 2008 2011 2014 2017 2020 ξ The large supply of DG from the ethanol industry provides a feed that is priced similarly to corn, with a significantly higher protein content. Since these DG can comprise as much as 40% of the diet for cattle, producers should be able to partially mitigate the high prices for conventional feed grains. ξ Keeping cattle on pasture longer (i.e. less time in the feedlot) is the second modification made to feeding practices that will allow cattle producers to partially mitigate high feed costs. ξ Continued changes in the structure of U.S. hog production and better integration of DG into hog feed rations is expected to improve productivity over the medium term and to maintain supply. 25 L iv e s to c k to F e e d G r a in Pr ic e R a tio World Dairy Prices - Australia and New Zealand (Oceania) 500 450 400 350 300 250 200 150 Like many other agricultural commodities, dairy products are expected to remain on a higher price plateau. 100 50 Cheese Butter Skim Milk Powder 0 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 ξ Income growth in developing countries, particularly in Asia, is a strong source of increasing demand for dairy products. ξ Competition for land with other primary sectors is reducing the expansion of milk production in New Zealand. Water scarcity and the new water allocation system in some parts of Australia will prevent a return to the high production growth rates of the 1990s. ξ A significant reduction in the EU dairy support prices has contributed to the elimination of dairy product surpluses and has significantly reduced the use of export subsidies. 26 $ U .S. p e r H u n d r e d K ilo g r a ms Skim Milk Powder Prices 500 450 400 350 300 250 200 150 The United States and European Union skim milk powder markets are expected to be fully integrated into the world market. 100 50 EU 0 U.S. World 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 ξ Due to stable or reduced support prices, lower valued currencies and high world dairy prices, the U.S. and EU will be able to export skim milk powder without any export subsidies. Their domestic prices will be determined by the world price minus transportation costs. ξ The same outcome is expected for the U.S. butter and cheese markets, as well as the EU whole milk powder and most cheese markets. Of the key dairy products, only the EU butter price is expected to remain slightly above the world price. 27 $ U .S. p e r 1 0 0 k ilo g r a m s 28 NATIONAL MARKETS 29 30 National Assumptions ξMacroeconomic Forecasts  Canadian population is projected to increase by 1.2% per year.  GDP is expected to grow by 2.6% annually as projected by the Conference Board of Canada.  The Canadian dollar is projected to remain relatively stable and slightly above the U.S. currency, averaging $1.01 U.S. over the projection period. ξGrains, Oilseeds and Biofuels  No major weather events (floods/droughts) are projected.  Total crop land is expected to be relatively stable.  Yields for grains and oilseeds are expected to increase at trend rates.  Federal regulations requiring an annual average renewable content of 5% in gasoline came into effect on December 15, 2010. The 2% mandate for biodiesel in diesel fuel and heating oil was implemented on July 1, 2011.  The Federal biofuels program that provides payment incentives to selected ethanol and biodiesel producers is scheduled to be phased out by 2017. ξ Livestock and Dairy Products  As announced by Quebec in 2010, the cap on the number of animals covered under the Farm Income Stabilization Insurance (ASRA) program is included in the outlook.  The increase in the price of industrial milk is distributed between the support price of butter and skim milk powder.  The fat/solids-not-fat ratio for raw milk should be relatively stable, as measures implemented by producers are maintained.  Following a favourable WTO Dispute Settlement Body decision, it is assumed that U.S. COOL will be revised in 2013 so as to not be detrimental to Canada and Mexico. 31 Canadian Trade of Agricultural and Agri-food Commodities* 50 45 Exports 40 Trade Balance Imports 35 30 25 20 15 It is expected that on average the Canadian trade balance for agriculture and agri-food commodities will remain at historical levels. 