Agri-Business
Forecasting the year ahead in agri-business is an impossible task given the dependence upon nature to deliver the agriculture crop domestically and on a global basis. A longer term view must be taken. I have stated previously that “agri-business is arguably emerging as one of the highest potential global industry sectors – well positioned to address some of the world’s most compelling challenges. With innovation and bold new trade initiatives, agri-business has the potential to lead the growth of the Canadian economy and provide Canada the opportunity to re-enforce its position as a global agri-business leader.”
New trade agreements offer new and expanded market opportunities. However, in order to capitalize upon these markets, Canada must embrace and evolve to take advantage of inevitable changes to outdated practices such as supply management and government supported business risk management. In addition, Canada needs to complement its traditional role as supplier of commodity export crops with an ongoing shift to value-added agri-products. Innovation is needed to create these products, and perhaps more importantly, to ensure our productivity improves to enable global competitiveness.
Bill Churchward (click to see Bill’s profile)
Head of Practice - Agri-Business
Finance
2013 rolled through with very little change in the financial world except for the gains in the markets in the third and fourth quarter. 2014 will see nothing new. All the pundits have made their predictions but none have anything earth shattering to predict. My own thought is that the changes will be small in 2014, with the exception of the value of the Canadian dollar.
The value of the dollar as I write is US$0.9348 and £0.5669 per the Bank of Canada. The general predictions have been between US$0.93 and US$0.88. We are at the higher end now and I see no reason why we should not finish at the lower. Commodity prices will stay soft and the Bank of Canada is unlikely to take any measures to strengthen the dollar. Otherwise: mortgages will creep up a bit but not much; growth in GDP will be around 2.3% (US 3.0% but they have farther to come back anyway); a little strengthening of the employment market everywhere with Alberta leading the way; and the markets will continue to climb a little more before stabilizing. The TSX will slide back a little on the weak commodity prices. The quantum of each of these? Pick your pundit. The changes over the year will not be significant.
Roger Andrews (click to see Roger’s profile)
Principal
Global Economy
My thoughts on different economists outlook on the North American economy and potential impact on the global economy for 2014:
- Uncertainty and uneasy interdependence characterize a 2014 forecast on the North American economic growth. High rates of unemployment persist in developed economies while emerging economies rely on those nations for exports and jobs for their own citizens. The International Monetary Fund forecasts 3.5%growth for 2014.
- The US Federal Reserve has begun pulling back from monthly bond purchases pouring massive liquidity into global markets; the slowing of massive purchases of mortgages and government bonds to increase liquidity and hold down interest rates – was announced in the last week of December and could have worldwide impacts.
- Congressional priorities remain skewed. In addition to monetary uncertainty, the US fiscal battle to reduce the deficit or implement constructive spending could face partisan gridlock. Congress has approved a two year budget this month, but government spending is still hamstrung. Congress resists infrastructure investment to repair things like rusting bridges and approves large corporate farming subsidies while cutting unemployment benefits and food stamps. The rocky health-care rollout has thrown a sixth of the US economy into turmoil, and the risk of a default on US debt, while reduced, is not removed.
- Europe and Japan post low growth amid many policy challenges. Both the Euro zone and Japan are expected to grow about 1 to 1.5% next year, and both face policy challenges. European banks remain loaded with shaky government and private debt supported by extraordinary measures of the European Central Bank, while Japan must cut back on its expansionary monetary and fiscal policies and implement politically difficult structural reforms in its rapidly aging society. Political turmoil in Europe’s Mediterranean economies could cause further problems, but so long as the Germans allow the ECB to continue preventing collapse, slow progress is likely.
- China remains a major question mark. Its growth of 7 to 8% has been a factor in keeping global demand relatively buoyant and helped raw material exporters in the Americas, Africa and Australia. However, weak banks, growing social expenditures and tapering of excessive investment along with slowing to zero labour force growth should mean somewhat slower growth in the medium term. Although economists expect 7% growth to continue in the next few years, anti-pollution measures could restrict energy use or increase costs.
