Agriculture is changing. We all agree on that. But who has the road map? That’s the harder question. In fact, it may be the hardest question of all. Without doubt, there are opportunities ahead, and there are dangers too, and knowing where they might be hiding could be a massive advantage not only for your own home farm, but for all of Canadian agriculture.
Can we see the forest for the tree? Will we blind-sided by our competitors? What are our weaknesses, and where are the strengths we should be building on?
Read Also
Riding the tariff rollercoaster
Farmers are accustomed to roller-coaster years. But the current geopolitical windstorm is something else entirely. On his cattle operation near…
Australia and New Zealand have transformed themselves into fierce competitors, aggressively deregulating their agriculture sector while taking an innovative approach to industry organization.
In comparison, Canada has clearly been dragging its feet. Sometimes, in fact, we’ve simply ceded territory, backing away from an interventionist approach in many sectors without coming up with a coherent replacement.
“We badly need a strategy and vision in the Canadian agriculture and food industry,” says Sylvain Charlebois. “We simply don’t do enough of this sort of thing in Canadian agriculture.”
Charlebois is a business expert at Saskatchewan’s Johnson-Shoyama School of Public Policy. This fall, he is moving into a senior role at southern Ontario’s University of Guelph. He passionately believes it’s important for Canadian agriculture to take a page from the larger business communities and use valuable tools like SWOT (Stengths, Weaknesses, Opportunities and Threats) to generate an overall vision for their industry, rather than simply reacting to what comes down the pike.
“As much as we may disagree with the Farm Bill and what it stands for in the U.S., in Canada agriculture has no vision and it’s affecting our capacity to market agriculture to ourselves and the world,” says Charlebois.
Big questions
When you start asking these big questions about Canadian agriculture and its role in the world, you’d be hard-pressed to find a better informed observer than Al Mussell, a senior research associate at the proudly pro-market think-tank the George Morris Centre, based in Guelph, Ont. A former Fulbright scholar who holds a doctorate in agriculture economics, when COUNTRY GUIDE contacted him recently about a high-level analysis of the Canadian industry, Mussell modestly conceded he had a few thoughts he might share.
“Canadian agriculture and its place in the world — I guess that is sort of where I live,” Mussell says with a chuckle.
He agrees that taking the 30,000-foot view from time to time is an important exercise. But nearly as important is setting aside any preconceived notions you may harbour about exactly what sort of agricultural nation Canada is.
Take, for example, the often widely held view that Canada is a boy scout nation when it comes to farm subsidies, and the temptation to lump us in with low-subsidy countries like Australia and New Zealand. When I raise this issue with Mussell, he suggests perception and reality can be two very different things.
“I think you might be giving us a bit too much credit there,” Mussell says. “I suspect the OECD (Organization for Economic Development and Cooperation) would beg to differ with you.”
“We’re not exactly pure as the driven (snow),” Mussell says. “It is true that we’ve gone through an evolution and we’ve changed the way we used to subsidize — we’ve gotten rid of things like the WGTA (the legislation that subsidized freight rates for Western farmers through the Crow Rate) and Tripartite (a stabilization program for red meat and grains from the same era), but we have adopted these whole-farm stabilization type measures.”
Likewise, there’s the issue of what are known as PSEs or “producer subsidy equivalents” that act exactly like a subsidy to elevate farm income, even if the money doesn’t come directly from the government itself. In Canada the classic examples of this are the major supply-managed agriculture commodities that eliminate imports from the market and elevate the prices paid directly by consumers through a legislative mandate.
“Don’t think for a minute that when all these things are taken in aggregate, we’re so much cleaner than the U. S. or Europe,” Mussell says. “We’re actually significantly higher than the U.S. and a whole lot like the Europeans. We should ’fess up. People in glass houses shouldn’t throw stones.”
That’s not to say any other countries necessarily live up to their hype either though, Mussell stresses. In most cases it’s simply a question of the methods they use, and in some cases it’s the scale of the subsidies.
“It’s a dirty business,” Mussell says with a rueful laugh. “Every country has a subset of producers — the prodigal sons — that they want to protect. And everyone protects something, even the Australians and New Zealanders.”
Because “Canadian Agriculture” is a phrase that covers a lot of ground, it’s helpful to look at a few key sectors with their own unique regulatory environments, similar market opportunities and similar competition from other nations.
