A recent agriculture report from the Royal Bank of Canada paints a picture of a sector with big opportunities and big challenges.
Farmer 4.0: How the coming skills revolution can transform agriculture is all-in on the concept of farms thriving in the digital age. It paints a picture of autonomous equipment, sensor-driven agronomy and other advances.
It’s good that the largest bank in Canada takes agriculture seriously enough to ponder its future. The report makes some excellent points.
It’s not exactly breaking news, but they correctly highlighted a labour and skills shortage that will only grow more acute as this technological shift accelerates. Agriculture is long on agronomy, for example, and short on coding skills.
They also correctly noted that there are tremendous growth opportunities to be found in the sector. The report pegs that opportunity at an additional $11 billion in GDP by the year 2030, for a total contribution of $51 billion a year. As the authors note that would make agriculture and food “… bigger than automobile assembly and aeronautics combined.”
The report also notes some shortfalls, such as how Canada imports more farm machinery than it makes and only captures 3.4 per cent of global ag tech investment, behind rising competitors such as Brazil.
Perhaps the most surprising statement in the report however, is a thinly veiled suggestion that Canadian farmers are falling behind in productivity.
It notes Canada’s share of global agriculture exports has been falling for years. In 2000 Canada accounted for 6.3 per cent of global exports. By 2005 that was just 4.9 per cent and today it’s 3.9 per cent.
But as our Allan Dawson reports in our cover story, that’s not for lack of trying. In the marketing year that just ended Canada, despite ferocious trade-related headwinds, posted yet another record for total grain exports.
The RBC report does concede that part of the issue is not so much a decline in Canadian productivity but rather the rapidly increasing productivity on the part of competitors. But goes on to fret that part of the problem is also “stalled” agricultural productivity growth.
While it’s true, Canadian agricultural productivity hasn’t been growing at the same rate as, for example, Brazil or the Black Sea region, there are likely some very good reasons for that.
One is that Canada has already plucked most of the low-hanging fruit. Our grain farms, for example, are already highly mechanized and use the latest genetics, inputs and crop protection products.
Contrast that with the Black Sea region, which limped along for years on patched and re-patched Soviet-era equipment until the 2008 grain boom provided a reason and ready capital to modernize.
Canada also isn’t putting the Prairie under the plow any longer and breaking millions of acres of new farmland, unlike some of its key competitors. A 2016 report by the website GlobalAgInvesting.com noted “Brazil’s total arable land area nears 600 million acres with only 170 million acres presently cultivated.”
A better and fairer comparison is with farmers operating under similar conditions and with a similar developmental history — our American cousins. Here Canada shows itself to be competitive.
A 2017 report on the University of Illinois’ Farm Policy News web page reports similar trends and writes that “… although the U.S. remains the second-largest exporter of agricultural goods in the world, the share of U.S. agricultural exports has fallen from 23 per cent of global value in 1995 to 12.5 per cent in 2013.”
Canadian farmers — and U.S. farmers, European farmers and Australian farmers — have demonstrated they’re a very competitive and innovative lot. And their current lower rate of productivity growth isn’t a reflection of their reluctance to invest. It’s a testimony to their readiness in past years.
There’s also more than a little evidence to suggest they continue to be ready to invest in technology — when the economics warrant it. Look no further than the wholesale adoption of zero and minimum tillage, biotechnology and other productivity advances in the past couple of decades.
A chart prepared by Statistics Canada tracking Canadian agricultural productivity offers some insight into the decision-making processes of Canadian farmers.
It presents a sawtoothed chart that trends ever upwards, with the downward spikes nicely correlating with periods of lower prices and upward moves likewise matching the arrival of better times.
Fittingly it ends with a sharp upward movement that coincides almost exactly with the latest — and most dramatic in recent memory — upwards spike.
Farmers will adopt new practices and technology, but only when someone can prove to them there’s a business case to do so.