CHARLOTTETOWN - June 2, 2005 - Prince Edward Island's (PEI) export performance will be flat again in 2005, according to an Export Development Canada (EDC) forecast. However, in 2006, EDC predicts total provincial exports will grow by 3 per cent, driven by stronger export conditions in the United States and other key markets. "The bulk of PEI's exports are in the agri-food sector, and sluggishness here will translate into weakness for the total provincial export outlook," says EDC Senior Vice-President and Chief Economist Stephen Poloz. "Better things are in store for 2006, with strong global growth and stabilization in the agri-food sector lifting overall exports." PEI's agri-food sector is dominated by potato production. Potato exports consist of fresh, frozen, seed and manufactured potato products. Frozen french fries account for more than 80 per cent of the value of all potato exports. In 2004, these exports declined slightly by 0.5 per cent, while fresh potato exports decreased by over 30 per cent due to weaker pricing. Potato stocks in the province were 16.3 million hundredweight (cwt) as of March 2005, a y/y increase of 1.6 per cent that lifted stocks up 18 per cent over the average level reported in the past three years. It is expected that PEI growers will have trouble moving the entire crop from 2004 through normal market channels. For the past three years, PEI potato producers have found it difficult to move all of the potatoes grown. This is due in part to contract volumes being reduced by processing plants. McCain Foods announced that it will be decreasing purchases of potatoes from PEI by approximately 15 to 17 per cent. "After being the top exporter of potatoes in Canada prior to 2003, PEI dropped to third in 2004, behind both Manitoba and Alberta," added Mr. Poloz. "For 2005 we're forecasting that the Island's frozen potato exports will decline slightly while fresh potato shipments will also decline, but at a lower rate than in 2004." After falling by 8 per cent in 2004, exports of fish are expected to decline slightly in 2005 but return to modest growth in 2006. Export prices are expected to be relatively stable over the forecast period and should reflect movements in the Canadian dollar. Lobster accounts for approximately 80 per cent of PEI's total fish exports. Exports of lobster fell 9 per cent in 2004 and are forecast to remain steady in 2005 and grow slightly in 2006. The outlook for lobster landings remains fairly stable over the forecast period while slightly lower prices are anticipated this year. Mussel exports fell 3 per cent in 2004 and volume shipments are expected to remain stable in 2005 and 2006, while export prices are expected to move with dollar adjustments. The strength in transportation exports in 2004 was supported by an increase in rail exports of more than 120 per cent, to CAD 18 million. This increase is in contrast to the 21 per cent decline in total Canadian rail exports seen in the past year. In 2004, a manufacturing facility was built on the Island by an established American company that manufactures aerospace and mass transit interiors. This company received a contract in 2004 to construct the interior of bi-level railcars. In late 2004, the company also received a contract to manufacture the interior of subway cars for Singapore. In March 2005, a PEI shipyard won a contract to build two tugboats for an international buyer and are expected to be completed in 2006. "While Canada's total rail exports begin to show a slow recovery, we expect that PEI's exports will increase at a faster rate over the same forecast period," added Mr. Poloz. "EDC has revised the export growth forecast strongly upward for transportation equipment in 2006 to reflect recent contract wins in this sector." Although accounting for only 3 per cent of total exports in 2004, PEI's shipments of forestry products posted strong gains last year. Supported by a healthy US housing market, the price for lumber saw a double-digit increase in 2004. This year, due to softening in the US housing market, EDC Economics expects the Island's forestry exports will ease back slightly. Nationally, the economy is expected to grow by 2.4 and 2.9 per cent in 2005 and 2006, based on good domestic economic fundamentals. In turn, Canada's export volumes should grow by 3 per cent in both 2005 and 2006. A copy of EDC's Global Export Forecast is available on EDC's web site: http://www.edc.ca/docs/ereports/gef/EFindex_e.htm EDC is a Crown corporation that provides trade finance and risk management services to Canadian exporters and investors in up to 200 markets worldwide. -30- Media Contact : Glen Nichols EDC-Public Affairs Telephone: (613) 598-2876 email: glnichols@edc.ca
