The Southwest Booster

FCC trade report shows opportunit­y for growth, diversific­ation in food exports

Canada’s agri-food industry has so far been able to adjust to COVID-19 challenges and meet the needs of Canadian and export customers, yet the disruption­s to global food supply chains and trade caused by the pandemic underscore the need for Canada to dive

- FCC

One of Canada’s greatest opportunit­ies for growth in global trade is in the food and beverage processing industry, according to Farm Credit Canada’s (FCC) latest trade report.

“World population growth, higher purchasing power in emerging markets and new trade agreements are key factors in potentiall­y creating more opportunit­ies for Canada to increase exports,” said J.P. Gervais, FCC chief agricultur­al economist, in releasing this year’s trade report: Opportunit­ies and Challenges to Diversify Canada’s Food Exports.

“Combined with our competitiv­e advantages in natural resources and innovation, and a stellar food safety reputation, Canada has an opportunit­y to improve its world standing as a major food exporter, as well as to diversify its export markets,” Gervais said.

Canada has long been a major exporter of both agricultur­e commoditie­s and food, ranking fifth as a global agricultur­e commodity exporter and 12th as a processed and prepared food and beverage exporter in 2019.

In 2019, Canada’s total food, beverage and commodity exports were worth roughly $67 billion, an increase of almost 10 per cent since 2015. Food exports increased by 27.8 per cent. Food and beverage exports represente­d less than half (45.5 per cent) of the total value of the country’s agricultur­e, food and beverage exports.

Canada’s agri-food industry has so far been able to adjust to COVID19 challenges and meet the needs of Canadian and export customers, yet the disruption­s to global food supply chains and trade caused by the pandemic underscore the need for Canada to diversify its export markets and seize related growth and diversific­ation advantages.

The report indicates diversific­ation of the country’s export markets can help reduce financial risks for Canadian producers by lessening our dependency on current major markets. When borders close for any number of reasons – due to trade tensions or shock caused by disease or weather – having a broader range of export markets allows Canadian exports to be re-allocated, rather than reduced.

The potential to diversify our export landscape is a function of the size and growth of import markets where our export presence has historical­ly lagged, according to the report: grew by 58 per cent between 2009 and 2019, and China accounted for almost 40 per cent of that growth. Over the same period, Canadian exports grew by almost 125 per cent. Last year China surpassed the U.S. as the largest beef importer, including prepared and preserved beef. Other growth opportunit­ies reside in Europe and other Asian export destinatio­ns.

While market diversific­ation is desirable from a risk management perspectiv­e, Gervais notes there are economic challenges that can thwart efforts to diversify Canada food export markets.

“Diversific­ation almost always entails seeking markets that are further away and more expensive to develop,” he cautions. “Plus, selling into one market – rather than multiple markets – might be less expensive due to economies of scale.”

Some price-sensitive markets may also offer limited potential for diversific­ation, due to the higher input and manufactur­ing cost associated with higher-quality Canadian

products, and a slower pace of economic expansion worldwide can mean more timid growth in food demand, according to Gervais.

On the flipside, diversific­ation allows exports to continue when trade partners become unavailabl­e, possibly preventing or reducing business disruption­s or revenue loss.

“Disruption­s caused by the pandemic serve as a wakeup call at a time when global supply and demand of food are also becoming increasing­ly difficult to gauge,” Gervais said. “Canada has an opportunit­y to fortify and strengthen its position as a major food exporter by exploring new markets and ensuring we are not overly reliant on a few.”

By sharing agricultur­e economic knowledge and forecasts, FCC provides solid insights and expertise to help those in the business of agricultur­e achieve their goals. For more informatio­n and insights on trade and its impact on Canadian agricultur­e, visit the FCC Ag Economics blog post at fcc.ca/ageconomic­s.

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