Top 5 economic trends for Canadian agriculture and food to watch in 2022

 

A wild trip in 2021 is throwing us into 2022 off-balance and unsure. Last 12 months wasn’t the 12 months of restoration and respite we thought was imminent after the horror story that was 2020. Instead, we’re left with trends more and more tough to forecast. COVID-19 continues to wind itself round just about each world and home economic growth, complicating issues outright. Weather disasters have wreaked havoc with the transportation of producing inputs and outputs. The world seemingly can’t (or won’t) cease demanding quickly disappearing items and providers. Inflation is unusually excessive. Canada’s labour market has maybe sorted itself out total, however pockets of nice uncertainty stay.

For these causes, we’re suggesting these in Canada’s agriculture and food sectors monitor the next 5 trends in 2022. We’ve recommended charts to make that simpler: inflation and future rate of interest modifications (the yield curve), ongoing provide chain woes (Baltic Dry Index), labour shortages (Beveridge Curve in food processing), supply-demand imbalances (stocks-to-use ratios), and energy in demand for meat amid inflation (the FCC Meat Demand Index).

1. Inflation, inflation, inflation
Inflation is our first development to monitor in 2022 because it underlies every of the opposite 4 trends. Because the bond market conveys expectations about future inflation, we’re monitoring modifications in the yield curve to assess inflationary pressures.

Pre-pandemic, the yield curve recommended Canada was headed for weak economic progress, then (*5*)COVID-19 triggered the worst Canadian recession since the Great Depression. The Bank of Canada (BoC) reduce its prime price and started a program of quantitative easing.

One results of the economic system ramping up from the preliminary shock in 2020 was rising inflation. That was factor: costs had fallen however then recovered. They’ve continued rising, with inflation now anticipated to be above the Bank’s goal price for most of 2022.

Short-term bond yields have climbed in line with expectations for the BoC to improve its coverage price by not less than 100 foundation factors in 2022. But long-term bond yields have retreated from the highs of late November, suggesting markets aren’t overly involved about inflation accelerating and requiring additional price hikes. And whereas persistent provide chain disruptions and world demand will immediate increased costs of just about every thing and provide shortages could proceed for some key commodities, pressures on oil, fuel and world ag commodity provides are anticipated to weaken. Of course, the largest unknown proper now’s omicron threatening the progress in unlocking provide chains.

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