High grain and oilseed prices are likely to hold up, fertilizer costs will moderate to a one per cent increase after soaring last year and livestock, dairy and poultry profits should be good.
Farm cash receipts are expected to increase by 4.6 percent to $98.8 billion. That compares with an increase of 14.1 per cent last year.
Prices are likely to continue fluctuating more than usual, predicts Desmond Sobool, principal economist with FCC, but not by as much as in the aftermath of Russia’s invasion of the Ukraine.
Oilseed and protein meal prices will be heavily influenced by what happens in Brazil and Argentina, two countries that accounted for 57 percent of global soybean exports and just under half of the world’s corn exports last year.
“What happens in South America does have a huge impact on global commodity prices,” Sobool said during a recent FCC webinar.
Argentina is enduring its worst drought in 40 years, while Brazil has experienced timely precipitation.
“Overall, it’s a bit ambiguous what’s going to happen in South America, but it is definitely something we want to keep our eye on,” he said.
U.S. fed and feeder cattle futures prices increased in the second half of 2022 and at the start of 2023 remain above their five-year average values.
“This is going to be good news for feedlots and a return to profitability in 2023,” said Sobool. “There is some much-needed optimism in the beef sector, which has not been there for a while.”
Ranchers are culling herds because of drought in the United Statesand high feed costs, so for the first time in a decade, heifers will account for more than 30 per cent of cattle slaughter.
That sets the stage for good demand for Canadian cattle.
FCC chief economist J.P. Gervais said hog prices should support profitability in that sector as well, although prices are expected to fall in the second half of the year.
Hog farm cash receipts are expected to increase 7.7 percent to $7.2 billion. Meanwhile, feed costs will drop eight percent from 2022 levels.
The Canadian Dairy Commission is increasing the support price for butter on Feb 1, estimating it will result in a 2.2 percent increase in the milk price. Farm cash receipts for the dairy sector are forecast to increase 5.7 percent to $8.7 billion.
Workers are still in high demand, both on farms and right through the supply chain of processors, wholesalers and retailers. Job vacancy rates are more than double pre-pandemic levels, so Gervais said farmers should prepare for that labour shortage.