Farm Credit Canada forecasts farm cash receipts will reach a record high this year, bolstered by strong prices for grains and oilseeds.
Sebastien Pouliot, chief agricultural economist, said he was surprised when he ran the models and found such a rosy outlook.
“For crops, I was expecting an increase but not all that strong,” he said in an interview.
Receipts in that sector could rise about 20 percent after a strong showing last year, even though production estimates are down for most crops except barley, canola and soybeans.
Canola in particular, according to FCC, could see receipts of $14.7 billion on volume of 20.1 million tonnes at a price of $652 per tonne. Futures prices are running nearly double last year.
“The price rally started mid-summer last year and since then it’s just been growing and growing. That’s true for canola especially,” Pouliot said. “Wheat, not as much.”
Corn and soy are also showing strong potential return.
The risk is a price drop later this year but he said farmers are pricing a good share of production right now to take advantage while they can.
China is a factor as the year plays out. It has had strong demand for corn and soybeans.
“It’s hard to document exactly what’s going on in China but one story is that stocks of grains were low and you had the hog industry recovering so they needed to feed more and more hogs,” he explained. “There’s been a lot of consolidation so it’s more industrial. It’s using more grain so they’re not using table scraps to feed hogs, at least a lot less than before.”
Canola follows soybean prices, and production problems in both Australia and Europe have led to more demand from North America.
Overall, Pouliot forecasts crop cash receipts at $33.1 billion this year for the crops it analyzed, up from $27.7 billion in 2020. The data is for barley, canola, corn, dry peas, lentils, oats, soybeans, wheat and durum.
For cattle, FCC expects a challenging year as the sector recovers from last year’s backlog from short-term plant closures and the loss of foodservice markets.
Fed cattle futures are better than they were a year ago but still aren’t growing, Pouliot said. Stocks are lower, feed prices are up and cash receipts for cattle and calves are likely to move sideways at $9.1 billion.
Hog producers, on the other hand, should be looking at a strong 2021, with prices rising almost 40 percent since the beginning of the year, he said.
That should drive production up by 3.4 percent.
“The inventory is down a little bit too but for hogs the turn-around is faster so we can actually ramp up production a little bit faster.”
China is again a main factor. There have been recurrent problems with African swine fever there and demand is currently strong
Belly meat demand in particular is driving the domestic market.
Pouliot estimates an average hog price 27.7 percent higher this year, and hog receipts to rise by 32 percent to a record $6.2 billion.
He added that dairy receipts were also a surprise to him. They are projected to go up six percent to $7.6 billion. He said production cuts for a few months last year affected that industry and this year will be steadier.
“The downside risk there is possibly imports coming from the United States,” Pouliot said, referring to the Canada-United States-Mexico trade agreement. “So far that hasn’t happened.”