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Canadian Agri-Food Economy

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					Canadian Agri-Food Economy
  Training on the Administration and Regulation of the
             Canadian Agricultural Sector
          27 February 2005 to 11 March 2005

  The Canada-China Small Farmers Adapting to Global
                  Markets Project
             China-Canada Cooperation in Agriculture
                     Canadian Agri-Food Economy




• Objectives:
  – To outline the characteristics of the Canadian
    agri-food economy
  – To show the evolution of the agri-food
    economy in Canada
  – To link growth in the agri-food industry in
    Canada to the growth of trade, investment
    and technology

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                China-Canada Cooperation in Agriculture
                   Canadian Agri-Food Economy




• An Overview:
    – Canadian GDP:                            $977 billion
    – Manufacturing:                           $165 billion
         • Food:                               $     16.5 billion


• Food manufacturing:
    – 10 percent of all manufacturing
    – 1.7 percent of GDP

Data from 2002
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                    China-Canada Cooperation in Agriculture
                           Canadian Agri-Food Economy




• Employment:
   – Total Manufacturing:                       1,976,105 persons
   – Food Manufacturing:                          237,744 persons

• Food manufacturing:
   –   % of all manufacturing employment:                           12
   –   % of all manufacturing establishments:          11
   –   % of all manufacturing shipments:               11
   –   % of production workers’ wages in manufacturing: 9
   –   % of all manufacturing wages and salaries:                   8.6
   –   % of all manufacturing value added:                          9.3
   –   % of manufacturing exports:                                  5.2
   –   % of all manufacturing imports:                  3.9
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                      China-Canada Cooperation in Agriculture
                    Canadian Agri-Food Economy




• The largest food industries by percent of
  food processing value added in Canada:
  –   Meats                               21.2
  –   Dairy                               13.7
  –   Bakeries and Related                12.3
  –   Fruit and Vegetables                12.1



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                China-Canada Cooperation in Agriculture
               Canadian Agri-Food Economy




• The entire “food chain” from farms to
  processing, distribution, retail and food
  service:
  – About 15 percent of employment
  – About 9 percent of GDP
• Implication:
  – A lot of jobs, but many at lower end of wage
    scale
  – Examples: food service, repetitive processing
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    jobs         China-Canada Cooperation in Agriculture
              Canadian Agri-Food Economy




• Historically, Canadian agri-food
  processing industry was oriented to
  domestic consumption
  – Short processing lines, many products
  – With trade agreements, integration with USA
    and world markets taking place
  – Processing lines getting longer, fewer
    products produced in Canada, but with North
    American or world mandates
  – China will likely see much the same evolution
    as agri-food trade accelerates                7
               China-Canada Cooperation in Agriculture
                         Canadian Agri-Food Economy




• Export and import orientation of food
  processing industry:
    – One-quarter of all shipments exported
    – One-fifth of all domestic food (processed)
      consumption imported
    – Export intensity growth nearly double import intensity
      growth*
    – Net export surplus in processed food products
    – Significant growth in processing exports in last 15
      years (principally to USA)
    – Processed products now 60 percent (and growing) of
      all agri-food exports
* Export intensity = exports / shipments; Import intensity = imports / domestic
   consumption                                                                    8
                          China-Canada Cooperation in Agriculture
                                Canadian Agri-Food Economy

                                                           Canadian Exports by Type, 1988 to 2003

                                               30.0
                                                                                                    Consumer
                                                                                                    Oriented
• Rapid growth in exports                      25.0
                                                                                                    Intermediate

• Highest growth in                            20.0
                                                                                                    Bulk


                                   $ billion
intermediate and consumer
                                               15.0
oriented products
                                               10.0
• High concentration on USA
market                                          5.0

• Agriculture and agri-food                     0.0
trade has a different pattern
                                                88

                                                       90

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                                                                                            02
                                               19

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than rest of Canadian trade


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                          China-Canada Cooperation in Agriculture
                               Canadian Agri-Food Economy


                                                               Canadian Imports by Type, 1988 to 2003

• Canadian imports are                      25.0
                                                                                                            Consumer
also changing                                                                                               Oriented
                                            20.0                                                            Intermediate

• While bulk imports have                   15.0                                                            Bulk
                                $ billion
increased somewhat, the
consumer oriented                           10.0
products have grown very
rapidly                                      5.0


                                             0.0
• Most of these changes
                                               88

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                                                                                               00

