The world wants Canadian food – Part 2

Building Canada’s capacity to feed the world

More processing, stronger infrastructure and higher productivity can help Canadian agriculture and food businesses compete in more markets.

In part 1, we highlighted the $12-billion opportunity for Canadian food and beverage products to find markets outside of the United States. But finding potential customers is only the beginning. Capturing that demand requires the ability to make the right products, at a competitive cost, and deliver them reliably over much longer distances. Diversification is about both trade and investment strategy.

Figure 1: How Canada’s agriculture and food sector can capture $12 billion in export growth opportunity

Source: FCC

We need to add more value before products leave Canada

Approximately 50% of Canada’s primary agriculture outputs are exported to be processed. Expanding domestic processing capacity could turn more of this output into higher-value ingredients and finished foods. This is not about replacing commodity exports – Canada can remain a leading supplier of primary agricultural products while also expanding the range of processed products it sells. A larger processing base can support product diversification, reduce dependence on individual markets and allow more of the economic value generated by Canadian agriculture to remain in Canadian businesses and communities.

We need to invest in productivity to drive export growth

Productivity growth is about producing more with less – generating more or higher-value outputs from the labour, equipment, energy and materials used in production. For Canadian food and beverage manufacturers, productivity growth can look like more efficient equipment, automation, upskilled employees, improved management or reduced waste. And it is essential to maintaining global export competitiveness – it helps businesses control costs, improve quality and operate at greater scale. FCC’s Thought Leadership team recently highlighted boosting productivity to achieve 3% annual GDP growth in food and beverage manufacturing between 2024 and 2035 could generate $40 billion in additional GDP, create 217,000 additional jobs and add $16 billion in labour income.

The investment foundation already exists. Capital spending in Canadian food manufacturing more than doubled from $1.89 billion in 2017 to $4.2 billion in 2024. The next step is to focus investment on the capacity and capabilities that can serve growing domestic and international markets.

We need to invest in reliable infrastructure and logistics

International customers need confidence that a shipment will arrive safely, consistently and on time. That makes trade infrastructure – processing plants, warehouses, refrigerated storage, roads, railways, ports and intermodal connections — part of Canada’s export proposition. Yet Canada ranked 32 globally in 2019 for transportation infrastructure. Port congestion and delays – due to weather, rail and labour disruptions, among other issues – create further challenges. And weaknesses in Canada’s cold chain storage (temperature-controlled storage and transport systems that keep perishable food safe) – like gaps in backup power and emergency preparedness, limited monitoring, aging or insufficient capacity – are exacerbated by climate changes, especially in rural, remote and Indigenous communities.

Modern infrastructure also includes information and technology. Traceability, logistics, automation and real-time data can help producers, processors and transportation providers respond faster when demand, inventories or shipping conditions change. These tools can improve transparency and coordination, but their benefits depend on skills, broadband access and the ability of businesses to adopt them. Overall, there is a shortage of supply chain investment in Canada, particularly around commerce, data and technology. Addressing these gaps will require significant investment.

We need to sustain market development for continued growth

Canada continues to invest in trade relationships beyond the U.S. We have 15 free trade agreements covering 51 countries and 1.5 billion consumers worldwide, and are the only G7 country to have free-trade agreements with every other G7 country. While trade agreements lower barriers, but they do not create customers on their own. Businesses need market intelligence, regulatory knowledge, local relationships, product adaptation and continuing promotion. Canada’s free trade agreements can reduce tariffs and make rules more predictable, while the Trade Commissioner Service and other partners can help businesses understand specific markets. And the new federal AgriMarketing Program for small and medium enterprises includes support things like market research, trade missions and international marketing to support diversification, with a committed $75 million over the next five fiscal years.

Turning opportunity into export capacity

Canada has the resources, expertise, trade relationships and reputation to feed more of the world. By investing in productivity, processing, infrastructure and market development, we can convert today’s trade uncertainty into a broader foundation for growth.

Diversification will take sustained work from producers, processors, manufacturers, governments, investors and supply-chain partners. The next step is to align market opportunities with practical investments, then build the capacity that allows Canadian businesses to compete and grow wherever demand emerges.

Article by: Bethany Lipka (Senior Economist) and Isaac Kwarteng (Senior Economist)

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The world wants Canadian food – Part 1

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Thought Leadership

Canadian food exports have a $12-billion opportunity to grow beyond the U.S., with Europe and Asia offering the strongest potential for Canadian agriculture and food businesses.