Low prices for energy and agri-food exports weigh down 2016 results
Low energy prices are depressing Alberta’s overall export forecast this year, but the story is expected to brighten in 2017. In its semi-annual Global Export Forecast, Export Development Canada (EDC) predicts a strong recovery in Alberta’s exports, rebounding from a 10 per cent decline this year to a 14 per cent increase next year. The challenges facing Alberta’s energy sector – which accounts for more than two-thirds of the province’s exports – are the primary cause for this year’s drop in exports.
“In Alberta, it’s all about the energy story. Nowhere else in Canada does it play more heavily on a province’s export picture,” said Peter Hall, EDC’s Chief Economist.
This year, EDC expects Alberta’s earnings from energy exports to decline by 14 per cent as a result of low crude and natural gas prices. While concerns in the oil industry, specifically, have revolved around unplugging bottlenecks and getting Alberta crude to market, steps have been taken in recent years to increase pipeline capacity. With expected volume gains and a partial price recovery next year, EDC anticipates the energy sector’s exports will grow by 19 per cent in 2017.
EDC anticipates that the devastating fires in Fort McMurray will interrupt oil flows significantly in the second quarter of this year, though the full impact on production is not yet known. A full recovery of oil flows is expected in the second half of the year, according to EDC.
“Oil will make its eventual recovery on the strengths of increased pipeline capacity, a narrowing of the price spread between Western Canada Select and West Texas crude, and a weak Canadian dollar providing a discount to buyers. Low prices are currently trumping these potential export advantages, but we expect that to change next year,” added Hall.
Looking beyond the energy sector, the province’s second-largest exporting sector – agri-food – will hold steady in 2016 and rise by two per cent next year. Again, the issue limiting export growth is low prices, this time for beef and wheat.
EDC points to changing economic and demographic trends around the world as a promising sign for the future of Alberta’s agri-food sector. While the United States continues to be the top destination for the province’s exports, Alberta producers have much to gain from turning their focus to large emerging markets, in particular China and India. Population growth and rising incomes in these countries means that every year there are millions of new, middle class consumers looking for quality Alberta agri-food products.
“This is certainly a challenging time for Alberta exporters, especially those in the energy sector, but we do expect a return to growth,” said Hall. “Exporters can turn to EDC for market intelligence and financing solutions that can help them find and capitalize on global opportunities.”
Mr. Hall will be at the Renaissance Edmonton Airport Hotel today to discuss the export outlook for Alberta and Canada. The event is being held in collaboration with the Alberta Division of Canadian Manufacturers and Exporters (CME). Over the past month, Hall has been travelling across Canada for EDC’s Let’s Talk Exports tour, which offers insights on the current global economy and explores how economic trends will impact Canadian companies and exporters.
Visit EDC’s Global Export Forecast: Spring 2016 to learn more.
Export Development Canada (EDC) is a financial Crown corporation dedicated to helping Canadian businesses make an impact at home and abroad. EDC has the financial products and knowledge Canadian companies need to confidently enter new markets, reduce financial risk and grow their business as they go from local to global. Together, EDC and Canadian companies are building a more prosperous, stronger and sustainable economy for all Canadians.
For more information and to learn how we can help your company, call us at 1-800-229-0575 or visit www.edc.ca.