Economic Digest – May 2016

COMMODITIES

Canada’s two major railways are seeing a plunge in prices and demand for industrial commodities. The number of carloads hauled by them has fallen by more than nine percent this year, excluding container traffic. The decline is led by a 29 per cent drop in carloads of metallic ores and a 15 per cent slump in coal. Loads of oil and other petroleum products are down by 12 per cent. Despite the declines in traffic, both carriers are expecting higher profits thanks to tight controls over costs, staffing levels and pricing power. Slowing economic growth in China has hammered demand for iron ore and metallurgical coal. Thermal coal, used to generate electricity has seen demand plunge as power plants around the world turn to natural gas which is cheap and favoured by emissions regulators.

APPS

The Alberta government is making it easier to find farmers markets with a new app that cost C$40,000 and four months to develop. The app lists approved farmers markets, meaning 80 per cent of the vendors meet the “make it, bake it, grow it” criteria. Markets have become an important part of the agricultural economy of Alberta and the app is another tool for Albertans to be able to find those farmers.  The app lists locations, hours, what’s in season and where you can find those foods. The Conference Board of Canada estimates that the economic footprint of rural Alberta is more than C$77-billion annually. Shoppers say they like the atmosphere at farmers markets, which often have live musicians and unique arts and crafts as well.

PANAMA

The US$6.9-billion expansion of the Panama Canal has overcome leaks, labour disputes and financial hurdles but might have run into a mightier foe: Mother Nature. El Nino has caused a drought in the region and reduced water levels in the lake  that make up about half the 77-kilometre water route, forcing the canal’s operators to limit the draft of a ship, the hull depth, that can sail the trade route connecting the Atlantic and Pacific Oceans. The restrictions cast a shadow over the opening of the expanded canal which has been pushed back yet again. The expansion which includes wider locks and deeper channels comes amid a tough year for the world’s shipping companies. There are too many ships at a time of slowing growth in consumer and industrial demand. The expanded canal will allow passage of ships carrying as many as 14,000 containers compared with the current 5,000. However, the shallower draft restrictions mean even the current ships cannot pass fully laden.

FUEL EFFICIENCY

The steady improvement in fuel economy in the Canadian vehicle fleet has ground to a halt amid the drop in gasoline prices and the surge in popularity of crossovers and pickup trucks. The average fuel consumption of new vehicles rose to 10.3 litres for every 100 kilometres travelled last year from 10.28 litres in 2014. That deterioration reversed the improvement in fuel economy since 2011 when new vehicles on average took 10.91 litres of gas to travel 100 kilometres. The deterioration in fuel economy follows increased consumer demand for vehicles that are less fuel-efficient and a sharp drop in demand for vehicles that are among the least thirsty for gasoline.

REMMITANCES

Many Canadian immigrants send money back home to families. The World Bank estimates that Canada accounted for US$23-billion in remittances in 2014, about $635 per capita.  Globally, some $580-billion was shuttled from country to country, or more than three times the amount spent on international development. The top remittance-sending countries were: the US ($130-billion), Saudi Arabia ($44-billion), United Arab Emirates ($30-billion) and the United Kingdom ($25-billion). The top countries receiving remittances from Canada were: China (4.1-billion), India (2.8-billion), Philippines ($2.1-billion) and France ($1.3-billion).

AIRLINES

Big airlines are making waves in the oil market for the first time since prices went into a tailspin nearly two years ago, betting this may be their best chance to lock in cheap jet fuel for years to come. A number of airlines moved recently to place significant oil price hedges for 2017, 2018 and even 2019.The renewed activity suggests that airline executives who were stung by billions of dollars in hedging-related losses last year and more confident that they are buying at the bottom.  Oil prices have dropped more than 60 per cent since 2014.

POWER

A flotilla of floating power stations will soon traverse the vast waters of eastern Indonesia. The ships, burning marine oil and leased from a Turkish firm, will be a temporary fix for the sprawling archipelago’s rising thirst for power. Indonesia consumes about half as much electricity as Britain, despite being four times as populous, about 50-million Indonesians have no mains power at all. Shortages will grow more pressing as the country’s middle class expands over the next decade or so. Electricity demand is expected to rise by nearly 9 per cent a year. Putting a stop to blackouts is a priority for the government.

CANS

A recent study conducted by six non profit groups in Canada and the US reports that the majority of food cans found in major Canadian retail stores contain bisphenol A, or BPA, a chemical linked to health concerns.  The group surveyed 192 cans of food from major retailers on both sides of the border and found that 67 per cent had BPA in the epoxy resin of the can lining or lid. Advocates say that bisphenol A exposure in even tiny amounts has been linked to increased risk of breast and prostate cancer, infertility, type-2 diabetes, obesity, asthma and behavioural changes including, attention-deficit disorder.

KENYA

Coffee was once Kenya’s biggest foreign-exchange earner but these days the industry looks less buoyant. The country’s record 127,000-ton crop was way back in 1987-88. Output plunged by 40 per cent the following year, after the global coffee cartel axed its quotas, exposing the industry to competition. It has been falling ever since: last year it was less than 45,000-tonnes, a mere 0.5 per cent of coffee production worldwide. That is not for lack of quality. Kenya’s Arabica coffee, grown in the highlands around Mount Kenya, is world-renowned. For many smallholders, who account for 60 per cent of the country’s coffee production there is not enough money in beans any more. Some small farmers have abandoned the crop altogether for vegetables or other, more lucrative export crops, such as macadamia nuts.