10 5 0 2000 2003 2006 2009 2012 2015 2018 2021 * Excludes Fish and Seafood and their products. Exports in the graphic represent the domestic values. Exports, Imports and Trade balance are in current dollars. ξ Canadian agriculture and agri-food trade balance increased substantially in 2011. ξ The trade balance is expected to return to historical levels on average. ξ Grains, oilseeds and related products represent approximately 50% of the export value, while live animals, red meat and other animal products represent approximately 20% of trade. 32 $C A N (B i l l i ons) Canadian Prices for Selected Crops 600 500 400 300 200 The Canadian grain and oilseeds sector is well integrated into world markets. Annual average crop prices follow movements of global indicator prices reasonably well. 100 Canola 0 Wheat Corn Barley 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 ξ Crop prices in Canada do not increase as much as international prices in 2011, due to the strong appreciation of the Canadian dollar vis-à-vis the U.S. currency. Over the medium term, Canadian crop prices are expected to track global prices (U.S. prices) since the U.S.-Canada exchange rate is assumed to be relatively stable. ξ Wheat, corn and barley prices are expected to continue to be largely influenced by higher U.S. prices, which are expected to be above mid-1990 to 2005 levels, but below the recent peaks. ξ Canola continues to benefit from strong global vegetable oil prices and will continue to attract area from other crops in Western Canada. ξ Global corn prices are expected to remain above mid-1990 to 2005 levels over the medium term, given strong global food, feed and industrial demand, as well as the relatively high use of energy intensive inputs in its production. 33 $ C A N p e r T o n n e Western Canada Eastern Canada 33% 35% 7% 9% 56% 51%7% 10% 25% 19% 23% 21% 27% 28% Land dedicated to crop production in Western and Eastern Canada is expected to increase modestly over the outlook. 24% 25% Average 2006-10 2021 Average 2006-10 2021 Wheat Canola Fallow Soybeans Corn Others Special Crops Others ξ Canola area is expected to continue expanding over the outlook, while only modest increases are expected in wheat, barley, corn and soybean area. Overall, the growth in total harvested area in Canada is expected to be modest, averaging 0.3% annually over the projection period. ξ Special crops area is expected to decline from recent highs and to remain slightly below the historical average. It is expected that relatively high grain and oilseed prices will prevent further expansion in area. ξ In Western Canada, summerfallow area is expected to continue its negative long term trend. 34 Crop S har e of Tota l Are a Crop S har e of Tota l Are a Composition of Canadian Feed Demand 30 25 20 15 10 Expected feed demand growth will be met through greater use of coarse grains (barley and corn), while modest increases in protein meal and pea consumption are expected. 5 Distiller’s Grains Protein Wheat 0 Coarse Grain 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 ξ Increases in Canadian feed demand will be met in large part by coarse grains - corn and barley. Barley use is expected to increase, as cattle producers in Western Canada gradually rebuild their herds over the medium term. ξ Stable to modest growth in wheat, protein (canola meal, soybean meal and field peas) and DG are anticipated over the medium term. 35 Feed G rain Consumpt ion ( M illion Tonnes) Canadian Wheat Exports and Utilization 30 25 20 15 10 Over the medium term, expected wheat returns support modest growth in both production and exports. 5 Exports 0 Biofuels 1993Other Dome1stic 995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 Food Use Feed ξ Feed demand, the largest domestic use for wheat, is partially dependent on crop quality and is expected to remain relatively stable. ξ Wheat for biofuel production is expected to increase slightly, due to overall growth in the Canadian ethanol industry, as well as a tightening of the corn to wheat price ratio that improves the economics of wheat-based ethanol production in Western Canada relative to corn. ξ It is anticipated that wheat for food use will remain relatively stable. 