On the 200th birthday of Charles Dickens, a prominent business journalist deferred to the famed English novelist when summing up the current state of Canadian agriculture.
“These are in some ways the best of times for producers, because we have grain prices going up, we have livestock prices going up,” said Brett Harris, western bureau chief for CTV’s Business News Network.
“They are of course the worst of times, in that the global economy really is sitting on a precipice and we don’t know which way it’s going to go.”
Speaking at the AgChoices 2012 conference in Red Deer on Tuesday, Harris devoted much of his time to an assessment of the economic conditions in Europe, the United States and China.
Although the domestic ag sector is coming off a strong year and has a promising outlook for 2012, he suggested that things could be volatile as long as the U.S. and Europe battle their economic demons.
“It’s going to be quite a roller-coaster ride.”
The biggest threat exists in Europe, said Harris, despite concerted efforts led by Germany and France to shore up teetering economies like Greece’s.
“It still looks like the European economy is inexorably sliding into recession.”
In the case of Greece, a default on government debt obligations could be manageable, he said.
But if bigger countries like Italy follow, the entire Eurozone could tumble and the global economy return to a recession that would be worse than the 2008 downturn.
“If Europe can’t fix what’s going on right now, we could all be in trouble.”
Harris didn’t sound optimistic, pointing to a Eurozone unemployment rate of 10.4 per cent — ranging from 5.5 per cent in Germany to 23 per cent in Spain.
These numbers illustrate the disparity between strong economies and weak ones among the 17 Eurozone members, he said.
“Countries that consistently overspend and under-produce are going to have to turn things around.”
As Canada’s largest trading partner and its biggest market for agricultural products, the United States is a critical to the fortunes of producers here, said Harris.
It’s staggering under a combined debt load of $56.5 trillion — including the financial obligations of government, corporations and individuals — which equates to about $683,000 for every American family, he noted.
“The U.S. really is facing its worst financial situation, probably since the Great Depression of the ‘30s.”
Our neighbours to the south did manage to extricate themselves from that recession, observed Harris, and recent encouraging signs have included a 2.8 per cent growth in U.S. GDP in the final quarter of 2011 and a declining unemployment rate. Corporate profits have been rising and manufacturing is on an upward path.
The U.S. does continue to suffer from “political paralysis,” said Harris, which could result in deep legislated spending cuts if the Democrats and Republicans can’t agree on how to tackle the debt.
“If they’re not strategically aimed, that’s going to hit the economy like an ax instead of a scalpel.”
China is also important to Canada and its agricultural exports, said Harris. But it’s being hurt by the European debt crisis, with export growth slowing to 14 from 21 per cent in the second half of 2011.
With China’s manufacturing output contracting and its housing sector cooling, the communist country’s economy could suffer a “hard landing” that would jar the rest of the world, he said.
For now, things look pretty rosy for most Canadian farmers, said Harris. The livestock sector in particular has been profitable, thanks to demand from emerging markets like China and Korea, and herd numbers that are the lowest in years.
“You don’t have to be an economic expert to know that when you have strong demand and you have very tight supply, you get good pricing.”
This year should be another good one for producers, although threats like rising input costs, the high loonie and competition from countries like Russia, Ukraine, Kazakhstan, Argentina and Brazil exist. Plus, said Harris, agricultural products are commodities, and as such their prices are subject to cyclical swings.
Harris recommended to his audience that they pursue diversified markets, ensure they have access to credit and try to lock in their costs and prices.
Despite the uncertainties in Europe, the United States and China, he added, Canadian farmers can take some comfort in one reality.
“People have to eat.”
Ag Choices is an annual opne-day agricultural conference. It’s sponsored by Growing Forward, a federal-provincial-territorial initiative.