RIGS

The number of rigs exploring for oil and natural gas in the United States dropped by 14 recently to 450, another all-time low amid continuing energy industry price woes. A year ago, 1,028 rigs were active. Among major oil- and gas-producing states Texas lost five rigs and Oklahoma four. New Mexico gained two rigs and Utah was up one. The US rig count peaked at 4,530 in 1981. The previous low of 488 rigs was set in 1999.

NEWSPAPERS

The Canadian newspaper publishers industry generated operating revenue of C$4.1 billion in 2014. Operating expenses were $3.7 billion with an operating profit of 9.5 per cent. Newspaper publishers in Ontario (44 per cent) accounted for the largest share of the industry’s operating revenues, followed by Western provinces (30.5 per cent), Quebec (19.3 per cent) and the Atlantic provinces (6.1 per cent). The main contributor to total sales was advertising revenues (64.2 per cent) followed by circulation sales (20.1 per cent) and the distribution of flyers and inserts (9.9 per cent). Total advertising sales were $2.4- billion, with $1.7-billion reported by daily newspapers and the rest by community and other newspapers.

PETS

An unseasonably warm winter in Eastern Canada and a weak economy took a big bite out of sales from businesses that cater to pets. Sales of doggie boots and coats slipped by more than 30 per cent last winter. The pet business is worth nearly C$7-billion annually, including food, clothing accessories and trips to the veterinarian. The industry has been evolving with sales of coats, booties and other accessories growing steadily.

BRAKES

Major US automakers have agreed to install emergency braking systems on nearly all US vehicles by September 2022.  10 automakers will eventually add the technology to prevent thousands of crashes each year. The agreement includes auto makers representing 99 per cent of US light vehicle sales. Auto makers are expected to follow suit in Canada. Automatic emergency-braking includes systems designed to prevent crashes in which drivers do not apply the brakes or fail to apply enough braking power to avoid a collision. It is estimated that as many as 20 per cent of crashes could be prevented by the technology.

TREES

Nordic pulp makers are developing clean ways to turn birch and pine trees into clothes or sofa covers to help revive their industry and meet demand from fashion and furniture firms for alternative textiles to cotton.  There has been no Nordic production of viscose, the main textile fibre from timber, for nearly a decade. A 2011 spike in cotton prices contributed to increased global demand for viscose and lyocell, the other major textile fibre from wood pulp. Production is dominated by plants in Austria, India and China.

PROTEIN

Officials in three provinces and six northern US states are launching an effort to brand the region as the potential provider of protein to the world.  The “Protein Highway” project aims to encourage scientists to work together and share information on protein-rich crops for research and economic development. That could lead to research that would aid farmers and also help entrepreneurs take new food products to market. It is estimated that demand for animal protein will double by 2040 as the world population increases. That should result in more demand for high-protein plant products to feed the animals being raised for meat. High-protein crops such as lentils, dry beans and dry peas have great potential throughout the “Protein Highway” region which encompasses Manitoba, Saskatchewan, Alberta, the Dakotas, Minnesota, Nebraska, Montana and Iowa. 

PESTICIDES

More herbicides contain glyphosate, a weed killing chemical, than any other agent. First sold to farmers as Roundup, a product containing the stuff in the 1970s, the use of glyphosate- based preparations have increased 100-fold.  The manufacturers patent expired in 2000 and farmers from Brazil to Russia spray it as never before. Farmers value the chemical for reasons that have changed since it first appeared. Once a kill-all for unwanted weeds, it was transformed in 1996 when the company developed genetically engineered crops able to withstand it. Estimates suggest that two-thirds of all the glyphosate ever sprayed in the US have been applied in the past 10 years. Now, the European Union was to vote in March on whether to renew approval of glyphosate for another 15 years, some countries including France, Sweden Italy and the Netherlands are rebelling against re-licensing the chemical.

COMPLAINTS

The US Federal Trade Commission reports that Debt Collection, Identity Theft and Imposter Scams remain the top categories of consumer complaints received by the FTC in 2015. In 2015, there were 3,083,379 total complaints received. Florida, Georgia and Michigan were the top three states for fraud and other complaints, while Missouri, Connecticut and Florida were the top three states for identity theft complaints.

LOBSTERS

Maine’s lobster industry is booming. Early moulting in 2012 caused a glut in lobsters and a drop in prices. At the same time, there was a decline in cod and other natural predators of the lobster larva. This allowed the lobster population to flourish. Big hauls are now the norm. To accommodate the larger volumes, dealers began looking at overseas markets, especially Asia. Maine’s exports to China have tripled since 2012. However, experts are worried about the long-term. The lobster industry collapsed in southern New England and the Long Island Sound because of warming waters.

THRIFT

In a recent interview, the billionaire founder of IKEA admitted to buying all his clothes at thrift stores and having his hair cut in developing countries to save money.