36 M i l l i on Tonnes Canadian Biofuel Consumption 3,500 Ethanol Biodiesel 3,000 2,500 2,000 1,500 1,000 Although Canadian biofuel production accounts for a growing share of domestic mandates, imports will continue to play a role in fulfilling these requirements over the medium term. 500 Net Imports Domestic Production 0 Domestic Production 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 Net Imports ξ Since the late 1990s, the domestic biofuel industry has increased significantly, due primarily to the implementation of a 5% ethanol consumption mandate by Ontario in 2007 and by a 5% federal mandate in 2010. Biodiesel production is expected to continue increasing over the medium term, as the 2% federal consumption mandate came into effect in July 2011. ξ As gasoline and diesel consumption grow over the medium term, this will drive consumption growth in ethanol and biodiesel, respectively, since biofuel mandates represent a fixed share of these conventional fuels. ξ Corn-based ethanol production in Eastern Canada accounts for almost two thirds of all domestic production. Ethanol produced in Western Canada is predominantly wheat based, but some plants use corn as a feedstock. ξ The feedstocks used for biodiesel production include yellow grease, tallow, fish oils and vegetable oils (including canola). Over the medium term, production increases are expected to be increasingly driven by growth in vegetable oil-based biodiesel. 37 Millio n L itr e s Canadian Canola Exports and Utilization 20 18 16 14 12 10 8 Strong oilseed and vegetable o6il prices are expected to contribute to further expansion in domestic canola production, crushing and seed exports. 4 2 Crush 0 Exports 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 Other Use ξ Canola production in Canada over the last decade (2000-2010) has increased by more than 75%. The introduction of new canola hybrids and biotech traits, along with improved agronomic practices, has allowed Canadian farmers to improve canola yields significantly. ξ Rising canola production will continue to supply the domestic oilseed crushing industry as well as the significant demand for canola seed exports. ξ Canola oil is an attractive choice in the salad and cooking oil markets competing with oils from soybeans and palm. Demand from key importers, including Japan and China, will continue to be a driver for Canadian exports. There is also increasing industrial demand for canola oil for biodiesel production. 38 M il li o n T o n n e s Net Trade Position of the Canadian Feed Grain Market 7.0 5.0 3.0 1.0 -1.0 Relatively high feed grain prices should return Canada to a modest export surplus of feed grains over the medium term. -3.0 -5.0 1985 1989 1993 1997 2001 2005 2009 2013 2017 2021 ξ Because of a record Canadian corn crop in 2010-11, net exports of feed grains were positive. Over the medium term, high prices are expected to stimulate both corn and barley production and generate a modest feed grain surplus. ξ Corn imports from the U.S. will continue to enter the domestic feed grain market, but at a much reduced level. ξ A positive trade balance in the feed grain market improves the competitiveness of the Canadian livestock sector, given that more feed can be sourced from the surplus domestic supply, rather than imported from the U.S. and transported to Canada. 39 N e t T r a d e (Millio n T o n n e s ) Canadian Cattle Market 6,000 5,000 4,000 3,000 2,000 After several years of declines in the breeding herd, Canadian cattle producers are expected to rebuild their breeding herds over the medium term. 1,000 Breeding Herd 0 Cattle Slaughter Net Cattle Exports 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 ξ Over the medium term, cattle prices are expected to increase and it is anticipated that Canadian producers will increase the size of the breeding herd. ξ The North American cattle industry has historically been highly integrated. Important exceptions to this include the confirmed case of Bovine Spongiform Encephalopathy (BSE) in May 2003, which led the U.S. to issue a trade embargo on all Canadian beef and cattle. Trade resumed for animals under 30 months in September 2003 and for all live cattle in July 2005. ξ The introduction of U.S. COOL in 2008 has added additional costs and reduced the integration between U.S. and Canadian markets. Starting 2013, the revision on COOL is expected to facilitate increased exports of Canadian cattle to the United States. 