Follow the money, but don’t bank on it, FCC’s global trade report says

Regina, Saskatchewan – Productivity, innovation and solid trade relationships will contribute more to Canada’s long-term success as an agriculture exporter than the value of its currency, according to Farm Credit Canada’s (FCC) latest global trade report.

“Canada is one of the world’s largest agriculture and agri-food trading nations and our exports certainly benefit from our low dollar,” said J.P. Gervais, FCC’s chief agricultural economist, in releasing FCC’s 2015 A Look at Global Trade Report. “That’s the conventional wisdom, but when we take a closer look we see our competitive position has more to do with long-term success factors, rather than short-term fluctuations in exchange rates.”

Gervais said producers and agri-food business owners need to be aware of the fluctuations in exchange rates, but they should plan to build a competitive position around more long-term success factors, such as increasing productivity and innovation, as well as building solid trade relations.

The recently negotiated Trans-Pacific Partnership and the earlier Canada-European Union Comprehensive Economic and Trade Agreement will provide long-term benefits for Canadian agriculture, he added.

The report looks at 20 years of manufactured food products, crops and livestock export data. It found that while a weak Canadian dollar makes our exports more attractive to our trading partners, growth in Canadian exports is actually driven more by improved gross domestic product (GDP) of those export markets.

Of Canada’s top five export markets, China is expected to outpace others in GDP growth in 2016, which could mean an additional $343 million worth of Canadian crop exports in 2016.

“Canada is well positioned as an important agriculture trader in the world and the expansion of trade relations will only help to sustain and build on that,” he said.

A weak Canadian dollar, however, gives an immediate boost to Canadian exports, especially with the United States, Canada’s main trading partner. The U.S. takes in 30 per cent of Canada’s total agriculture exports, including one quarter of crop exports and about 75 per cent of livestock exports.

The benefits of a weak Canadian dollar take more time to realize in newer markets, and that’s where Canada’s reputation as a consistent producer of high-quality, safe agriculture commodities and manufactured food products plays a greater role, according to the report.

“By focusing on productivity, innovation and trade we ensure Canada upholds its reputation as one of the world’s most trusted sources of food and we maintain our status as a leading global exporter,” Gervais said.

Canada is the fifth largest exporter of agriculture and the eighth largest exporter of agri-food, despite a relatively small population of 34.8 million. In 2014, Canada’s agriculture and agri-food system provided 2.3 million jobs and contributed $108.2 billion (6.6 per cent) to Canada’s GDP.

Canada’s overall trade values in 2014, including both exports and imports, totalled $83.3 billion, or 3.8 per cent of the world’s total agriculture and agri-food trade.

“The success of Canada’s exports of agriculture and manufactured food products relies on having access to global markets with strong economies,” Gervais said. “Diversifying our exports into new markets is one of the best ways to mitigate the risk of any potential disruptions with our largest trading partner, the United States.”

By sharing agriculture economic knowledge and forecasts, FCC provides solid insights and expertise to help those in the business of agriculture achieve their goals. For further insights on the 2015 Look at Global Trade Report, view our video at www.fcc.ca/videos or read the latest FCC Ag Economist blog post at www.fcc.ca/AgEconomist.

FCC is Canada’s leading agriculture lender, with a healthy loan portfolio of more than $27 billion. Our employees are dedicated to the future of Canadian agriculture and its role in feeding an ever-growing world. We provide flexible, competitively priced financing, management software, information and knowledge specifically designed for the agriculture and agri-food industry. Our profits are reinvested back into agriculture and the communities where our customers and employees live and work. Visit fcc.ca or follow us on Facebook, LinkedIn, and on Twitter @FCCagriculture.

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For more information, photos or interviews, contact:

Trevor Sutter
Corporate Communication
Farm Credit Canada
1-855-780-5313
trevor.sutter@fcc.ca