Ottawa-It appears there will be no end of challenges for the entire agrifood sector in 2025 ranging from a slowing population growth to potential trade barriers, says Farm Credit Canada (FCC).

After a rough couple of years, when real GDP growth averaged a meagre 1.5 per cent, Canada’s economy is unlikely to get much better this year, FCC said. Reduced immigration levels are expected to slow population growth, significantly reducing potential GDP growth.

Then there will be an uncertain trade environment with U.S. President Donald Trump’s tariffs. FCC expects they will likely be imposed for a few months on selected products as a negotiating tactic for a new CUSMA trade deal. “But any tariff drama will be enough to restrain exports temporarily and depress investment, further restraining real GDP growth this year.”

The Canadian dollar will likely continue to suffer, which could help exports to other countries. Canola exports are draped in uncertainty due to China’s anti-dumping investigation but also a smaller than anticipated Canadian canola crop. Since the beginning of the 2024-25 crop year, canola exports have been strong with China accounting for more than 75 per cent of them. As of mid-January, Canada needed to export just another 3 million tonnes of canola to reach the export target of 7.5 million tonnes for the crop year. China’s anti-dumping probe is more likely to impact 2025/26 exports.

Canada’s 2024 canola crop of just under 18 million tonnes has been in demand by domestic processors in addition to the strong export pace. The canola crush sector is on track to process over 11.5 million tonnes. If exports slow more than anticipated, crushers could process closer to 12 million tonnes. The other factor to consider is demand for canola oil, which is currently price competitive compared to other vegetable oils including soybean oil. Canola oil has found a home in U.S. biofuel programs to date but uncertainty surrounding the specifics of U.S. biofuel and government policies for 2025 leaves this market in limbo right now.

Meanwhile hog producers face a Product of USA label meaning the animal must be born, raised, and processed within the U.S. While the rule does not come into force until next year, U.S. processors could begin implementing it later this year. This rule is voluntary, allowing companies to opt-out of labeling their products if they prefer.

Canadian hog production growth is closely linked to exports of live animals, including 21-day old piglets to market-ready hogs, with most of these exports going to the U.S. Before mCOOL was implemented in 2009, Canada produced approximately 32 million hogs annually and exported 8-10 million hogs. However, by 2013, production had decreased by 5 million hogs and exports declined accordingly. Production has never recovered to pre mCOOL levels, and with Canada's domestic slaughter capacity facing various challenges in recent years, any disruption in export demand could result in a smaller Canadian hog herd in the upcoming years as hog prices would be pressured to clear the excess supply.

The Canadian beef herd hit its lowest point in 30 years last year despite another year of excellent to record cattle prices. In 2024, nearly half of the slaughtered cattle in Canada and the U.S. were heifers and cows, a 3-year low but still historically high, which will result in the herd declining to start 2025. For the national herd to start to grow in a year, the industry needs cows and heifers to make up less than 47 per cent of slaughter. Until that happens cattle prices will remain near record levels, which will undoubtably support retail beef prices.

Cow-calf profitability is expected to remain strong in 2025 and while herd rebuilding might start later this year, significant expansion will not be seen for a few years. Rebuilding the herd will take several years of good weather and high prices. Fortunately, feed supplies improved last year.

Meanwhile the Canadian dairy sector has boosted its revenue by culling additional cows and sending more calves to slaughter increasing dairy revenue.

Back in November, the Canadian Dairy Commission announced a very slight decline in the farmgate milk price in 2025. However, about 11 per cent of butterfat goes into Class 5 products, where all components are determined by U.S. prices. The price of non-fat dry milk began to rise in the latter half of 2024 providing a small boost to Canadian average blended prices in the process.

This news item prepared for National Newswatch