40 Thousand Heads Canadian Beef Market 1,800 1,600 1,400 1,200 1,000 800 600 Despite short-term declines, Canadian beef exports are expected to increase over the medium term. 400 200 Exports 0 Canadian Beef Consumption 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 ξ An increase in cattle slaughter as well as an increase in the average slaughter weight leads to an increase in beef production in the medium term. ξ Export markets will continue to be important to the Canadian beef sector, given declining trends in per capita beef consumption and modest projections for domestic population growth. 41 T h o u s a n d T o n n e s Canadian Weanlings and Hog Marketings 25,000 20,000 15,000 Slaughter in Canada 10,000 Exports of Slaughter Hogs Hogs Exports Hog prices are expected to increase over the medium term, but high feed 5,000 prices will continue to put pressure on hog producers. Exports of Weanlings 0 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 ξ Although 2011 hog farm prices are significantly above 2010 levels, higher feed costs have lowered profit margins. As a result, slaughter hog marketings (slaughter and exports) will increase only modestly. ξ COOL increased the costs for U.S. packing plants and feed lots to use Canadian animals, putting downward pressure on the Canadian price relative to the U.S. The combination of COOL and the strong Canadian dollar led to a large decline in slaughter hogs and weanling exports in 2009 and 2010. ξ The revision of COOL will benefit the Canadian hog industry in the medium term, but slaughter hogs and weanling exports are not expected to return to the historically high levels. 42 T h o u s a n d H e a d s Canadian Pork Market 2,200 2,000 1,800 1,600 1,400 1,200 1,000 800 600 The declining trend in per capita pork consumption is expected to continue. Export markets will remain critical over the medium term. 400 200 Exports 0 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 Canadian Pork Consumption ξ It is anticipated that declining per capita consumption and limited population growth will continue to influence domestic consumption and that exports will continue to be important to the processing sector. Higher average hog slaughter weights will contribute to rising production and consequently, exports. ξ In the past many external factors have contributed to the strong growth in the Canadian hog and pork industry including: a strong depreciation of the Canadian dollar, disease outbreaks in key competitors, the removal of grain transportation subsidies and a more open, liberalized trade environment. Going forward, a strong Canadian dollar and relatively high feed grain prices will continue to provide challenges for this sector. 43 Thousand Tonnes Canadian Poultry Consumption and Average 10-year Growth Rates 1,800 1,600 1,400 1,200 1,000 800 600 400 Growth in Canadian poultry consumption is expected to be slower than in the previous decade, given the maturity of the domestic market and higher prices for poultry relative to other meats. 200 1.5% 1.7% 3.4% 0 4.1% 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017 2021 ξ Over the medium term, Canadian poultry prices are expected to increase relative to substitute meats. These higher prices partially reflect increasing feed grain prices, which comprise a large share of total production costs. ξ Growth in the demand for chicken (approximately 1.5% per year) is expected to be slower over the medium term than in the past, because of market maturity. ξ Historically, the annual growth rate of turkey consumption has been 1.5%. Turkey consumption is expected to grow by the same rate per year on average over the projection period. 