China’s pandemic buying spree has ag commodity prices soaring — but as canola growers (and others) know, Beijing can quickly turn hostile.
But the ag sector here needs to be bold and aim to grow its ag and agri-food exports to China, says Canada’s ambassador to the country.
“Even when things were really rough and tough on the bilateral side, there are lineups for stores selling Canadian products,” said Dominic Barton. “That gives me energy during the tough periods to see that, because of the connection with the consumer.”
A former managing partner of the global consulting giant McKinsey & Company, Barton made waves four years ago when an advisory panel he led said the country should aim to boost its ag exports to $75 billion by 2025. It seemed like an audacious goal as it would require a massive 36 per cent jump from 2015 levels.
But with four years to go, Canadian ag and ag-food exports have already topped $70 billion.
“Even though we thought we were being ambitious, we weren’t as ambitious as we could be,” Barton said during a virtual ‘fireside chat’ hosted by Farm Credit Canada.
China offers the sorts of opportunities that Canada’s ag and food sector should be running hard to seize, he added.
Step 1 is to change the way we think about China.
“China is not a monolith. It’s not ‘a’ China,” he said. “There are so many different aspects to China, from the government level to the 22 different regions that operate quite differently.
“There’s very good and exciting parts of China and there’s very bad and frustrating parts of China — all at the same time.”
And while most of the focus is on Beijing, Shanghai and other mega-cities such as Guangzhou, there are more than 100 cities with a million people, each offering a variety of different opportunities. Canada needs to build its capabilities to deal with this multi-faceted China, and learn how decisions get made and different regions work, he said.
His second piece of advice is to leverage the favourable impressions that Chinese consumers have towards Canadian products.
“Where I think we need to jack it up is a shift towards a more value-added space,” said Barton. “We have this amazing brand that we are not maximizing. Consumers love it. It’s a quality image.”
The key to that is innovation and the ambassador gave a shout-out to educational institutions such as Olds College and the University of Guelph for their efforts to be on the cutting edge when it comes to innovative technology.
His third piece of advice was to aim high.
“We have to secure our markets, which includes China, which has been tough,” he said. “But we have to diversify beyond that into other parts of Asia. We have to be a dominant player.”
And to do that, we want Canadian companies that compete and excel in the global marketplace.
“If we are going to be the powerhouse that we are, we have to have at least six to seven of the top ag and food companies in the world based in Canada,” said Barton, adding we should also foster small- and medium-size enterprises as they are vibrant and create a lot of jobs.
The pandemic has given smaller companies a new entryway into China.
“Consumers are buying online. They are looking at products online,” he said, noting China is the largest e-commerce market in the world. “That has created a very big opportunity.”
But the fight for market share — particularly for the Chinese middle class, which will be the largest in the world — will be fierce and companies from a host of nations are well established.
“So we’ve got to treat this like a home market, and we’ve got to treat other parts of Asia like a home market, even though it seems far away,” Barton said.
Of course, China is also far away from Canada when it comes to playing by the rules of global trade. In 2019, Beijing suddenly suspended the licences of Canada’s two biggest canola exporters to the nation and later that year banned pork imports for several months.
Barton’s advice on that score is to recognize the threat and that “there may not be a lot we can do in the short term.”
“We just have to make sure we’re diversified and not be so dependent on one country for the bulk of what we do,” he said.
However, moving from just shipping commodities to value-added products would provide some protection as consumers want to see the brands they buy on store shelves, regardless of what’s happening on the diplomatic front.
“We have to get to the consumer, because they are powerful and governments get nervous about messing with consumers.”
The Advisory Council on Economic Growth that Barton led issued a trio of reports about how to grow the Canadian economy. They covered topics affecting a host of sectors, including boosting productivity, attracting talent via immigration, attracting foreign investment and workforce training.
But Barton said he was the most personally excited about the potential of the agriculture sector.
“It’s the most underappreciated sector,” he said. “A lot of people think it’s ‘Old World.’ That’s wrong. Agriculture is a very high-tech sector.
“It’s a very consumer-oriented sector and it has to be if we’re going to be able to feed the world like we are.”