Canadian food and beverage makers have begun to feel the pinch of trade tensions with the U.S. according to a new forcast by Farm Credit Canada, which downgraded sales growth predictions from the start of the year.
“This downward revision should not be surprising given the impacts that tariffs are having on the economy and the trade landscape,” wrote FCC senior economist Amanda Norris in a Sept. 24 report.
“Much of the sales growth seen so far is price-driven, that is sales are slowly trending up because of price increases while the volume of goods sold is declining.”
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Food and beverage sales increased by 0.8 per cent in the first half of the year, but are now expected to drop by 0.3 per cent in the second half of the year. FCC Economics forecasts overall sales growth in 2025 to be 0.2 per cent, down from its forecast of 0.6 per cent growth at the beginning of the year.
Export volumes began to decline in March, wrote Norris. Volumes are now trending near the five-year minimum.
Gains and losses
Grain and oilseed milling —a heavily export-driven sector — saw a 10.6 per cent decline in year-over-year sales in the first half of 2025. FCC projects a 10.0 per cent decline in the second half of the year.
”Tariffs from China on canola seed, meal, and oil, combined with biofuel policy uncertainty in the U.S., have dampened demand and prices, bringing sales down as a result,” said Norris.
Dairy products, a sector that caters largely to domestic demand, saw a 3.8 per cent sales growth. FCC projects a 0.5 per cent increase in the latter half of 2025.
Meat products saw sales increase 5.7 per cent and are projected to see a 4.1 per cent increase in the second half of the year.
Distilleries saw a 6.1 per cent bump in sales, but are predicted to see a 1.7 per cent slump for the rest of the year. Seafood preparation saw a 1.9 per cent increase, but is predicted to decline by 9.8 per cent in the latter half of 2025.
Manufacturers’ margins are also pressured by falling sales.
“While higher prices helped offset falling demand in the first half of the year, it’s not likely enough to bring positive sales growth in the second half of the year. That, combined with raw material and labour costs that are taking longer to ease, suggests to us that 2025 margins will not improve from last year,” Norris wrote.
Industries dependent on steel and aluminum may also see packaging stockpiled pre-tariffs dwindle next year.
Bright spots
FCC is more optimistic about 2026 said Norris.
“A modest rebound in sales, paired with stabilizing or even falling input prices, could set the stage for recovery,” she wrote.
Low grain and oilseed prices, which are expected to continue, are good news for grain and oilseed millers, bakeries and beverage manufacturing.
The labour market may also see some improvement. The job vacancy rate in food and beverage manufacturing fell to 2.8 per cent in the second quarter, which FCC said is the lowest for any second quarter since reporting began in 2015. The unemployment rate in that sector grew over the summer and reached 9.4 per cent in August — the highest in over four years. This, combined with softening wages, point to a “slightly more accessible labour market” for food and beverage makers.
