In the 2020 Nourish Trend Report we examined three “smaller” trends in Canadian agriculture.
We thought these were interesting trends, and ones that could play a larger part in driving the Canadian agriculture economy forward, if not today, then in the near future.
But as the value of the Canadian agriculture and agri-food economy continues to grow (recent data shows agriculture and agri-food contributed more than $49 billion to Canada’s gross domestic product [GDP]), the stakes and potential gains get higher for all participants in the sector.
A recent report from RBC Royal Bank indicates that with proper supports, the ag sector could contribute an additional $11 billion to Canada’s GDP by 2030, making it more productive than auto manufacturing and aerospace combined.
There’s one factor we believe will have the most significant impact on the health of the Canadian ag economy in the next couple of years, and likely beyond – trade.
International trade in Canadian agricultural products has been the single largest driver of the Canadian agri-food sector for decades. According to the Canadian Agri-Food Trade Alliance (CAFTA):
There are a few major factors that are expected to influence trade in Canadian agricultural products this year. While the new Canada-United States-Mexico Agreement (CUSMA) has not been fully ratified, it is expected to be shortly. Like other trade agreements, the results will only be fully known over time. And as with all policy changes, there are expected to be winners and losers in each sector.
One sector that can expect to be negatively affected is the supply-managed dairy industry. In February, Saputo Inc. announced it will close two Canadian facilities, cutting nearly 300 jobs, as it looks to trim costs. This may or may not be related to CUSMA. How other sectors will be affected by the new trilateral trade agreement remains to be seen, but certainly bears watching.
The China Factor
Trade relations with China continue to be tied closely to politics, both bilateral and international.
According to CAFTA, China has become the third largest destination for agricultural products worldwide and is expected to become the world’s largest agricultural importer by 2020. China is Canada’s second largest national two-way trade partner after the U.S.
China is also Canada’s second largest agricultural export market, absorbing $4.7 billion of Canadian agriculture and agri-food products in 2014. Unlike many of Canada’s trading partners, exports to China have been climbing steadily and did not fall during the global economic crisis.
In 2019. Canada’s relationship with China was, to say the least, problematic. Political tensions related to U.S./China relations (most notably the detainment of Huawei CFO Meng Wanzhou by Canadian authorities at the request of the U.S.) have halted Canadian exports of many agricultural products, including soybeans, canola and meat products. Although the ban on meat products is at least notionally related to a forged inspection document found on a pork shipment.
What 2020 will bring to the Canada/China trade relationship is up for debate. The recently signed Phase 1 trade agreement between China and the U.S. did not provide a lot of clarity for Canadians. While Beijing committed to buying an additional US$200 billion in American goods over the next two years, including US$40 billion to US$50 billion in agricultural products, it is unclear how Canadian ag exports will be affected. So, for Canadian grains, oilseed and livestock exporters – stay tuned and stay prepared!
This week, I had the pleasure of being interviewed by fellow OAC alum Mike Brine, agri-business specialist at Trillium Mutual Insurance Company, for his Podcast The Back 40. Our topic: marketing and branding your farm. You can check out the full podcast here, and for convenience, I have included the Coles Notes version below. And … Read More
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