Things may seem bleak now, but there are silver linings in those dark clouds, says Farm Credit Canada’s chief ag economist.
“In a lot of ways, things are different than they were 12 months ago,” said J.P. Gervais.
One is that consumers are more interested in local and specialty foods, and knowing where those foods come from.
“That is going to boost local initiatives and local supply chains, and we have seen some of that and had some success with that for sure,” he said.
Couple that with another pandemic-induced change — greater savings — and that creates opportunities.
Those with job stability are saving more and that’s sent the national saving rates into the stratosphere. In the five years prior to the pandemic, Canadians have only saved two per cent of their disposable income. But that pattern has changed dramatically.
“The saving rate in the economy was 27.5 per cent mid-2020. It was 14 per cent in the third quarter of 2020.”
That’s not only created pent-up demand but also given many people the ability to indulge in “treats” such as pricey steaks.
“There is money on the sidelines,” he said. “We don’t want to minimize the point that there is a segment of Canadians who have been affected (economically) by the pandemic (but) with the government support of the economy, with low interest rates, I think people will want to splurge when the economy reopens.
“I think food service is going to benefit, and there’s the question of how much of a benefit there will be for other levels of the supply chain, including producers and processors.”
The pandemic has led to more diversity in production and some producers getting more involved in different types of supply chains, such as local or organic.
“Consumers are interested in a number of different foods, and may be willing to experiment more,” said Gervais. “That’s all positive for the industry, but at the same time, we have to acknowledge that there are going to be competitive pressures, and that price points matter as well.
“What are you going to be able to sell to consumers and at what price?”
While there’s a lot of emphasis on local, there are also a lot of countries that are now more aware of their dependence on imports, and that means an opportunity for Canada to leverage its reputation as a reliable supplier of quality food.
The grain sector has benefited from that and the livestock sector, although hit harder by the pandemic, can too, he said.
“To me this is an opportunity for us to work on our brand, find that capacity, invest more where it makes sense and be able to raise our supply so we can meet the demand of the world. I see overwhelming evidence that there’s a lot of strength in the demand out there.”
But while the rollout of vaccines and a surprisingly strong world economy “has brought a lot of hope,” everyone should be realistic about the road ahead, he added.
“It’s still unknown how many businesses will be able to get through the pandemic,” said Gervais. “Financially, there is a segment of the economy that has been hurt, in some ways significantly. If you think of food service, it’s going to take us time.”
So don’t base your business plan on your guess on how things might play out, he said.
“The strategy from a producer’s standpoint is to carry on their risk management strategy. It’s not about anticipating the outcomes. No one knows at this point.”