Canada Markets

The start of the New Year is always accompanied by an endless number of predictions for the upcoming year along with gauges of sentiment for comparison against prior years. Agriculture is no exception. Monday saw the release of the DTN/The Progressive Farmer Confidence Index, summarized in an article written by DTN Markets Editor Katie Micik.

The index is described as an average of producers' evaluations for the present day as well as expectations for the following 12-month period for United States producers, with an index of 100 being neutral, while levels above 100 reflect an optimistic sentiment and levels below 100 indicate a pessimistic outlook.

Micik reported that the December index was calculated at 92.7, down from 99.4 in August and 103.4 in December 2014. "Farmers have never felt worse about their current financial situation in the history of the DTN Ag Confidence Index," said index creator and agriculture economist Robert Hill. "It's declined precipitously from where it was at this time last year, and it was at a low point then, too. Not only have crop producers reached these new lows this year, but now the livestock producers have joined them. It's ugly all around and not expected to turn around within the next 12 months."

For the first time in history, the report indicated that a majority of producers (53%) reported current input prices as bad, while a majority of responses (42%) also reported current income as bad for the first time ever. Also, more than 50% felt that this situation will be unchanged this time next year.

Sentiments across Canadian business, as indicated in the Canadian Federation of Independent Business (CFIB), showed respondents viewing December as "the weakest month of the weakest year since the 2008-09 financial crises." The national index for all industries in December was reported at 55.7, down from 61.9 in December 2014. The CFIB index ranges between 0 and 100, with an index above 50 indicating business owners expecting stronger business prospects in the upcoming year outweighing those expecting weaker business prospects. The CFIB views readings between 65 and 70 as representing industries which are growing at potential.

Of the 13 business sectors evaluated, agriculture is one of four sectors where business sentiment for the industry is calculated below the national average for all sectors. Joining agriculture are construction, manufacturing and natural resources, the weakest sector of all with an index of 45.3. The highest national indexes are seen in the hospitality industry and the finance, insurance and real estate sector with an index of 61.

Of the major grain producing provinces, the highest sentiment was seen in Manitoba (66.4 index for all industries), Ontario (59.9), Saskatchewan (56.3) and the lowest of all provinces, Alberta (33.1), with the December index in brackets.

The index of 53 for agriculture is down from 60 reported in December 2014 and the lowest December rating since the index was reported at 44.9 in December 2008, while is up from the neutral 50 rating reported for July and August of 2015.

The agriculture survey conducted by the CFIB included a deeper look at some of the key concerns faced by business owners. When polled on the limitations faced on sales or production growth, the largest response indicated a shortage of skilled labor, chosen by 34% of respondents, while 31% selected foreign competition and 30% indicated a shortage of un/semi-skilled labor. The next two concerns involved an insufficient domestic demand and a shortage of working capital, selected by 26% of respondents.

Major cost constraints include product input prices, selected by 59% of respondents, fuel and energy (52%), taxes and regulation (51%) and wages and insurance at 48% of respondents.

An informal poll conducted by DTN in the ongoing 360 Poll space indicated that 37% of Canadian respondents viewed the ability to control costs as the top challenge for the farm operation in 2016, while the next largest response was tied at 27%, indicating that lower commodity prices or the impact of government policy to be the greatest obstacles.

By province, Saskatchewan responses tended to be evenly split between the top three choices, as mentioned above. Manitoba producers seemed far more concerned about the ability to control costs, as selected by two-thirds of respondents, while the highest response in Alberta focused on the impact of government policies.

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DTN 360 Poll

The Canadian government has announced fines for both CN and CP Rail for exceeding 2014/15 revenue caps in moving western grain. Is this initiative effective?

We'd love to know what you think, with the 360 poll found at the lower-right side of your DTN Home Page.

Cliff Jamieson can be reached at cliff.jamieson@dtn.com

Follow Cliff Jamieson on Twitter @CliffJamieson

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