Agri food Canada: FCC reports no storm clouds on horizon

The sun is shining on Canada’s agricultural exports.

According to Farm Credit Canada’s (FCC) most recent trade ranking reports on agriculture and manufactured food, there’s good reason to be optimistic about the future of Canada’s agri-food sectors.

Canada is positioned as the fifth-largest exporter of agricultural commodities—a consistent ranking since 2011 when it dropped from fourth place. Canada is also ranked as the 11^th largest exporter of manufactured food products, which is consistent with last year, but an improvement over the 12^th place ranking in 2014.

Overall, agri-food products accounted for 13 per cent of Canada’s exports in 2016 and recorded 1.5 per cent growth. According to EDC’s latest Global Export Forecast, the sector will increase by two per cent this year and grow by an additional five per cent in 2018.

The reports released November 7, are a barometer of changing trends in the global agricultural industry. They are developed from 2016 global agricultural data based on products in the Harmonized System (HS).

“The purpose of these reports is to emphasize the importance of trade as an engine of growth for agriculture and understand where Canada stands,” says J.P. Gervais, FCC Vice-President and Chief Agricultural Economist. “It provides a snapshot of where we are (currently) and gives companies an idea of the global trends with a look to the future.”

In terms of commodities, the agricultural report reveals Canadian exports totalled US$24.6 billion which is 5.3 per cent of the world’s total agricultural commodities exports. The U.S., China and the Netherlands kept their respective top-three ranking since 2013.

Wheat was Canada’s top commodity export in 2016, recording a value of US$4.5 billion, followed closely by canola seed exports, accounting for US$4.3 billion. With a value of US$3.1 billion, pulses rounded off the nation’s top three exports.

Looking forward, the report identifies pulses, oilseeds and fresh fish as Canada’s “sweet spots,” because each is a global, as well as a Canadian top-dollar export, and among the fastest-growing exports in the world.

Canadian manufactured food exports accounted for US$19.1 billion or 3.2 per cent of the world’s total in 2016. According to FCC’s the Netherlands, Germany and the U.S. were the globe’s top exporters in 2016—a consistent ranking since 2010.

The manufactured food report highlights some good news for Canada in the global agricultural market—Canadian strengths include canola oil and beef offal as both have a quickly growing demand.

The country is also positioned as a top exporter of fresh beef, chocolate, bread, pork, fruit and nuts. However, the Canadian “sweet spots” include food preparations, malt and coffee, due to the fact that each is a top-dollar export both in Canada and globally and among the fastest growing exports in the world.

“There are plenty of reasons the future looks bright,” Gervais says.

One of the main reasons is that the demand for both agricultural commodities and manufactured food products will continue to grow.

It’s estimated that by 2050, global demand for food will rise by 60 per cent. That translates into producing as much food in the next 45 years as in the previous 10,000.

The emerging economies of China and India will be key drivers of this demand for global agri-food exports, courtesy of growing populations and an emerging middle class in both countries.

However, new opportunities also create new challenges, namely competition. Gervais says that Canada will need to tap into and enhance its current competitive advantages which include food safety, innovation and resource availability to capitalize on this new potential.

“Quite frankly, we’ve done an excellent job building a solid Canadian brand,” he says. “Sustainability and food safety are ranked very high. But looking forward, we have to figure out: how do we build on those attributes while not raising the cost of doing business?”

That’s in line with the thinking of the federal government’s Advisory Council of Economic Growth, which has identified the agri-food sector as one of six key drivers powering the Canadian economy. It has developed a road map to future prosperity for the industry, complete with aggressive targets.

Achieving those targets will revolve around seeking out additional market access, namely with China, India and Japan. It will also require enhancing the Canadian “trusted food brand,” encouraging foreign investment and improving regulation.

That’s why this year’s trade ranking reports have a new importance.
“These reports really do build on the momentum of the advisory council,” says Gervais. “It (the council) has set some very bold objectives and ambitious goals in terms of where we need to be a few years from now.

“The purpose of this report is not how do we get there, but rather it shows where we stand and where we can improve.”

Improving Canada’s competitiveness on the world stage will require pushing the innovation envelope, according to Gervais.

“We’ve always been innovative, but the low-hanging fruit is gone,” he says. “Our productivity has been climbing, but it’s been climbing at a slower pace as of late. We need to reverse that trend and grow at an even higher pace.”

In the short term, Gervais says that companies need to be aware that markets are focusing on volume as well as price.

“My advice to exporters is to ensure you are cost competitive,” he adds. “We are moving toward a more volume-based driven market and margins will be a little bit tighter.”