Canada is already a major exporter of agricultural goods, food and beverages — but increasing food and beverage exports is still one of Canada’s biggest trade opportunities, says Farm Credit Canada (FCC).
And by diversifying exports farmers will become less dependent on current major markets reducing their financial risk.
“When borders close for any number of reasons due to trade tensions or shock caused by disease or weather, having a broader range of export markets allows Canadian exports to be reallocated, rather than reduced,” FCC said in a news release Nov. 17 along with the release of its 2020 trade report entitled “Opportunities and Challenges to Diversify Canada’s Food Exports.”
After identifying the world’s biggest and fastest-growing food import markets, including those where Canada has a small existing market share, FCC identified opportunities to expand five Canadian food exports: canola oil, prepared or preserved pork, potato products, prepared crab and prepared or preserved beef.
In 2019 Canada ranked fifth and 11th in global agricultural and food exports, respectively, with sales earning $67 billion — a 10 per cent increase from 2015.
Of those sales, $29 billion were for food, accounting for 45.5 per cent of the total.
Food exports are up 28 per cent since 2015.
But 79 per cent of the increase was due to exports to just one market — the United States.
That’s a lot of eggs in one basket.
“Combined with our competitive advantages in natural resources and innovation, and a stellar food safety reputation, Canada has an opportunity to improve its world standing as a major food exporter, as well as to diversify its export markets,” J.P. Gervais, FCC’s chief agricultural economist, said in the release.
“World population growth, higher purchasing power in emerging markets and new trade agreements are key factors in potentially creating more opportunities for Canada to increase exports.”
Why it matters: Canadian farmers rely heavily on exports of unprocessed agricultural goods because they grow so much more than the domestic market consumes.
Canada’s agri-food industry has so far been able to fill domestic and export demands, despite COVID-19, Gervais told reporters via telephone Nov. 13 ahead of the report’s release.
“I would say there is a huge opportunity for us as an exporter in this world where a lot of food importers are not food secure… to say, ‘here we are in Canada with quality and safety… we have all that to offer…’” Gervais said. “I think that’s a huge opportunity for us in 2021… we can be a leading supplier…”
Canola oil is the fastest-growing vegetable oil behind coconut, FCC says. Canola oil is used mostly for food rather than biofuel. Importers in Asia and the West prefer it because it’s more environmentally friendly than some other oils. FCC says there is more potential to export more Canadian canola oil to Asia and Europe.
Beyond China, most Canadian pork has an advantage in small countries with slow recent growth. Excluding China, the markets that show the greatest potential for Canadian pork are in Europe — Italy, France, Germany, Belgium and Poland. There are hurdles, including a European Union requirement that meat imports be certified free of antimicrobials, Gervais said.
“If you break down all the barriers we have a very competitive pork product in Europe,” he said.
In 2019, Canada was the fourth-largest exporter of potato products, worth just over $1 billion. The expanding western diet has increased demand for french fries and potato products. While the United Kingdom is the largest and fastest-growing importer, there is opportunity for expansion in Europe and China.
From 2009 to 2019, Canada has been the world’s largest exporter of prepared crab, capturing 33 per cent of total global exports last year. China, along with South Korea, Indonesia, Vietnam, Thailand and Hong Kong, represent a third of the global import growth. However, Russia is threatening to overtake Canada in crab meat exports.
Global prepared and preserved beef imports grew by 58 per cent between 2009 and 2019 and China accounted for almost 40 per cent of it. Over the same period, Canadian exports grew by almost 125 per cent. Last year China surpassed the U.S. as the largest beef importer, including prepared and preserved beef. There are opportunities for Canadian beef in Europe and other Asian countries.
While FCC’s report extolls the benefits of increasing food exports and diversifying markets, it acknowledges it’s not easy. That’s why FCC is helping smaller and medium-size companies to first grow exports to existing customers, Gervais said.
“Then afterwards I am convinced we can see some diversification given the efforts,” he said.
“Diversification almost always entails seeking markets that are farther away and more expensive to develop,” the report says.
Some potential markets are price sensitive, especially for high-quality Canadian products, the report says.
China can also be as influential in world food markets as the U.S.
“It (China) can engage in the protracted tensions that have shaped much of global trade since 2019 and led to shifts in trade flows that do not truly reflect diversification,” the report says.
“A slower pace of economic expansion worldwide can mean more timid growth in food demand, impeding diversifying efforts. The pandemic has reminded us of the importance of a robust food supply chain and economic consequences for some countries may last years.”