44 Thousand Tonnes Canadian Egg Consumption 45,000 40,000 35,000 30,000 25,000 20,000 15,000 Canadian egg consumption is expected to continue to grow in the medium term. 10,000 5,000 Breaker Eggs 0 Table Eggs 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 ξ Table egg consumption has increased 12% between 1985 and 2010. This growth rate is expected to hold over the outlook. ξ Over the past decade and a half, breaker egg domestic use has increased five fold; however, growth has slowed to 10% over the last decade. This new modest growth rate is expected to continue over the medium term. ξ To fund the difference between breaker and table egg prices, each egg producer pays a fee (or levy) on every dozen eggs sold. The levy is included in the cost of production formula which determines the price of table eggs. 45 T h o u s a n d o f B o x e s o f 1 5 D o ze n Canadian Sheep Consumption 45 40 35 30 25 20 15 10 Domestic consumption for sheep meat will continue to be met through significant imports. 5 0 Imports 198Pro2duct 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021ion ξ Traditionally, imports (largely from New Zealand) have accounted for more than 50% of the Canadian sheep meat supply. ξ The total supply of lamb to the Canadian market continued to fall in 2011, but is expected to recover and grow over the medium term. ξ Despite higher lamb prices, recent declines in domestic production can likely be attributed to the decision of some producers to leave the industry in light of relatively low margins. Furthermore, an increase in the ewe flock size suggests that producers may be rebuilding their breeding capacity. 46 Thousand Tonnes Canadian Per Capita Consumption of Selected Meats and Poultry 100 90 80 70 60 50 40 30 Overall, Canadian per capita consumption of meat and poultry is expected to continue declining over the medium term. 20 10 Beef 0 Pork Chicken 1982 1985 1988 1991 1994 1997 2000 2003 2006 2009 2012 2015 2018 2021 Sheep Turkey ξ From 2000-2010, Canadian per capita consumption of pork, beef, and sheep has decreased by 25%, 14%, and 2% respectively. During the same period, turkey per capita consumption has increased by 3%, while chicken has increased by approximately 7%. ξ Going forward, an aging Canadian population and changing diets are expected to prevent significant growth in Canadian per capita meat consumption over the outlook. 47 K ilo g r a m s p e r C a p ita Selected Butter Prices 20 15 Canadian tariffs should prevent over-quota imports of butter and skim milk powder over the medium term. 10 Selected Skim Milk Powder Prices 5 Import 14 12 0 Canadian World 10 1997 2000 2003 2006 2009 2012 2015 2018 2021 8 6 4 Import 2 Canadian 0 World 1997 2000 2003 2006 2009 2012 2015 2018 2021 ξ Canadian prices of butter and skim milk powder are expected to increase moderately, while world prices are expected to remain relatively high. ξ The estimated annual import price, provides an indication of the potential for imports to enter Canada. It includes the world price, the import tariff and estimated transportation costs. ξ Over the medium term, the tariff should prevent over-quota imports and offset the impact of a strong Canadian dollar. 48 $C A N p er K i l o g r am $C A N p er K i l o g r am Growth in Per Capita Consumption - Selected Dairy Products 3.5 3.0 2.5 2.0 1.5 1.0 Growth in the per capita consumption of most dairy products will be limited with the exception of yogurt. 0.5 Yogurt 0.0 Cream Cheese Fluid Milk Butter 1Ice9 Cream9 7 2001 2005 2009 2013 2017 2021 ξ The Canadian dairy market is mature and characterized by an aging population. Per capita consumption of most dairy products will either be stable or continue to fall. ξ Yogurt is an exception, having shown continuous growth for more than 20 years. This growth is expected to continue in the future. ξ Per capita consumption of cream is also increasing, but the growth is minimal. 