Canada’s largest agricultural lender expects the coming year will be one of relative stability for farmers in Southwestern Ontario, one of the nation’s richest farm belts, after experiencing years of tumult.
“In the ag sector, stability is going to be the key word we are going to use, both in terms of land prices and just stability of the sector overall,” said Adam Vervoort, head of agricultural banking with BMO Financial Group. “We’ve seen a lot more stability in both crop prices as well as livestock prices.”
BMO, the largest lender to agriculture in Canada and second-largest in North America, released its North American agriculture report this week, noting that farmers in the United States have harvested their fourth straight bumper crop, with yields soaring 14 per cent above trend.
Wheat, corn and soybeans recorded their largest yields to date south of the border.
That upswing in U.S. production has affected crop markets around the world, BMO said.
Cushioning Canadian farmers, including Southwestern Ontario producers, has been the currency exchange rate, BMO said in its report.
“Canadian producers have undoubtedly been supported by the weaker loonie,” said Vervoort.
While Canadian crop prices are 18 per cent below all-time highs, U.S. farmers are facing a drop of about 30 per cent.
The lower Canadian dollar has been particularly important given Canada’s mediocre crop yields over the past few years, BMO said.
Offsetting some of the benefit of the lower Canadian dollar has been higher prices for some internationally-priced inputs in agriculture, such as fertilizer. But overall, Canadian farmers have come out ahead because of the difference in currency values, Vervoort said.
In Ontario, wheat farmers in 2016 harvested the biggest crop ever with the average yield hitting 91 bushels an acre, shattering the previous record of 84 bushels set in 2006.
But yields for corn and soybeans, the other two big cash crops grown in the London region, were just average.
In Western Canada, farmers are on track of harvesting a near-record canola crop but have struggled with harvest delays caused by weather.
Vervoort said it’s difficult to predict the year ahead for Canadian farmers given the uncertainties of global prices and weather.
“There is always a lot of unknowns in the agricultural world . . . Overall, the Canadian ag industry is very resilient and strong,” he said.