COVID-19 continues to wind itself around virtually every global and domestic economic development, according to Farm Credit Canada (FCC). Weather disasters have wreaked havoc with the transportation of manufacturing inputs and outputs. The world seemingly cannot (or will not) stop demanding rapidly disappearing goods and services. Inflation is unusually high. Canada’s labour market has perhaps sorted itself out overall, but pockets of great uncertainty remain. FCC recommends that those in Canada’s agriculture and food sectors monitor the following five trends in 2022:
1. Inflation, inflation, inflation
Inflation is our first trend to monitor in 2022 as it underlies each of the other four trends. Because the bond market conveys expectations about future inflation, we’re monitoring changes in the yield curve to assess inflationary pressures.
2. Time, the tides and shipping costs wait for nobody
Throughout the pandemic, supply chain disruptions caused by shortages and backlogs in global transport networks have only added to increasing inflationary pressures.
3. Stocks-to-use ratios for wheat, soybeans expected to balance out in 2022
Drought conditions, extreme weather events and surging demand since 2019 have contributed to recent global supply/demand imbalances for several major crops. In Canada, last year’s drought reduced Canadian stocks-to-use ratios to lows not seen in years. Not even the price spikes produced by record demand curbed trade of raw commodities worldwide throughout 2020 and 2021.
4. COVID further complicates food processors’ labour challenges
Food processing’s labour challenges are now chronic. At the start of 2022, more workers are employed in food manufacturing than before COVID, but businesses still can’t keep up with demand. Unfilled orders are trending up 50 per cent YoY. The latest job vacancy report (from 2021 Q3) was at 6.0 per cent, up from 3.9 per cent during the same period in 2019 and up from 2.7 per cent in 2016. Year-to-date average wages excluding overtime are up 4.4 per cent. Even record-high production per employee hasn’t offset higher costs.
5. COVID-19 casts long shadow on Canadian meat demand
Animal proteins weren’t immune to the inflationary pressures seen elsewhere. We normally have a good sense of how meat consumption patterns respond to economic fluctuations. As incomes fall or prices rise (both of which happened after the first several months of the pandemic), we expect meat consumption to decline as households cut back on more expensive meals. The recurring lockdowns and food service closures also curtailed meat consumption. The pandemic has clearly impacted consumption (consumer purchases) and demand (consumer preferences).
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