FCC economists identify five “crystal” charts to watch in 2022

 

Like fortune tellers with crystal balls, Farm Credit Canada’s (FCC) economics crew has been learning their “crystal” charts to forecast what’s in retailer for Canada’s agriculture and meals trade in 2022.

“Sometimes the best indicators of what will happen in the future can be found in the recent past,” stated J.P. Gervais, FCC’s chief economist. “But with a slower-than-expected recovery from the pandemic and multiple challenges that have rocked industry supply chains in 2021, this year’s forecast for Canada’s agriculture and food industry has been a real challenge.”

Despite the uncertainty, Gervais suggests trade producers and processors regulate five key developments: Canada’s inflation and rates of interest, ongoing provide chain challenges, labour shortages, supply-demand imbalances and power in meat demand. Understanding these developments will assist enterprise homeowners and operators mitigate dangers and reap the benefits of alternatives all through 2022 and past.

Inflation and rates of interest

Inflation is predicted to be above the Bank of Canada’s goal fee for many of 2022, which additionally ought to drive rate of interest will increase in an effort by the central financial institution to preserve a lid on inflation.

“Persistent provide chain disruptions and international demand will proceed to immediate increased costs on nearly every thing – two developments that started nicely earlier than 2021,” Gervais stated. “Supply shortages may continue for some key commodities, and overall price increases on oil, gas and global agriculture commodity supplies are not expected to weaken before mid-year.”

Supply chain and labour drive challenges

Throughout the pandemic, provide chain disruptions brought on by shortages and backlogs in international transport networks created inflationary pressures. Average month-over-month international transportation prices for dry items elevated 7.3 per cent in 2020 and greater than doubled in 2021 with a median enhance of 15.3 per cent.

“Looking ahead in 2022, we see strong demand for raw agriculture commodities and other manufacturing inputs. Coupled with shipping container and transportation labour shortages, we’re forecasting a continuing trend toward higher transportation costs,” Gervais stated. “It’s highly predictable the higher cost will be passed onto consumers and reflected in the price we pay for food and beverages in the grocery store.”

At the identical time, continual labour drive shortages in the meals processing sector — made worse by the pandemic — may additionally contribute to increased meals prices.

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