Boston, MA -- (SBWIRE) -- 06/14/2013 -- BMI View: Canada's position in the global grain market is being reinforced in 2012/13 thanks to betterthan- expected wheat and corn production and in a context of tight supply from other major producers. The country could temporarily gain export markets from the US, as the wheat Canada produces is the closest to the US hard winter wheat. The country's livestock industry could suffer from the implementation of country of origin legislation (MCOOL) in the US but margins for the dairy and livestock sectors should improve overall in 2013 thanks to moderating grain prices. As a result, we highlight growth potential in the near term for poultry and bakery processor Maple Leaf Foods.

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- Wheat production growth to 2016/17: 9.2% to 27.6mn tonnes. Liberalisation of the Canadian Wheat Board will increase competition between exporters and encourage farmers to boost production.
- Beef consumption growth to 2017: 0.6% to 1.0mn tonnes. We see potential for consumers to shift to cheaper and healthier types of meat such as pork and poultry.
- Milk production growth to 2016/17: 8.9% to 9.2mn tonnes. This will come on the back of continued yield increases and investment in the sector. We believe recent signs of reconsideration of the supply management system also will be beneficial to the industry in the medium term.
- 2013 real GDP growth: 1.9% year-on-year (y-o-y). Down from 2.0% in 2012 and predicted to average 2.2% over 2012-2017.
- Consumer price inflation: 2.0% y-o-y in 2013. Up from 1.7% in 2012 and predicted to average 2.2% over 2012-2017.
- BMI universe agribusiness market value: 2.6% y-o-y increase to US$27.3bn in 2012/13. Forecast to increase by an average of 0.5% annually between 2011/12 and 2016/17.

Industry Outlook

We maintain our estimate for Canadian wheat production to increase by 8.0% y-o-y in 2012/13 as weather conditions during plantings, especially for the spring crops, were more favourable than in many of the other major wheat producers. Also, the recent liberalisation of the country's wheat sector, with the end of Canadian Wheat Board's (CWB) monopoly on wheat sales, has encouraged farmers to plant more wheat in 2012/13, hoping for better profits from sales to private traders. The US Department of Agriculture (USDA) forecasts that the area harvested for wheat in Canada will increase to 9.5mn hectares (ha) in 2012/13, compared with 8.5mn ha in 2011/12. Yields should remain about constant, at 2.9tonnes/ha.

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