Hard to factor in impact of food guide changes and CFIA changes on bottom lines.   Ottawa—Canada's food processors face an uncertain situation in 2019 because of a mixed bag of business ingredients, says Farm Credit Canada in an outlook report. Among the factors they'll have to track is new export opportunities, pricing of raw commodities, shifts in consumer demand and a weaker Canadian dollar and higher interest rates, FCC said. “Canada's food processing sectors continue to expand, yet the profitability outlook for each is uneven in 2019. Production challenges, trade uncertainty and higher input costs generally dampen this outlook, while expansion in export markets, strong household disposable income and a lower Canadian dollar will support revenues of food manufacturers.” The report doesn't directly mention one of the sector's big concerns this year—a new Canada Food Guide that suggests much different eating recommendations and the implementation of a new regulatory regime at the Canadian Food Inspection Agency. FCC's Chief Agricultural Economist J.P. Gervais said the Food Guide and regulatory changes would have been speculative to include in the outlook because the agency hadn't studied them. “However, they could have been inserted in our 'on the radar' section in terms of the potential long-term impacts they may have.” The outlook does “mention the likelihood of higher costs for processors about eight times,” he said. Other factors that will affect food processors this year include the ongoing headache of a tight labour market especially in central Canada, the outlook said. “New fiscal measures should encourage investment to automate processing and gain productivity.” Companies will be under pressure to reduce their operating ratios by controlling costs, it said. “Proper evaluation of financial risks will be especially important on loans due for renewal in 2019, as periods of rising interest rates may require greater shares of revenues to cover interest payments.” On the plus side, both the Pacific and European trade deals should offer new export opportunities for Canadian food processors, FCC said. Exports of beef, pork, maple syrup, canola oil and plant-based proteins should pick up across the Atlantic. As for exports to Pacific countries, FCC expects shipments to Japan to increase. Rising food prices in Canada could affect consumer buying patterns, FCC said. “We expect food inflation in 2019 to exceed the most recent 12-month figure of 1.8 per cent as food retailers seek to pass higher labour and energy costs on to consumers. The good news is that low unemployment rates and stronger participation in the labour market are expected to support wage growth in 2019 at levels that could exceed the overall inflation rate currently at 1.7 per cent.” Meanwhile a weaker loonie, likely at about US75 cents “will help offset pressures on processing margins.” The ongoing U.S.-China trade tensions will “sustain the volatility in commodity prices observed in 2018,” FCC said. As well, there is a risk of a slowdown in global economic growth this year “driven in part by uncertainty around China's ability to sustain its debt-fuelled economic expansion without triggering inflation. Chinese debt is a growing financial risk for the health of the world economy.” The long-range weather outlook also merits attention as an elevated probability “of an El Nino event that would bring more rainfall in the southern part of the U.S. and drier conditions in the northern part of the U.S. and Canada. Drier conditions are expected to prevail as well in Asia and Africa. Disruptions in production of agricultural commodities can lead to large swings in commodity prices.” Alex Binkley is a freelance journalist and writes for domestic and international publications about agriculture, food and transportation issues. He's also the author of two science fiction novels with more in the works.