                                                                                                       02
result from NAFTA and
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WTO agreements
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                          China-Canada Cooperation in Agriculture
                                      Canadian Agri-Food Economy


                                             Canada-USA Exports and Imports, 1988 to 2003

                                    20,000
• Over 60% of                                                                               Total Agri-
Canadian agri-food                                                                          Food
                                    15,000
trade is with the USA   $ billion                                                           Exports

• Over 85% of total                 10,000
Canadian trade is                                                                           Total Agri-
                                                                                            Food
with the USA                         5,000
                                                                                            Imports

• Exports rising                        0
faster than exports                          1988 1990 1992 1994 1996 1998 2000 2002
for several years


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                        China-Canada Cooperation in Agriculture
                                                                       Canadian Agri-Food Economy

                                                                                                Canadian Agri-food Imports from the USA
                                                                                                         by Type, 1988 to 2003

            •Largest increases in Canada-                                                 14,000
                                                                                          12,000                                                            Consumer
                                                                                                                                                            Oriented
            USA agri-food trade are in                                                    10,000




                                                                              $ billion
                                                                                           8,000                                                            Intermediate
            consumer oriented products                                                     6,000
                                                                                           4,000                                                            Bulk
                                                                                           2,000
                                                                                               0




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                        Canadian Agri-food Exports to USA
                              by Type, 1988 to 2003                                                            • Demonstrates the growing
                                                                                           Consumer
            20,000                                                                         Oriented            integration between Canadian
            15,000
                                                                                           Intermediate        and USA agri-food systems
$ billion




            10,000                                                                         Bulk
                                                                                                               • These changes are caused by
             5,000
                                                                                                               the NAFTA and WTO
                 0
                                                                                                               agreements
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              19

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                                                              China-Canada Cooperation in Agriculture
                 Canadian Agri-Food Economy




• Despite the averages, a lot of variation by
  region:
  – Some regions export a much higher
    proportion of production than others, e.g.,
    hogs from Manitoba
  – Agri-food GDP as high as 11 percent of some
    provincial economies, and less than 1 percent
    in others
  – Ontario and Quebec have the largest share of
    the processing industry, but it represents a
    small part of these overall provincial            13
    economies China-Canada Cooperation in Agriculture
                                        Canadian Agri-Food Economy


                • Agriculture and agri-food GDP varies in
                  importance by province:
                       – Large proportion of national total value in Ontario,
                         Quebec and Alberta
                       – Small national value but very high proportion in other
                         provinces, e.g., PEI, Saskatchewan, Manitoba.
                                Provincial Agri-Food GDP, 1999
Billions of                                                                             Share of
 1992 $                                                                                Prov. GDP
                                                                 Value
14                                                               Share                        14

12                                                                                            12

10                                                                                            10

 8                                                                                            8

 6                                                                                            6

 4                                                                                            4

 2                                                                                            2

 0                                                                                            0
        B.C.   Alta.   Sask.   Man.     Ont.     Que.      N.B.      N.S.   P.E.I.   Nfld.
                                                                                                   14
                               China-Canada Cooperation in Agriculture
                   Canadian Agri-Food Economy




                         Industrial Rank of Food Processing

• Food
  processing is
  in the top
  three ranks of             3
                                        1         1                                                                 1
                                                           1
  manufacturing                                                           2
                                                                                          1
                                                                                                            1
                                                                                                        3
  industry                                                                                                      1


  across                 Based on Value of Shipments



  Canada           Note: Food processing by Province includes fish processing due to confidentiality.



                                                                                                                        15
                   China-Canada Cooperation in Agriculture
               Canadian Agri-Food Economy




• Some of the food processing industries are
  highly concentrated:
  – Meats: four or five very large plants, a few medium
    sized, many small, local ones
  – Potatoes: two large companies, very few medium and
    small
  – Dairy: a few large companies/cooperatives in an
    increasingly concentrated industry with many plant
    locations, some small, local plants
  – Increasingly integrated with USA: for multinational
    companies, “product mandates” in Canada for
    distribution across North America                   16
                 China-Canada Cooperation in Agriculture
               Canadian Agri-Food Economy




