Canada's involvement in the Trans-Pacific Partnership negotiations has the potential to begin a process that could ultimately see the country's dairy and poultry supply management system dismantled. After the abolition of the Canadian Wheat Board's monopoly on grain trading, dairy and poultry could be the next industries to be shaken up. For now, we expect milk, poultry and pork production growth to be mild in 2011/12. We forecast corn output to decline in 2011/12 but to remain strong in the coming years as higher renewable fuel content requirements encourage the construction of new ethanol plants.
- Corn production growth to 2015/16: 10.7% to 13.0mn tonnes. Large domestic demand growth coming from the livestock sector and higher renewable fuel content requirements will drive output growth. - Milk production growth to 2015/16: 6.8% to 9.0 tonnes. Output will increase on the back of continued yield increases and investment in the sector. The recent signs of reconsideration of the supply management system could be beneficial to the industry in the medium term. - Poultry consumption growth to 2015/16: 13.7% 1.1mn tonnes. The perceived healthier nature of poultry as well as increasing export opportunities will help to support consumption growth.
- 2012 real GDP growth: 2.0% year-on-year (y-o-y). Down from 2.5% in 2011; predicted to average 2.4% over 2011-2016.
- Consumer price inflation: 1.8% y-o-y in 2012. Down from 2.9% in 2011; predicted to average 2.2% over 2011-2016.
- BMI universe agribusiness market value: 3.9% y-o-y decline to US$23.6bn in 2011/12; forecast to average US$23.8bn between 2010/11 and 2015/16. Industry Outlook Owing to favourable weather and higher global prices in 2011, we expect improved output for Canadian wheat in 2012/13. There was much speculation regarding the end of the Canadian Wheat Board as sole marketing authority for western wheat (starting on August 1 2012) and its effect on future production.
We believe the end of the monopoly is likely to have broader and positive effects for farmers in the coming years, as they could receive higher prices in a more competitive market with several purchasing entities. The industry is also likely to benefit from Canada's recent free trade agreement with Morocco, which is set to offer Canadian wheat unrestricted access to one of the world's largest wheat importers. In 2011/12, we are forecasting poultry production to increase slightly driven by demand from the retail sector and as more consumers switch away from beef. The Canadian government announced an investment of more than CAD600,000 into the Atlantic Poultry Institute in order to improve feed and health research. The investment is aimed at increasing the region's poultry producers' competitiveness, enabling them to increase quality of their products in order to meet demand from the more healthconscious consumer. This is expected to support production in the longer term, as will increasing export opportunities and high poultry prices. In 2011/12, we forecast mild milk production growth. The number of milk cows in Canada has fallen by 17% over the last decade, but this has been countered by a subsequent increase in yields and greater consolidation at the farm level. BMI believes that Canada's involvement in the Trans-Pacific Partnership has the potential to begin a process that could ultimately see the country's dairy and poultry supply management system dismantled. In our view, this could be the catalyst that leads the system to the same fate as the abolished Canada Wheat Board. Over the short term, this development could reduce Canada's dairy production, but it presents upside risks to our long-term production outlook.