GRAINS AND OILSEEDS
Of all of the Canadian agriculture sectors, this is arguably the one that has faced the greatest ongoing challenges over the past 30 years or so. It has therefore been forced to adapt and improve more quickly than almost any other ag sector.
Two main factors have driven this trend — a structural debt crisis in the 1980s fuelled by heavy borrowing in the 70s, followed by a crash in grain prices and the resulting “grain wars” between the U.S. and European Union in the late 1980s and early 90s.
Backed up against the wall by these factors, grains and oilseed producers found themselves in the midst of an orgy of “creative destruction” that forced them to examine every possible option to diversify, cut costs, adopt new technology that made economic sense and generally take every step they could to ensure their businesses survived to fight another day. The result has been a lean, mean production machine that’s proven its adaptability time and time again.
As just one example, look at the production systems commonly used in dry-land Prairie agriculture. As recently as the 1970s it was centred around conventional tillage, press drills and summerfallow. Over the span of a single generation that was pretty much entirely replaced by zero-and minimum tillage, direct seeding and continuous cropping.
Evidence of this adaptability can also be seen in the crop mix grown in that region, Mussell says. Over that same time period, canola acreage has exploded due to tremendous technological improvements in that crop. Likewise pulse production took off as field peas, lentils and chickpeas became a more and more common sight.
“We had to diversify and people did,” Mussell says. “We saw an explosion in acreage of (pulse crops). Who would have thought that would happen — and as it turns out, we’re pretty good at it.”
All this has positioned Canadian grain and oilseeds producers fairly well if, as expected, the grains sector benefits from growing demand, Mussell says.
“I personally think — and this is not a forecast, because I don’t do forecasts — grain is on the verge of another bull run,” Mussell says.
That said, there do remain potential pitfalls. If global economic conditions fail to meet expectations, demand growth may not materialize immediately, at least not at the hoped for rate. That could suppress prices for a while as demand slowly matches the increased global agriculture productivity that was added during the recent price spike.
Canada also faces potential challenges centring around trade, and more specifically around market access issues. In a world where we’re exporters with production that annually significantly outpaces domestic demand, we’re always going to be a bit at the mercy of local producers and politicians in importing countries with an axe to grind.
RED MEAT
A few words come to mind when pondering the red meat industry over the past few years. “Painful nightmare” might be a good start. Or perhaps “bloodbath” is a better choice.
Anyone with even half a heart looking at the lot of beef and pork producers couldn’t really help but feel sympathy for these folks.
Beef producers saw a one-two combination that put the industry on the ropes in the form of a BSE border lockdown that shut the country out of export markets, resulting in a glut of supply on the Canadian market. Then just as that issue got cleared up a world wide financial crisis and accompanying severe recession emptied steakhouses around the globe — something that was particularly troubling when you consider the niche that North American beef has carved out for itself.
Other major beef producers and exporters — nations like Brazil, Australia, New Zealand and Argentina — also export plenty of beef. But it’s all grass-fed beef. While there’s plenty of market for that product, it’s also not necessarily aimed at the same market, Mussell explains.
“You don’t go into a steakhouse and order a steak from an old cow,” Mussell says. “What you want and expect is the really juicy, tender texture of a grain-fed animal. Basically our only real competitor for grain-fed beef is the U.S.”
“These other countries don’t really have a tradition of grain feeding.”
Pork producers have suffered a similar fate over the past several years, but for different reasons. Their economic woes have largely been based on the turning of the pork cycle, along with tepid demand likely due to the aforementioned economic global economic issues. But anyway you slice it, that’s been bad news for pork operations around the country. In some cases we’ve seen established, major operations facing big economic problems, up to and including bankruptcy.
Mussell says the picture is a bit brighter these days and he expects increased demand, especially from the fast-growing Asian economies as the days and months roll by, although he notes that pork producers don’t necessarily have the benefits of a distinct product like our beef producers do.
“There’s no equivalent of grain-fed beef in the pork sector,” Mussell says.
Generally, however, Mussell expects both sectors to benefit as global demand for animal protein rises, thanks to improving economic conditions for citizens in emerging economies around the globe. Still, Mussell knows farmers might be a bit impatient with these predictions, which they’ve heard again and again over the years. “It is a bit like the Promised Land — we have to figure out how to get there first.”
