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Hope for the best, plan for the worst

This week's editorial looks at what 2016 may hold.

If one is to believe in the mantra that the beginning of a new year shapes its progress throughout, we are in for a terrible year: In finance, 2016 started with a massive selloff in international markets, and politically, a very serious conflict erupted in the Middle East, thankfully far away from Canada.

But the new year may be harbouring a lot more potential to impact us just here in the Prairies on a big scale ranging from climate to commodity and beef prices, from resource industries to real estate prices.

It is fair to say that we are halfway through the Prairie winter and the amount of precipitation we have received so far does not amount to even half of the snow that the region had by this time last year. While there is still a lot of time for more moisture to come, there is also the El Nino weather phenomenon affecting North America, among other regions of the world. This weather occurrence, prompted by the warming of the waters in the equatorial belt of central and east central parts of the Pacific Ocean is associated with high pressure weather systems, which, in turn, are generally marked by drier conditions.

So are we facing a potential for drought, will there be enough moisture in the soil when the sowing season comes? Will we have enough precipitation after the completion of the sowing season? How will the harvest turn out?

Let’s hope and assume that there will be adequate snow and rain in the coming weeks and months and there will be a satisfactory harvest; will the farmers get the worth of their investment and labour once they try to market their crop?

Market watchers report that grain silos in most parts of the world are full and further bumper crops are expected in Europe and Asia. How will the glut of cereals in international markets impact the price a Prairie farmer will be able to get for his/her harvest?

Thanks to a World Trade Organization (WTO) ruling, the US Congress repealed the restrictions on Canadian beef exports to the south of the border, creating an opportunity for farmers to access one of the world’s biggest beef markets. And Canadian dollar is trading at a significantly low to the US greenback, which should help exports in principle. But is the Canadian beef sector in the best shape to be able to make the optimum use of this opportunity? A seasoned observer of the industry recently commented this freedom to export cattle and hogs to the US could seal the fate of the meat packing industry in Canada. Another concern is the ability of livestock sector to keep their herds at sustainable levels if they take the opportunity to export to US given the fact that the livestock population in Canada has declined over the last few years.

While the tensions in the Middle East may temporarily push oil prices up by a few dollars, the global glut of oil is unlikely to go away any time soon, meaning 2016 will continue to see oil prices below $50/barrel. Investment bankers Goldman Sachs predicts even a lower level, $20/barrel through the new year.

Latest real estate statistics speak of a 25 per cent decline in residential sales in Calgary region, impacting house prices all over Alberta.

To make a long story short, while it is good to keep the spirits high at the beginning of a new year, it is prudent to be ready for the risks that might emerge in the course of it.

With the financial markets showing increasing signs of unease, it is indispensable that both provincial and federal governments steer the ship of the economy prudently to ensure that it will not list to the point of being overturned.