FCC’s top economist is urging farmers to find any way they can to save money, as the ag lender projects a 4.8 per cent decline in farm cash receipts in 2024 on the heels of lower commodity prices.
“In this environment, I do think that management skills are absolutely critical,” said J.P. Gervais, vice-president and chief economist with Farm Credit Canada (FCC).
“Any two, three, four or five per cent that you can get in terms of efficiency, in terms of productivity, will help on the bottom line because there’s a multiplicative effect when it comes to lowering your costs and the impact on the overall profitability of operations.”
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That said, Gervais is “cautiously optimistic” about Canadian agriculture this year.
“I’m optimistic because we’re going to get relief when it comes to interest rates. We know that (input) costs for some sectors are going to be coming down. So that’s going to help profitability,” he said at FCC’s 2024 economic outlook January 23.
“But I’m being cautious as well because consumers are under a little bit of pressure. And it all starts with consumers.”
From a broader economic perspective, Krishen Rangasamy, principal economist with FCC, noted a recent downward trend in inflation in Canada created by economic slowdown. This may result in interest rates dropping in 2024, he said.
“We’re forecasting growth to be below potential. In other words, you can expect inflation to keep trending towards the Bank of Canada’s two per cent target,” said Rangasamy.
“Our own forecast is for the Bank of Canada to start cutting interest rates in the second half of the year. But the Bank of Canada is going to do that only if they become comfortable about inflation sustainably going down,” he said.
“So that’s why we think they’re going to wait a little bit.”
Beyond 2024, Gervais envisions health for the overall ag industry.
“I think the long term outlook for the industry remains extremely positive. I think we know there is a very, very strong demand for what we can grow and produce as food. That’s the reason why I think we’re still very optimistic about the long term,” he said.
—Jeff Melchior writes for the Alberta Farmer Express.