SUPPLY MANAGEMENT
Supply-managed commodities, of course, are exactly that. They’re the dairy, egg and poultry industries including chickens, turkeys and hatching eggs which concentrate almost exclusively on the domestic market. There, they’ve enjoyed a decades-long legislated mandate that sets production quotas accompanied by prices based on a cost-of-production formula.
They’re also one of the most controversial issues in Canadian agriculture, and have proven to be a polarizing topic where there is virtually no middle ground, Mussell says. “They’re one of those issues where it appears people are either totally for them or totally against them.”
That could prove to be a real problem, says Sylvain Charlebois, who says it’s time to take another look at supply management in light of the way the Canadian and world economies have evolved in the years since the system was put in place. “In the 1960s, for example, I think supply management was actually quite relevant to Canada,” Charlebois says. “But today the Canadian economy is much different that it was in the 1960s.”
For one thing, it’s much more closely linked to other economies through free trade agreements like NAFTA and the WTO, and therefore much more trade dependent, making supply management a perennial irritant at trade talks. There’s also the issue of meeting evolving new consumer demands — something the top-down system of supply management may not be able to do as nimbly as an open market could, where individual producers may see opportunities and pursue them.
“It’s a weakness of supply management, they’re unable to be responsive to new market trends,” Charlebois says. “Supply management is all about supply, it has nothing to do with demand.”
Al Mussell says that has frequently resulted in flat trend lines for consumption in the supply-managed commodities, along with new competition that addresses consumer demand. He cites the example of the dairy industry where volume growth has fallen short of the rate of population growth.
“There are a lot of good things about supply management,” Mussell says. Even so, he adds, “Per capita Canadians are drinking less milk, and the dairy industry is facing new competition from soy products.”
All this is building momentum for a fundamental rethink of supply management, though both researchers concede it’s a topic that will have to be approached carefully. Says Charlebois: “These farm families invested many years in good faith.”
VINEYARD, ORCHARD AND HORTICULTURE
In a country known informally worldwide as the “Great White North” you know that high-value warm-season crops like tender fruit and grapes or vegetables are always going to be a bit of an anomaly — but that doesn’t mean this sector isn’t an important source of new opportunities.
In fact it’s arguably in better shape than it’s been in a long time thanks to a couple of trends, says Al Mussell.
“Our tender fruit industry is seeing some real opportunities because of the local food trend,” Mussell says. “They’re also benefiting, though it might seem counter-intuitive, from more year-round imports. I think it keeps your products top-of-mind.”
Charlebois agrees the local food industry is a great start for people in this sector, but counsels them not to limit their vision too much.
“The local market gives them a good starting point — but they shouldn’t stop at local,” he says. “They should add value and market them abroad too.”
Charlebois also touts another issue that he recognizes is a controversial one in the farm community — the opportunities represented by global warming.
“I think whether you agree with it or not, there’s plenty of scientific evidence out there that it’s happening, and it could mean new opportunities for Canadian farmers,” Charlebois says. “They’ll be able to grow crops in areas they couldn’t historically.”CG
———
“ We should ’fess up. People in glass houses shouldn’t throw stones.”
— Al Mussell
———
HOW IMPORTANT ARE WE?
Another area where we tend to have a not-exactly-grounded-in-reality perception of ourselves is in our relative importance in global food production. True, our farms are enormously productive year-in and year-out, and we still call ourselves from time to time the breadbasket of the world.
But the simple truth is that if you run the numbers, we’re a significant player in a lot of markets but by no stretch of the imagination a dominant player in any of them. Take wheat, for example. In 2007, the International Grains Council pegged Canada in eighth place overall, at 20.6 million tonnes, just ahead of Turkey and just behind Germany.
Meanwhile the same report placed two countries that are often thought of as big buyers as the top producers — China was number one with just under 110 million tonnes and India came in in second place at 74.9 million tonnes.
Similar trends can be seen in other sectors, such as pork production, where again Canada is a significant player, but by no means the largest. Again, China tops the list as the largest annual pork producer, with about 50 per cent of the world’s swine population.
“When you look at the numbers in red meat, or grains and oilseeds, it becomes obvious that we’re a relatively small country in terms of total production,” Mussell says. “But in terms of the quantity available to export, we’re pretty material.”
