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Ag product price index rises again on crops

Prices farmers received for their commodities increased in December 2007 from the same month a year earlier as crop prices continued to soar, offsetting the drop in cattle and hog products prices, Statistics Canada reported Wednesday.

Prices for crops were up 19.3 per cent in December 2007 compared with December 2006, according to the farm product price index (FPPI), as only fruits and potatoes recorded decreases. Prices for grains, oilseeds and specialty crops continued their double-digit increase, a trend which began in November 2006.

However, prices for livestock and animal products were 3.4 per cent below their December 2006 level as cattle, calf and hog prices continued to slide. This was the seventh consecutive year-to-year declines for these major commodities. Meanwhile, prices for supply-managed commodities continued their upward trend, moderating the decrease.

Prices farmers received for their commodities rose 2.2 per cent in December 2007 from November 2007, as increases were recorded in both the crops index and the livestock and animal products index.

The FPPI (1997=100) stood at 106.3 in December, up from a revised November index of 104.0.

The index for livestock and animal products increased 3.8 per cent in December from the revised November index, as all prices except dairy (minus 0.6 per cent) and eggs (unchanged) were up. Hog prices were up (12 per cent) after three consecutive months of double-digit decreases. Cattle and calf prices also recorded an increase (3.8 per cent) after seven consecutive decreases.

Despite the increases in December, cattle and calf prices remained at their lowest level since November 2004, while hog prices were at their lowest level since January 1999.

The exchange rate of the Canadian dollar continued to impact these major commodities. After averaging above par during October and November, the value of the Canadian dollar fell 3.6 per cent to just below its U.S. counterpart in December 2007, supporting prices. However, compared with December 2006, the value of the Canadian dollar remained 14.9 per cent higher.

As feed costs continued to climb, cattle and hog exports to the U.S. remained strong as the economics of finishing these animals south of the border supported this movement. On the other hand, rising feed grain costs also contributed to the increase in supply-managed commodity prices.

The crop index rose 3.4 per cent as all commodities except fruit recorded increases. Increases ranged from 0.5 per cent for vegetables to 9.1 per cent for special crops.

Grain and oilseed prices continued their upward trend as demand remained strong, world supplies tightened and weather reports threatened to erode forecasts on upcoming production. Further enhancing supply concerns were releases by Statistics Canada and the United States Department of Agriculture, which lowered domestic production and tightened supplies for many of the major grains. Argentina and China joined the list of countries that imposed export restrictions on some grains in December.

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