By Alice McFarlane

Food and beverage processors remain positive in the final months of 2022

Sep 21, 2022 | 4:21 PM

MELFORT, Sask. – Economic conditions have shifted since the start of the year, and food and beverage processors remains positive.

Farm Credit Canada (FCC) released its mid-year update. The report featured insights and analysis on grain and oilseed milling; dairy, meat, sugar, confectionery, bakery, and tortilla products; seafood preparation; and fruit, vegetable, and specialty foods, soft drinks, breweries, wineries, and distilleries.

FCC Chief Economist J.P. Gervais said the report showed year-over-year sales growth is expected to slow in the second half of the year to six per cent from 12 per cent in the first half.

“As inflation eases and global economic growth moderates, Canadian consumers are paying attention to the price of food and their own limited savings compared to a year ago. Food and beverage manufacturers are reckoning with high costs and shifting consumer food patterns, but profitability is projected to improve in the months ahead,” Gervais said.

Grain and oilseed milling led sales growth in the first half of the year, along with sugar and confectionery, and meat products. That trend is expected to continue for the latter half of 2022. Gervais said demand for chicken and pork continues to be strong. He expects consumers will get back to eating more beef.

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“Consumers have cut back on beef consumption domestically since the start of the pandemic, but that is offset by strong beef exports. We are seeing positive trends in red meat and expect sales to rise in 2023,” he said.

The seafood and alcohol processing sectors are feeling the impact of higher food costs as consumers cut purchases in the last six months due to inflation. Gervais said seafood, breweries, and wineries are forecasted to see sales slip in the second half of 2022.

“Understanding these economic trends is critical for processors to navigate the headwinds we are experiencing,” Gervais said. “For those figuring out how to best withstand a slowdown, it may be time to review performance to make possible adjustments in financial planning and or relationships with suppliers. This will help manufacturers set budgets, monitor and control costs, and decide pricing strategies.”

Gervais said processing gross margins have been under pressure as consumers focused on purchasing lower-margin basics in the face of higher retail prices.

“We anticipate margins will start to improve as commodity prices decline,” Gervais said. “Overall, the trends to watch are the decline of global economic growth, job vacancies in the food and beverage sectors, and domestic food consumption growth as inflation slows and consumers return to normal shopping habits.”

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alice.mcfarlane@pattisonmedia.com

On Twitter: @farmnewsNOW