49 In d e x o f p e r C a p ita C o n s u m p tio n G r o w th R a te s , 1 9 9 7 B a s e Ye a r Annual Change in Canadian Food Consumer Price Index 5.0 4.5 4.0 3.5 3.0 2.5 2.0 1.5 The annual change in the Canadian fo1od consumer price index is .0 expected to average 2% over the medium term. 0.5 0.0 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019 2021 ξ Events in 2010 have put upward pressure on Canadian food prices in 2011, far less so than in 2009, in which prices were also affected by the depreciation of the Canadian dollar. ξ Among the highest price increases in 2011 are fresh or frozen meat (excluding poultry) (6.8%), bakery products (5.8%), eggs (7.1%), fresh vegetables (9.2%), coffee (9.4%) and sugar (10.9% ). ξ In 2011, prices rose more for food purchased in grocery stores (4.3%) than in restaurants (2.8%). 50 % C hange Acronyms AAFC Agriculture and Agri-Food Canada ACRE Average Crop Revenue Election ASRA Assurance stabilisation des revenus agricoles (Financière agricole du Québec) (Farm Income Stabilization Insurance) BRIC Brazil, Russia, India and China BSE Bovine Spongiform Encephalopathy CAP Common Agricultural Policy (European Union) COOL Country of Origin Labelling CW Carcass Weight DG Distiller’s Grains EPA Environmental Protection Agency EU European Union FAO Food and Agriculture Organization (United Nations) GDP Gross Domestic Product HA Hectare IMF International Monetary Fund KT Kilotonne (Thousand Metric Tonnes) LW Live Weight MHA Million Hectares MMT Million Metric Tonnes MT Million Tonnes MTO Medium Term Outlook NAFTA North American Free Trade Agreement OECD Organization for Economic Co-operation and Development RED Renewal Energy Directive PROCAMPO Programme of Direct Support to Farmers in Mexico RFS Renewable Fuels Standard T Metric Tonne TRQ Tariff Rate Quota U.S. United States USDA United States Department of Agriculture VEETC Volumetric Ethanol Excise Tax Credit WTO World Trade Organization 51 52 ANNEX OF TABLES 53 Average %Chg. 2021: Average 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2006-2010 2006-2010 growth rate Average 2011-2021 Crops Wheat Price, 1HRW, US Gulf (US$/t) 213.6 363.0 257.5 197.8 320.2 327.1 246.3 206.2 232.9 277.8 266.0 236.0 236.4 257.5 269.0 263.4 270.4 -2.6% -2.1% Wheat Price, 1HAD, Minneapolis (US$/t) 162.8 364.5 340.2 201.0 202.1 275.5 223.0 194.2 223.8 272.2 265.9 238.2 238.6 260.0 271.6 265.9 254.1 4.6% -0.4% PPI of flour, USA (1982=100) 149.8 201.3 185.2 170.2 196.6 205.4 183.4 174.9 177.8 195.1 191.0 179.4 179.9 188.7 193.5 191.6 180.6 6.1% -0.7% 1 PPI of bakery & pasta, USA (1982=100) 207.7 216.6 237.5 245.8 244.8 250.7 251.4 249.8 251.6 257.2 263.0 265.4 268.2 274.0 275.6 277.6 230.5 20.5% 1.0% Barley Price, 2 Feed, Portland (US$/t) 178.3 287.9 187.7 153.9 223.3 276.5 200.6 175.0 194.5 210.7 196.6 183.6 186.7 193.1 197.2 198.9 206.2 -3.6% -3.2% Corn, No. 2 Yellow, Central Illinois (US$/t) 138.5 201.9 154.2 145.4 253.6 313.9 227.7 198.7 220.8 239.2 223.2 208.5 211.9 219.3 223.9 225.8 178.7 26.4% -3.2% Soybean Price, Central Illinois (US$/t) 265.6 461.4 376.1 359.6 480.6 530.2 478.8 430.3 443.2 498.4 507.9 486.4 488.9 506.9 516.5 506.2 388.6 30.2% -0.5% Soymeal Price, Decatur (US$/t) 205.4 335.9 331.2 311.3 355.0 343.8 315.9 294.2 308.3 349.8 356.6 343.1 351.8 364.0 372.0 368.0 307.8 19.6% 0.7% Soyoil Price, Decatur (US$/t) 683.9 1147.1 709.0 792.6 1179.5 1211.4 1191.5 1098.4 1086.7 1121.6 1146.2 1141.7 1132.9 1172.7 1200.5 1195.5 902.4 32.5% -0.1% Refined Sugar Price, London (US$/t) 328.6 342.7 416.0 583.9 718.7 669.5 592.7 568.8 521.9 540.4 548.4 564.8 569.5 564.6 555.4 555.5 478.0 16.2% -1.8% Livestock Slaughter Steer Price, Nebraska (US$/cwt lw) 85.4 91.8 92.3 82.7 95.4 113.9 118.1 109.6 108.1 109.2 103.2 96.8 95.9 102.8 107.7 107.4 89.5 20.0% -0.6% Feeder Calf Price, Oklahoma (US$/cwt lw) 115.4 112.3 107.5 101.9 115.1 139.3 148.5 137.8 135.9 137.2 129.7 121.7 120.6 129.2 135.4 135.0 110.4 22.3% -0.3% Commercial cows, US National cow price, (US$/cwt lw) 89.6 85.4 103.5 92.1 111.7 135.2 146.3 134.9 129.3 125.9 117.4 108.9 104.8 107.0 107.9 105.0 96.5 8.8% -2.5% Wholesale of hide, Central USA (US$/cwt) 47.3 52.8 50.2 31.3 55.1 47.4 47.0 46.7 46.5 46.3 46.1 45.9 45.7 45.6 45.4 45.2 47.3 -4.5% -0.5% Wholesale boxed beef choice, 146.8 149.8 153.1 140.8 156.9 178.1 195.6 182.5 180.5 182.6 173.6 164.0 163.1 174.5 182.8 182.9 149.5 22.4% 0.3% Central US (US$/cwt) Wholesale canner-cutter cows, Central US (US$/cwt) 92.3 94.6 98.6 91.2 100.9 120.8 137.7 128.4 122.5 123.9 117.8 111.3 110.6 118.4 124.0 124.1 95.5 29.9% 0.3% Barrow & Gilt, Iowa, (US$/cwt lw) 47.3 47.1 47.8 41.2 55.1 66.3 67.4 54.3 51.4 68.7 70.0 55.9 56.4 64.4 68.6 61.7 47.7 29.4% -0.7% Wholesale price of pork, US (US$/cwt) 82.9 81.9 82.2 68.5 94.2 108.4 109.8 93.2 89.6 111.7 113.6 95.9 96.8 107.2 112.8 104.3 81.9 27.3% -0.4% Butter Price, FOB Oceania (US$/t) 177 294 365 235 409 473 406 374 386 398 400 396 398 414 433 445 296.0 50.3% -0.6% Skim Milk Powder Price, FOB Oceania (US$/t) 221 432 333 228 316 379 355 352 356 360 362 359 359 361 365 365 305.8 19.5% -0.4% Table 1: International prices Cheddar Cheese Price, FOB Oceania (US$/100 kg) 268 402 468 296 405 448 422 405 407 411 418 416 418 429 439 446 367.9 21.1% -0.1% Biofuels Ethanol Price, US (US$/hl) 68.2 59.2 65.3 47.2 51.0 70.1 59.9 60.9 65.0 71.2 72.4 72.5 72.6 75.2 76.7 77.6 58.2 33.3% 1.0% Ethanol Price, Brazil (US$/hl) 46 41 46 43 60 80 66 67 68 66 67 66 69 70 72 74 47.2 57.3% -0.7% Biodiesel Price, Central Europe (US$/hl) 93 103 145 112 131 149 148 139 141 146 149 150 150 153 154 149 116.7 28.0% 0.0% Historical Data Sources: AAFC FARM database; Forecast Data Source: OECD-FAO Outlook Notes: 1. Calendar year basis. 54 Average %Chg. 2021: Average 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2006-2010 2006-2010 growth rate Average 2011-2021 Population (mil) 32.7 33.0 33.4 33.9 34.3 34.6 35.0 35.4 35.9 36.3 36.7 37.1 37.6 38.0 38.4 38.9 33.5 16.2% 1.2% Gross Domestic Product (2002 $ billions) 1283 1311 1320 1284 1325 1353 1385 1431 1471 1509 1543 1582 1622 1664 1706 1750 1304.7 34.1% 2.6% 2.8% 2.2% 0.7% -2.8% 3.2% 2.1% 2.4% 3.3% 2.8% 2.6% 2.3% 2.5% 2.6% 2.5% 2.6% 2.6% GDP Deflator (2002=100) 113.0 116.6 121.4 119.1 122.6 126.7 129.7 132.6 135.2 137.7 140.2 142.8 145.3 148.0 150.7 153.4 118.6 29.4% 1.9% 2.7% 3.2% 4.1% -1.9% 2.9% 3.4% 2.4% 2.2% 1.9% 1.9% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% Per Capita Disposable Income ($) 26099 27282 28508 28540 29596 30126 30717 31641 32538 33428 34311 35217 36147 37102 38081 39087 28004.9 39.6% 2.6% 6.3% 4.5% 4.5% 0.1% 3.7% 1.8% 2.0% 3.0% 2.8% 2.7% 2.6% 2.6% 2.6% 2.6% 2.6% 2.6% Average Weekly Wages ($) 709.7 732.9 762.0 780.6 795.1 817.6 840.6 865.3 891.0 917.7 944.6 972.3 1000.8 1030.1 1060.3 1091.4 756.1 44.4% 2.9% 3.5% 3.3% 4.0% 2.4% 1.9% 2.8% 2.8% 2.9% 3.0% 3.0% 2.9% 2.9% 2.9% 2.9% 2.9% 2.9% Consumer Price Indices All Items 109.1 111.5 114.1 114.4 116.5 119.9 122.2 124.9 127.7 130.3 133.0 135.7 138.4 141.3 144.1 147.1 113.1 30.0% 2.1% 2.0% 2.1% 2.4% 0.3% 1.8% 2.9% 2.0% 2.2% 2.2% 2.1% 2.0% 2.0% 2.0% 2.0% 2.0% 2.0% Non-food, Non-energy 106.9 109.0 110.3 111.5 112.9 112.7 114.4 117.0 119.4 121.5 123.7 126.1 128.5 130.7 133.1 135.6 110.1 23.1% 1.9% 1.5% 2.0% 1.2% 1.1% 1.3% -0.2% 1.6% 2.2% 2.1% 1.7% 1.8% 1.9% 1.9% 1.7% 1.8% 1.9% Energy 132.8 135.9 149.3 129.2 137.8 154.7 159.3 164.1 169.0 174.1 179.3 184.7 190.3 196.0 201.8 207.9 137.0 51.8% 3.0% 5.2% 2.3% 9.8% -13.5% 6.6% 12.3% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% 3.0% Food 108.9 111.8 115.7 121.4 123.1 127.8 131.0 133.3 135.8 139.1 141.9 144.4 147.0 150.4 153.7 156.4 116.2 34.6% 2.0% 2.4% 2.6% 3.5% 4.9% 1.4% 3.8% 2.5% 1.7% 1.9% 2.4% 2.0% 1.8% 1.8% 2.3% 2.1% 1.8% Industrial Product Price Indices Petroleum & Coal 174.20 183.50 230.20 165.60 186.80 204.36 207.94 223.66 234.53 245.06 252.37 259.25 266.31 273.56 281.01 288.66 188.1 53.5% 3.5% 8.9% 5.3% 25.4% -28.1% 12.8% 9.4% 1.8% 7.6% 4.9% 4.5% 3.0% 2.7% 2.7% 2.7% 2.7% 2.7% Wood 86.80 80.10 76.00 75.90 79.20 77.18 78.00 79.43 80.69 81.82 82.93 84.08 85.24 86.42 87.61 88.82 79.6 11.6% 1.4% -8.1% -7.7% -5.1% -0.1% 4.3% -2.6% 1.1% 1.8% 1.6% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% 1.4% Autos & Parts 80.96 78.26 78.63 83.01 78.28 75.65 76.45 77.86 79.25 80.70 82.16 83.65 85.17 86.71 88.28 89.87 79.8 12.6% 1.7% -4.1% -3.3% 0.5% 5.6% -5.7% -3.3% 1.1% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% 1.8% Machinery 101.00 98.80 101.10 105.20 103.50 103.02 102.81 102.88 103.30 103.80 103.98 103.98 103.98 103.98 103.98 103.98 101.9 2.0% 0.1% -1.3% -2.2% 2.3% 4.1% -1.6% -0.5% -0.2% 0.1% 0.4% 0.5% 0.2% 0.0% 0.0% 0.0% 0.0% 0.0% Interest Rates (%) Prime Lending Rate 5.8 6.1 4.7 2.4 2.6 3.0 3.3 5.