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Outlook good for farms, economist

High prices and growing demand will mean another great year for farmers but a glut of cheap oil could trip up everyone else, says one of Alberta’s top economists.

Todd Hirsch, a senior economist with ATB Financial, gave the keynote address Tuesday at the 2013 FarmTech conference in Edmonton, where thousands of farmers had gathered to learn about the latest tech trends in agriculture.

Agriculture has been on the upswing in Alberta for the last five years after about 30 years of decline and is poised to become a growing contributor to the provincial economy, Hirsch said.

Input costs like fertilizer may be high, he noted, but so are grain and oilseed prices. Cattle took a hit with last year’s tainted beef recall, but its prices seem to have stabilized. With good weather, he predicted, farmers should still come out ahead.

“If we get that right combination, I think 2013 may be another good year,” he said.

Other parts of Alberta are also looking rosy, Hirsch continued. American housing starts are pulling up lumber prices, which has helped the forestry sector recover after years of trade disputes and mountain pine beetles. Steady immigration to Alberta means continued high demand in housing and construction.

Despite all this, caution prevails in the province.

“Right now, there’s this sense in Alberta that something could go wrong,” Hirsch said.

One of the biggest problems is the price of heavy oil (bitumen). A glut of shale oil from North Dakota has sent those prices down about $20, taking a big bite out of provincial coffers.

There’s also the question of getting that bitumen to market due to the uncertainty around the Keystone XL and Northern Gateway pipelines. Alberta has other options if these projects don’t proceed, but Hirsch predicted a soft year for Alberta energy overall.

This shouldn’t affect farmers too much, Hirsch continued.

“You might be seeing a little bit of a break on fuel prices,” he said, but this slump shouldn’t cause a major scale-back in drilling leases on farmland. “Even with prices being soft, (oil producers) are still better off producing rather than shutting (pumps) off.”

High construction costs in Alberta would likely deter any more bitumen upgraders from moving here this year besides the one in Sturgeon County, Hirsch said. However, should pipeline problems and low bitumen prices persist, the province could become cheap enough to draw more refineries.

Crop prices could fluctuate, he acknowledged, in response to a question from the audience, but continued demand from China makes it unlikely that we’ll see another slump like the one in the 1970s.

Soil moisture and crop prices are both looking good for 2013, said Al Wagner, regional representative for Sturgeon County with the Alberta Wheat Commission.

“Most farmers are pretty optimistic,” he said.

Fertilizer is normally a big concern, he continued, but prices are lower than in past years.

“We will see an increased price come spring,” he predicted, especially if the American corn industry picks up, but farmers can lock in these lower prices now.

Canola stocks are the tightest they’ve been in years, which makes for better prices, but a bumper soybean crop in the U.S. could pop a hole in that balloon, said Todd Hames, FarmTech conference chair and director with the Alberta Canola Producers Commission.

“We’re at the mercy of the soybean market,” he said.

Alberta as a whole should expect to see about three per cent economic growth, Hirsch concluded, and will continue to lead the nation.

Kevin Ma: Kevin Ma joined the St. Albert Gazette in 2006. He writes about Sturgeon County, education, the environment, agriculture, science and aboriginal affairs. He also contributes features, photographs and video.