- Many major emerging economies, such as India, Brazil and Indonesia, rely on borrowing and the latter two on raw material exports. If the Fed tapering and Chinese transitions to more sustainable growth happen together, these economies would slow more than the modest growth gains currently projected. This is a downside risk. While Indonesia recently cut fuel subsidies, the approaching election could slow policy responses; political scandals in Brazil could also impair strong responses to policy challenges. India remains in a slowing mode due to a weak currency, inflation and policy paralysis facing outsize budget deficits. Whatever reforms were attempted, implementation remains frozen pending the spring 2014 election.
- If forecasts work out and the rich countries average 2% growth in 2014 while the emerging economies average 5%, the expected 3.5% growth would be realized – a rate similar to what the world experienced from 1995 to 2004, except the 3.5% is reached by the higher weight of the emerging economies offsetting slower growth of rich nations. So, the world is back to normal despite problems in half of its GDP! Canada will closely follow the US in growth as usual, but optimism will still depend on both pipelines approval, which will be severely impacted by environmental and First Nations concerns.
Dale Doering (click to see Dale’s profile)
Principal
Human Resources
The workforce in Alberta and Saskatchewan continues to be strong with unemployment rates at 4.7 and 4.1 respectively. British Columbia is showing some weakness with an increase in its unemployment rate to 6.7 but still optimistic about the labour market. I predict that employers will continue to be challenged in not only identifying but attracting those necessary hires and then keeping their teams engaged. Business owners and leaders need to recognize the link between highly engaged employees and high productivity. According to recent research, companies in the top quartile when it comes to employee engagement have 21% better productivity and 22% higher profitability than companies in the bottom quartile. This means that leaders and HR practitioners need to be able to articulate and measure employee engagement enabling them to build programs to improve the employment experience. Some of the areas that are included in these metrics are relationships with managers, trust and belief in company leaders and having a feeling of personal accomplishment at work. This means that going forward I believe a greater focus must be made on employee engagement to meet the challenges of the labour market.
Judy Conrad (click to see Judy’s profile)
Principal
Information Technology
2014 will continue to be a year of consolidation; profits continue to fall, and product commoditization makes business tough, particularly for many of the small to medium sized players. As well, technology budgets of large corporations have been experiencing strong downward pressure, making pricing an even more critical issue. Growth will most easily come from acquisition.
Simon Batcup (click to see Simon’s profile)
Principal
Not-for-Profits
I’ve always thought it highly dangerous to make predictions of any kind – political, economic, technological - that can come back to haunt me a year later. An Economics professor once said that Economists who give predictions make weather forecasters look accurate and astrologers credible, and that probably applies here as well.
However, there are some signs for what might be ahead in the coming year for not-for-profits in Alberta, and the one main issue that I think has been on the horizon for a while is the rationalizing of many different charities operating in the same field. For example, there are several breast cancer, prostate cancer and general cancer support groups and the result is not only perceived duplication of missions and services, but a fragmentation of funding. This applies to many different not-for-profits of course and not just all the different cancer support groups, and potential donors can be confused over which support group, research group or lobbying group does what. In fact, there is often confusion over which group they are donating to as their names may be very similar.
With over 18,000 registered charities operating in Alberta and all of them legitimately seeking donations, government support or funding from various granting agencies, there is bound to be duplication and crossover leading to difficulty in deciding which one of the charities in a certain field should get a donation. It also means if a major gift goes to a certain charity, the others in the same field may feel unfairly treated and believe that they should have been the recipient of that donation.
I am aware of at least one not-for-profit that is in discussions about merging with another group in the same arena, and I believe that combining their resources and fundraising efforts while eliminating donor confusion will be a benefit to both charities. As the competition for funds becomes fiercer in 2014 I predict that more not-for-profits will begin to see the value and benefits in joining with an organization with whom traditionally they’ve been competing for funding. The result will be greater growth and more efficiency than either were achieving on their own.
Blane Hogue (click to see Blane’s profile)
Principal
Oil & Gas (1)
With US energy self-sufficiency around the corner, if not already here, there will be pressure in the next twelve months on the US government to lift the ban on energy exports and allow companies to starts selling product overseas; most likely gas. Selling to Asia, where market prices are considerably higher than North America, will be the most likely destination.
Transportation of oil will make a shift away from rail. The American and Canadian public will not accept many more accidents, yet they are occurring with increased frequency. As a result, pressure will be on to bring pipeline proposals back to the table.