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 6.0 4.3 38.6% 7.2% Table 2: Canadian macroeconomy Exchange Rate $Cdn./$U.S. 1.13 1.07 1.07 1.14 1.03 0.98 0.97 0.97 0.98 0.99 0.99 0.99 0.99 0.99 0.99 0.99 1.1 -9.0% 0.2% $U.S./$Cdn. 0.88 0.93 0.94 0.88 0.97 1.03 1.03 1.03 1.02 1.01 1.01 1.01 1.01 1.01 1.01 1.01 0.9 9.7% -0.2% Average Grain Freight Rate, Mid prairies to port ($/t) 38.1 42.0 36.3 37.2 38.1 38.1 38.6 39.1 39.6 40.1 40.6 41.1 41.6 42.1 42.6 43.1 38.3 12.5% 1.2% W. TEXAS INT. OIL PRICE US$ per barrel 66.08 72.26 99.68 61.66 79.41 94.79 97.20 106.25 111.84 117.05 121.00 125.09 129.32 133.69 138.21 142.88 75.8 88.4% 4.2% Historical Data Sources: Statistics Canada - CANSIM; Conference Board of Canada - Medium Term Forecast Forecast Data Source: Conference Board of Canada - Extrapolation of Medium Term Forecast 55 Average %Chg. 2021: Average 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2006-2010 2006-2010 growth rate Average 2011-2021 Crop Area Harvested (Mha) 37.38 37.94 38.09 36.56 37.31 37.77 38.09 38.44 38.51 38.57 38.64 38.70 38.77 38.84 38.90 38.97 37.5 4.0% 0.3% Wheat 9.7 8.6 10.0 9.6 8.3 8.5 9.7 9.1 9.0 9.4 9.5 9.7 9.6 9.6 9.6 9.7 9.3 5.1% 1.3% 1 Coarse Grains 6.11 7.39 6.33 5.23 4.67 4.74 5.54 5.75 5.93 5.88 6.13 5.95 5.80 5.87 5.94 6.02 5.9 1.2% 2.4% 2 Oilseeds 7.22 7.97 8.32 8.11 8.34 9.29 9.79 10.32 10.23 9.92 9.91 10.05 10.15 10.12 10.28 10.39 8.0 30.0% 1.1% 3 Special Crops (Western Canada) 2.2 2.6 2.8 2.9 3.1 2.2 2.4 2.4 2.5 2.6 2.4 2.4 2.5 2.6 2.5 2.5 2.7 -8.5% 1.2% Hay (Seeded Area) 8.7 8.2 8.2 8.2 8.2 8.0 8.2 8.2 8.1 8.2 8.2 8.2 8.3 8.4 8.3 8.2 8.3 -1.4% 0.3% Summerfallow 3.5 3.1 2.5 2.5 4.7 5.0 2.5 2.6 2.8 2.7 2.5 2.4 2.4 2.3 2.2 2.2 3.3 -33.3% -8.0% Production, Domestic Use & Export Summary (Mt) Wheat Production 25.3 20.1 28.6 26.8 23.2 25.3 27.2 25.2 25.0 26.3 26.8 27.6 27.5 27.6 28.0 28.6 24.8 15.4% 1.2% Domestic Use 8.70 6.68 7.89 7.20 7.68 8.43 8.53 8.75 8.83 8.60 8.74 8.77 8.80 8.71 8.69 8.72 7.6 14.3% 0.3% Exports 19.4 15.9 18.6 18.5 16.2 17.4 18.2 16.3 16.6 17.7 17.9 18.3 18.5 19.0 19.2 19.6 17.7 10.8% 1.2% 1 Coarse Grains Production 23.14 27.84 27.18 22.48 22.26 21.82 24.24 24.96 25.65 25.88 26.83 26.42 26.22 26.77 27.15 27.62 24.6 12.4% 2.4% Domestic Use 22.32 21.90 20.73 20.08 19.05 19.22 19.63 19.99 19.71 20.34 20.79 20.60 21.08 21.43 21.71 22.02 20.8 5.8% 1.4% Exports 4.81 7.82 5.23 4.47 5.83 4.41 4.00 5.91 6.74 6.33 6.63 6.46 5.80 5.74 5.82 6.11 5.6 8.5% 3.3% 2 Oilseeds Table 3: Canadian grain and oilseed summary (crop year) Production 13.45 12.93 16.84 17.33 17.54 18.78 19.57 19.94 20.08 19.73 20.04 20.69 21.43 21.72 22.24 22.81 15.6 46.0% 2.0% Domestic Use 6.22 6.29 6.52 7.04 8.35 8.68 8.60 9.04 9.24 9.43 9.64 9.87 10.01 10.12 10.17 10.24 6.9 48.7% 1.7% Exports 7.90 8.04 10.43 10.05 10.21 11.05 11.29 11.38 11.21 10.73 11.02 11.40 11.82 12.11 12.50 13.04 9.3 39.8% 1.7% Historical Data Sources: Statistics Canada - CANSIM Notes: 1. Coarse Grains consists of Barley, Corn, Oats, Rye and Mixed Grains. 2. Oilseeds consists of Canola, Soybeans and Flaxseed 3. Special Crops consists of Canary Seed, Mustard Seed, Lentils, Dry Peas, Sunflower and Chickpeas. 56 Average %Chg. 2021: Average 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2006-2010 2006-2010 growth rate Average 2011-2021 All Wheat Supply-Disposition (Mt) Area Harvested (Mha) 9.7 8.6 10.0 9.6 8.3 8.5 9.7 9.1 9.0 9.4 9.5 9.7 9.6 9.6 9.6 9.7 9.3 5.1% 1.3% Yield (t/ha) 2.6 2.3 2.9 2.8 2.8 3.0 2.8 2.8 2.8 2.8 2.8 2.8 2.9 2.9 2.9 2.9 2.7 10.0% -0.1% Production 25.3 20.1 28.6 26.8 23.2 25.3 27.2 25.2 25.0 26.3 26.8 27.6 27.5 27.6 28.0 28.6 24.8 15.4% 1.2% Food Use 3.0 2.9 2.7 2.8 2.7 2.8 2.8 2.8 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.9 2.8 2.7% 0.5% Use for Ethanol 0.41 0.39 0.65 0.73 0.81 0.90 1.03 1.07 1.11 1.13 1.16 1.19 1.22 1.25 1.28 1.31 0.6 119.6% 3.9% Feed Use 4.4 2.4 3.5 2.8 3.2 3.9 3.8 3.9 4.0 3.7 3.8 3.8 3.7 3.6 3.6 3.6 3.3 9.2% -0.9% Other Domestic Use 0.9 1.0 1.0 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 0.9 -0.2% 0.9% Exports 19.4 15.9 18.6 18.5 16.2 17.4 18.2 16.3 16.6 17.7 17.9 18.3 18.5 19.0 19.2 19.6 17.7 10.8% 1.2% Ending Stocks 6.87 4.41 6.55 7.83 7.19 6.70 7.2
Posted: 25 June 2012

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