6.8 billion… that’s a lot

‘6.8 billion’ is a very large number, if you ask me. And in the agri-food world, it tells the very large story of the trade deficit Canada now has in secondary and tertiary food processing.

But as the story goes, size isn’t everything. ‘6.8 billion’ is large, but it’s not the whole food manufacturing tale.

Canadian food processing: A different story

For many of Canada’s food processors, it’s a zero sum game to try to compete with the huge exporters who service large scale markets with a wide array of goods. They focus instead on consumer segmentation and preferences, servicing smaller markets often neglected by mass production. Smaller Canadian production can be more agile, able to adapt quickly to changing consumer needs, experimenting and innovating products.

The point is that a trade balance, no matter the size, doesn't provide the entire picture of profitability.

Profitability of the Canadian food manufacturing sector - highly integrated with the U.S. agriculture and agri-food system - requires the efficient use of labour and logistics. David Sparling noted the ways that Canadian food reorganization and consolidation between 2006 and 2014 helped to increase competitiveness. During this period, non-Multi National Enterprises had the largest number of openings and investments.

Secondary food processing tells one tale of many to be told

Looking only at the overall trade value in secondary processing suggests the food sector overall isn’t performing. But this changes when we look at the other categories of food processing (meat, vegetable and fruit, fats and oils processing). Canada’s trade in these selected sectors ran a $4.5 billion surplus in 2013.

There are some bright spots in food. Canada’s processing industries demonstrated resilience during the recession according to a CAPI report released earlier this year. Moreover, Canada grew overall exports by 30 per cent since 2009 and in 2012 and 2013, total exports of secondary food processing grew faster than imports.

Neither does the ‘6.8 billion’ account for the added value of different processed foods in the supply chain. Not all export dollars are created equal after all – higher value embodied in food products equals more profits. 

Still, the sector overall faces significant challenges. As the largest manufacturing employer, food must compete for scarce skilled labour able to run equipment and robotics. The sector's capacity utilization rate (or the rate at which the industry matches actual output with potential output) was the envy of other manufacturing sectors in 2007-09 – but this has fallen since 2011.

There’s always more to a story than one number can relay. Part of the broader food story will be anticipating what challenges and opportunities lay ahead. How do we continue the trends that are working?

Martha Roberts, Economic Research Specialist