2013-02-24 15:19:32 - Recently published research from Business Monitor International, "Canada Agribusiness Report Q1 2013", is now available at Fast Market Research

BMI View: Canada's position in the global grain market is being reinforced in 2012/13 thanks to betterthan- expected wheat and corn production and in a context of tight supply from other major producers. The country could temporarily gain export markets from the US, as the wheat Canada produces is the closest to the US hard winter wheat. Canada's dairy industry has seen improvements in margins, and we believe it will continue to do so in the medium term. The country's livestock industry has been suffering from tight margins and disease outbreaks, which could confirm the country's decreasing importance in the global meat market.

* Wheat production growth to 2016/17: 9.2% to 27.6mn tonnes. Liberalisation of the Canadian Wheat Board will

increase competition between exporters and encourage farmers to boost production.
* Beef consumption growth to 2017: 0.6% to 1.0mn tonnes. We see potential for consumers to shift to cheaper and healthier types of meat such as pork and poultry.
* Milk production growth to 2016/17: 8.9% to 9.2mn tonnes. This will come on the back of continued yield increases and investment in the sector. We believe recent signs of reconsideration of the supply management system also will be beneficial to the industry in the medium term.
* We highlight that integrated dairy and livestock companies such as Saputo and Maple Leaf Foods have weathered well the recent spike in global grain prices and maintained strong margins.
* 2013 real GDP growth: 1.9% year-on-year (y-o-y). Down from 2.0% in 2012 and predicted to average 2.2% over 2012-2017.
* Consumer price inflation: 2.1% y-o-y in 2013. Up from 1.9% in 2012 and predicted to average 2.1% over 2012-2017.
* BMI universe agribusiness market value: 0.9% y-o-y increase to US$23.8bn in 2012/13. Forecast to increase by an average of 0.5% annually between 2011/12 and 2016/17.


Full Report Details at
- www.fastmr.com/prod/536412_canada_agribusiness_report_q1_2013.as ..


Industry Outlook

US-based Dean Foods will sell its Morningstar dairy business to Canadian dairy products maker Saputo for US$1.45bn. The deal will enable Saputo to broaden its product range and expand its business footprint in the US. The Morningstar sale marks a major step in the break-up plans of Dean, which is spinning off an additional business into WhiteWave Foods. Saputo will fund the acquisition through a newly committed bank loan. The deal was scheduled to be completed by end-2012.

Both the US Department of Agriculture (USDA) and the International Grains Council are forecasting Canada's wheat export capacity to reach 19.0mn tonnes in 2012/13, compared with 17.3mn tonnes in 2011/12. We forecast a production surplus of 18.9mn tonnes, and because the country has about 5.9mn tonnes of wheat stocks from 2011/12, we do not believe these forecasts are overly optimistic. Also, the newly liberalised marketing process for exporters could encourage them to sell even more on the global markets, with wheat prices still at a high. Finally, as crop quality is high, wheat exporters will very likely prefer to export for food production rather than use the crop for domestic consumption for livestock.

The recent recalls of Canadian beef products linked to E.coli concerns could have downside effects on our consumption forecasts and eventually live cattle prices. In mid-September 2012, the USDA issued a health alert for beef products from Alberta-based XL Foods after confirming that various beef products tested positive for E.coli 157:H7. Since then, the Canadian Food Inspection Agency announced its own positive tests, and the company has been forced to take beef off supermarket shelves. The sector has struggled with disease concerns in the past, and the most recent outbreak could have important consequences for live cattle prices.

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