The Chief Agricultural Economist with Farm Credit Canada JP Gervais told producers at an Economic Trends in Agriculture event that there is a strong demand for our agricultural commodities worldwide.
“We’re well positioned in Canada for a number of different reasons trade deals, being very competitive, very productive, our good quality, and our reliable reputation as a supplier. All of that makes me really optimistic, but there are a few headwinds for sure, from a pricing standpoint and profitability as well. So, those are the things that operations need to monitor going into the year.”
Gervais is forecasting a 75 cent Canadian dollar and expects to see at least one hike in interest rates coming in the second half of 2019.
He notes that Canadian households carry a lot of debt adding that farm debt has been climbing fast in recent years along with the strong growth we’ve seen in the industry.
Gervais says just in Saskatchewan, for example, we’ve been able to grow gross farm income by more than $600 million a year for ten years.
“Of course, that has actually fed into asset values going up and we’ve had some very strong appreciation rates for farm assets, especially farmland and with that farm debt has grown. So, with that, I think now we have to be a little more cautious."
He suggests producers take a second look and see where they stand in terms of financial risk in their operation, especially with borrowing costs climbing.
Gervais expects margins will be tighter in 2018-19 adding that farm asset values, farmland in particular, in Saskatchewan will be more stable or grow at a more moderate pace.