FCC Releases 2022 Ag Economic Outlook

Farm Credit Canada held their 2022 Ag Economic Outlook last week.

Chief Economist JP Gervais says for now we'll have to live with inflation above the Bank of Canada target, but he thinks once we sort out some disruptions in the supply chain he feels inflation should start to subside, possibly in the second half of 2022.

"That is consistent nonetheless with prices remaining elevated, right. So we're talking about inflation coming down, it doesn't mean that prices are going to fall. It just means that we're going to live with higher prices, but perhaps prices that somewhat reach a plateau when it comes to overall inflation in the economy."

As far as interest rates, Gervais expects to see an increase in interest rates, possibly in March or April.

He says we could see interest rates increasing by as much as 50 basis points or .5 per cent.

Given that, Gervais says, it's time for people to evaluate their operations and financial risk.

"Should I be looking at my own strategy when it comes to you know the financial risks that I face right now? Should I be locking in some rates? Should I look at my loan portfolio and say well maybe there's an opportunity for me to lock in some rates? Knowing that we will likely get short term rates going up in the next 12 months."

Gervais says overall in 2022 he sees the Canadian dollar gaining value.

He notes that in December, with the climb we've seen in oil prices, it's leading them to set a forecast of 81 to 82 cents U-S for the Loonie.

As for the Euro, FCC is forecasting a decline in its value against the Canadian dollar, putting the exchange rate at about point 69 Euro which is an increase
in the Loonie over last year.