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All things considered: January 2010

A Few Icebergs Out There


February 26, 2010
By Jim Knisley


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Welcome to the back page’s occasionally annual Look Out! report.

Welcome to the back page’s occasionally annual Look Out! report.

This is where we take inspiration from Capt. Edward J. Smith of the Titanic and Capt. Joseph Jeffrey Hazelwood of the Exxon Valdez. Unlike the builders of the Titanic we don’t believe the craft is unsinkable. We also believe that it is best for oil tankers not to run aground.

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So, with that in mind, our considered opinion is that in the year ahead it is best to proceed with caution. A brief exhale of relief that 2009 is over is allowed – because 2009 (the year that gave us the phrase Great Recession) was truly dreadful.

Economies around the globe shuddered and stalled. Governments reeled and then fired up the printing presses to throw money at everything from banks and car companies to lowly water and sewer systems.
By year’s end many of the big dogs were fully stuffed and were rapidly forgetting that taxpayers had provided the meal.

For the rest, the bowl may still be half empty, but there is hope – something that was in short supply last spring. Recovery is being talked about and not just by politicians.

The economy has stopped falling apart. The really, really big iceberg may have been avoided. But pulling things together, climbing up or returning to course looks to be a long, slow process.

For many it’s going to be like the old joke about the fall not being so bad but the sudden stop that hurts.

Having survived 2009’s fall, the overall economy is expected to limp through 2010.Unemployment is expected to remain high in much of the country. Saskatchewan, Manitoba, Ottawa and, to a lesser extent, Alberta are possible exceptions.

Car centric Ontario is expected to continue to struggle. While in the Maritimes the larger cities look to be coming back, smaller centres dependent on manufacturing and resource industries struggle.

For agriculture, the commodity boom of a couple of years ago is just the wisp of a memory. Beef and pork spent all of 2009 running into one iceberg after another. They have sunk so far that submarines are their new neighbours.

The first few months of 2010 don’t look to be much better. But by the second half of the year those who have survived might actually sense a little buoyancy.

On the grain side of things, 2009 could have been a whole lot worse. If there was any brightness in last year’s gloom it was in the supply-managed sectors. While the rapid rise of the Canadian dollar provided a fright in the summer and fall, a semblance of sanity was restored in late October when the dollar began to slide.

It was an especially good year for the Canadian dairy industry. Outside of Canada, chaos reigned. Massive milk surpluses and record low prices led to government bailouts and cow culls in the United States and elsewhere. These were followed by more programs and more money, but dairy producer losses continued to pile up.

Meanwhile, Canada’s dairy industry was stable and, thanks to supply management, able to avoid the horror.
Canada’s poultry industry also steered a steady course on calm seas. While the U.S. industry was in turmoil, with its largest chicken processor declaring bankruptcy and being bought up by a Brazilian company, in Canada it was pretty much steady as she goes.

But there are a few icebergs out there for 2010. By far the biggest is the WTO. Some think that a trade deal could be hammered out in the coming year. If it’s a bad deal that takes a direct run at Canada’s system of protecting its dairy and poultry industries, the result could be unpleasant.

But there are rumours that the United States is moving off its fairly firm open trade stance and looking at better protection for some of its producers. That could be hopeful.

There are also a sizeable number of observers who believe the WTO’s agenda remains far too ambitious and, if it isn’t wound back, we’re in for more years of all talk no action.

On the positive side, the Canadian government hasn’t backed away from its commitment to support and defend supply management. In recent bilateral trade talks with Europe the EU made no secret that it wanted more access for its cheese and other dairy products. The Canadian government said simply that supply management is non-negotiable.

So, for 2010, our fearless (or perhaps feckless) forecast is for more of the same for the poultry industry. While the WTO may continue to loom on the horizon, it will likely be a kept at a distance. Other threats and problems may appear, but careful navigation should see the industry clear.

But remember, as Capt. Smith discovered, nothing is unsinkable, so keep a close watch on the horizon.


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