Sticking to the status quo isn’t good enough to propel Canada into the uppermost ranks of global agricultural exporters.
“Over the past year, there’s been quite a bit of optimism around food and agriculture. It’s been identified as one of the main sectors to grow in this country,” said J.P. Gervais, chief agricultural economist for Farm Credit Canada.
“That means something, but at the same time, it doesn’t mean we don’t have any challenges in front of us. The status quo will allow us to remain where we are, but it’s not going to allow us to grow.”
Canada is currently the fifth-largest exporter of agricultural commodities and the 11th-largest exporter of manufactured food products in the world, according to two trade ranking reports that FCC released earlier this month.
Gervais said he expects demand for Canadian ag products will grow, but the country still has a ways to go to reach the ambitious targets set out in the Advisory Council on Economic Growth’s report Unleashing the Growth Potential of Key Sectors. The federal report, released earlier this year, sets a target of becoming a top three exporter of ag commodity exports and No. 5 (up from 11th spot) in manufactured food exports.
That’s doable, but not easy, said Gervais.
“The reason we’ve been so successful is because we’ve raised our productivity. But the low-hanging fruits are gone. Our rate of productivity is still increasing, but at a slower pace.”
Investment is key
Improving productivity means innovating — not “simply putting more land into production.”
“Sustainability issues are at the forefront of the discussion when it comes to ag, so we need to rely on innovation, infrastructure, and efficiency to remain competitive,” he said.
“I have no doubt we can be successful doing it, but that’s going to require us to do things a little differently from everybody who’s invested in the supply chain.”
Investment is key, but that’s already happening, Gervais said.
He pointed to water-efficient wheat varieties as a prime example of innovation. Improved genetics allowed many wheat growers in drought-hit parts of Saskatchewan and Alberta surprisingly good yields.
“That investment in innovation directly resulted in our ability to be more competitive and to raise income when it comes to agricultural production,” said Gervais.
Another example is the big investment in grain-handling facilities, export terminals, and canola crush and pulse fractionation plants in recent years.
But more work needs to be done on increasing processing efficiency.
“In Canada, we’ve been really good at product innovation. Now we have to be as successful on process innovations,” said Gervais.
“We’ve got a tight labour supply right now, and it’s not likely to improve. Automation is the obvious solution when it comes to food manufacturing.”
It can be hard to see where farmers fit in the big picture — but they’re actually the driving force behind these industry advances, he said.
“Producers are the ones who are controlling this rate of growth and productivity by the investments they make into the equipment, technology, and management practices they bring on the farm.”
But rising costs in the past three years are a looming issue.
“The margins have been good going back over the past three or four years, but now, margins are getting a little bit tighter,” he said. “For producers, the challenge is, how can we make investments that are going to return a positive profit and continue to sustain our competitive position.
“It’s hard to understand how opportunities in world markets turn into profit.”
That means taking a long-term view of the opportunities coming down the pipe and building a bit of a five-year plan.
“They need to be thinking about where they want to take their farm. Is it growing bigger? Is it scaling back? Is it diversifying into other sectors?” said Gervais.
“We can’t just take a short-term view of the next few months and the market prices we’re seeing out there. We have to take a long-term view and look at where the growth is likely to be coming from.”
“The low-hanging fruits are gone, and for us to take the next step to that next level, we have to look at how we can remain competitive.”