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New study says productivity gains reshaping agriculture

Canadian farmers have become a lot more productive in the past 15 years, according to a new study by BMO Bank of Montreal.

“With the quantity of land devoted to farming relatively stable and reliance on government support generally in decline, the industry is truly doing more with less,” said David Rinneard, the bank’s national manager of agriculture.

Agricultural output has jumped 30 per cent even while employment in the sector has declined 26 per cent, he noted.

“This represents a remarkable productivity gain, particularly as real capital input increased by only three per cent over the same time frame,” he said.

The average farm is now 28 per cent larger than in 1997 and the rising age of operators (54 years old), means “there should be an ongoing opportunity for further consolidation as new retirees exit the industry,” said Rinneard.

The study says improved seed and livestock genetics, along with better management, have greatly boosted productivity. It also gives credit to farmers for moving away from traditional crops, such as wheat, to higher-profit ones and for “ramping up production of higher value-added products including organics, non-genetically modified products, and locally produced foods.”

All of this has been good for the bottom line, the study says. It says farm debt “remains low relative to equity” and “only four per cent of industry revenue is required to service debt.”

However, the report notes, that while grain producers are benefiting from high commodity prices, the picture is less rosy for livestock sectors.

The high value of the loonie is also a concern, said Rinneard. Food imports have risen by 64 per cent since 2002 because of the dollar’s appreciation in value while exports have only risen by 14 per cent. The report said European demand for Canadian food products has dropped while competition from other countries, especially in Latin America and Asia, has increased.

In the past, producers in developing countries were not equipped to compete with capital-intensive agricultural producers in developed economies, but this is changing with the adoption of more modern agricultural practices, the report states.

But emerging markets offer a great opportunity for Canadian agriculture and will account for nearly 60 per cent of new wheat demand and nearly 70 per cent of new demand for oilseeds.

“The situation is even more pronounced for meat products, which are constituting a greater part of diets in emerging markets as incomes grow,” the report states.

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