Simon Batcup (click to see Simon’s profile)
Principal
Oil & Gas (2)
I believe 2014 will see continued expansion of the oilsands but at a slower pace than the past ten years. Projects may be announced but will proceed slowly due to both shortages of staff and oversupply of oil. Recent growth in shale oil development in the U.S. has increased their domestic production to the point that they may become temporarily self-sufficient and will not need additional Canadian supply. Some of these projects will, however, be the type that deplete rapidly and the need for incremental imports will come again in a few years.
I expect not one but two major approvals for export pipelines and possibly more. But again their actual construction will be slowed by the availability of staff and the actual need for the capacity all at once. The pipelines may be contracted for their capacity at this time, but, in reality we may find that producers, wishing to cover their bases, have contracted capacity on all expansions and new construction so they won’t be left out if their first choice isn’t approved. But, they don’t really need all the capacity for which they have contracted. This is typical in the industry and most contracts for new pipeline capacity have clauses allowing the parties to renegotiate once the approvals are received. All of this will lead to continued slow growth for the economy and the need for expertise in niche markets.
Just my thoughts and I am not an economist.
David Wright (click to see David’s profile)
Partner
Sales & Marketing
It’s not about who you know, it’s about who you know that will introduce you to who you need to know. Those who build business savvy networks where the constituents collaborate quid pro quo will vault ahead in the game, and those who combine that art with traditional skills of needs identification/analysis and strong solution based proposals will win the game.
Social media experts will be overtaken by directors of digital enterprise management who will not just align a company’s social platform and elevate its brand, but lead the integration of sales and recruitment strategies into developing technology.
With respect to consumer goods, online sales will continue its strong growth cycle. Storefront competition at the middle to top end will be fierce with US stalwart Nordstrom’s opening, The Bay integrating Saks Fifth Avenue and Holt Renfrew expanding. It’s inevitable that more US retail stalwarts will migrate north, although they should ask Target how it enjoyed year one as the more organized version of Zellers.
Mark Olson (click to see Mark’s profile)
Managing Partner & Principal
Let Your Six Year Old Decide!
The next time your family wants to go out for dinner let your six year old decide where you will go. The next time you need to decide what activity you will do this weekend let your six year old decide. Establish agreed upon criteria and options that meet these criteria and then be sure to live with the six year old’s decision. Your delegation is an investment in future economic development and prosperity.
There is little doubt that one of Canada’s greatest economic development challenges is the lack of true leaders within the public, private and not-for-profit sectors. I am not suggesting leaders don’t exist in our Canadian economy; obviously, we can each point to many great examples of true leaders. However, the issue is, we don’t have enough leaders to fill the demand. When speaking for the need for more leaders, I am not referring to a shortage of managers, although we recognize that need as well. Leaders and managers are two different meanings. There are many managers who are not leaders and there are many leaders who cannot manage. The attributes are different for each. True, we want our managers to be good leaders, and I would suggest you cannot be a great manager without being at least a good leader, but unfortunately many are not.
Although the skills and attributes of a leader and a manager vary, the first difference between the two roles is simply that managers are appointed from above (employer) and leaders are anointed from below (followers). This is a subtle distinction packed with implications and at the heart of what is different about each role. In next month’s newsletter, I will present the attributes and skills that each role must have to be successful. In business, we know managers “get things done through others”. We also believe that leaders inspire others to use discretionary effort to do things. Again a subtle difference but the impact to productivity,
professionalism and profitability is significant.
Each of us is familiar with the saying “he/she is a born leader.” This is not possible. Leaders are not born with leadership skills. Leadership is a learned behaviour that becomes unconscious and automatic over time. Being decisive, taking responsibility and learning to lead others are three qualities your six year old can take away from being asked to make a family decision. The more you allow them to practice, the more you are contributing to them being a future leader. It may take two decades for us to welcome them to the workforce but at least we know their coming.
In 2014, let’s quit using the term manager and leader interchangeably – as if they are the same thing – this might be the first step to developing true leaders.
Randy Williams (click to see Randy’s profile)
Head of Practice - Hospitality, Tourism & Destination Marketing
