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Producers may be well-positioned to invest, even in the face of inflation

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November 30, 2021

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Turn on Bloomberg, CNBC, or Fox News and just about every mainstream news outlet is talking about inflation.

But how worried should farmers or ranchers be about inflation?

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In some ways, farmers or ranchers may be set up to benefit from inflation, says Shawn Hass of RBC Dominion Securities, in this interview with Shaun Haney on RealAg Radio.

“What are the two biggest assets of farmers? Well, they’re producing commodities and they’ve got a lot of real estate,” says Hass. “When you look at inflation those are typically two areas that run counter to inflation.”

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Hass adds that of course, there’s more to the financial picture than just those two assets when it comes to producers.

Inflation numbers in the range of 3 to 4.7 per cent, compared to historical numbers, seem a bit high, but as Hass points out, what’s behind those numbers is the important part.

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“Right now, one of the big factors for sure that I’m seeing is the supply chain issue,” says Hass, although he doesn’t think it’s a long-term issue as shipping costs are going down even if the time line is still delayed.

“I think the real area that needs to get the attention is actually housing,” Hass explains, and it accounts for roughly 40 per cent of the CPI number — it’s a big component in North America, at a faster pace than, say, Japan.

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Hear the full conversation from Hass and Haney, as part of Farm Management Canada’s Agricultural Excellence Conference, story continues below:

Farmers are exposed in a good way to a couple of the areas that are going to benefit from the inflationary trend, but Hass recommends that any surplus money should get off the farm.

Looking at the investment landscape, Hass compares it to driving a car — if the speed limit is 110 km/h, he’s ok with pushing on the gas and going 125 km/h, depending on the financial situation.

It’s an exciting prospect to invest into healthcare or technology, which are underrepresented especially in Canada. One scenario that Hass has his eye on  in particular is the effect of rates on wages, as the government pulls back its assistance programs. Hass doesn’t think it’s highly probably, but it could be a risky situation, and one to tap the brakes on.