• Productivity increases in food processing mostly
  due to in-bound foreign direct investment
• Research and development (R&D) expenditures
  in Canada are below:
  – Comparable R&D levels in USA
  – Comparable levels of R&D in other Canadian
    manufacturing sectors
• Since the start of North American Free Trade
  Agreement:
  – R&D expenditures by foreign firms in Canada falling
  – R&D expenditures by Canadian firms rising
                                                           17
                 China-Canada Cooperation in Agriculture
                  Canadian Agri-Food Economy




• The retail industry:
   – Five or six major retailers in Canada, although not all
     are available in all localities
      • Implication: greater concentration locally than nationally
   – Increasing concentration in retail industry, locally and
     nationally
   – Increasingly integrated with USA
   – Many small, franchised, convenience outlets
   – Virtually no single-store, privately-owned general food
     retail outlets remain in Canada
   – Some single-store, privately-owned specialty food
     stores emerging: high quality, local branding (e.g.,
     meats, breads)                                          18
                     China-Canada Cooperation in Agriculture
              Canadian Agri-Food Economy




• Issues:
  – Retail outlets need consistent, year-round,
    stable supply chains
     • Limited and variable growing season in Canada
       not easily compatible with retailers’ needs
  – Consumers demanding more information
    about products (food safety, environment)
  – Consumers demanding more convenience
    and exotic foods
                                                          19
                China-Canada Cooperation in Agriculture
                     Canadian Agri-Food Economy




• Summary:
  – With trade liberalization, integration across regional
    and national boundaries is taking place through
    multinationals and strategic alliances in the food
    industry
  – Foreign investment is a major vehicle for technology
    transfer in the food industry
  – Responding to consumer demands is critical to
    growing the agri-food industry
  – The issues transcend agriculture and food: human
    and animal health, environmental quality, safe
    production methods, worker health and safety,
    transportation and communications, education, water
    and power supply…all must come together for a
    growing industry.                                      20
                  China-Canada Cooperation in Agriculture
                      Evolution of Agri-food Industry: Relevance to China



•   What agri-food industries currently exist in west-central China?
•   Can they provide high quality, stable supplies:
     – Locally?
     – Nationally?
     – Internationally?
•   Are the marketing and transportation systems in place?
•   Are food quality regulatory systems in place?
•   What integration is taking place nationally in the food processing industry?
•   Can farmers access the distribution systems at processing and retail level?
•   What decision processes are in place to assure that governments can
    integrate solutions across:
     –   Human and animal health
     –   Environmental quality
     –   Production methods
     –   Worker health and safety
     –   Transportation, communications, power, water
     –   education

                                                                               21
                            China-Canada Cooperation in Agriculture
                Canadian Agri-Food Economy



                    Background materials
– Zuhair A. Hassan, Glenn Fox, David Sparling and John
  Cranfield, 2002. “Innovation and the Competitiveness of the
  Canadian Economy with Special Focus on the Agri-food Sector:
  Workshop Report”. Summary and presentations at the national
  workshop on innovation in the Canadian economy and the
  Canadian agriculture and food sector held on September 26-27,
  2002 in Guelph, Ontario, Canada.
– Zuhair A. Hassan, Mushtaq Ahmed and Richard Carew, 2004.
  “Does the Canadian Food Processing Industry Need an
  Innovation Strategy?”. Agriculture and Agri-food Canada, March
  2004.
– Brad Gilmour, 2004. Role of Demographics, Infrastructure and
  Institutions in China’s Agri-food Sector. Presented at The Asia-
  Pacific Summit, 2004. 13-14 October 2004, Vancouver, Canada.
– F.W. Tongeren and J. Huang, 2004. “China’s food economy in
  the early 21st Century; Development of China’s food economy
  and its impact on global trade and the EU.” Agricultural         22

  Economics Research Institute (LEI), The Hague, Netherlands.
                    China-Canada Cooperation in Agriculture
                      Canadian Agri-Food Economy




                   Other materials
– John Baldwin, David Sabourin and Donald West, 1999.
  “Advanced technology in the Canadian food processing
  industry“. Catalogue no. 88-518-XPE, December 1999.
  Agriculture and Agri-Food Canada and Statistics Canada.
– Jeffrey I. Bernstein, 1994. International R&D Spillovers
  Between Industries in Canada and the United States.
  Working Paper No. 3, September 1994, Industry Canada.
– Industry Canada, 1994. Canadian-Based Multinationals: An
  Analysis of Activities and Performance. Working Paper No. 2,
  July 1994, Industry Canada.
– Industry Canada, 1994. Economic Integration in North
  America: Trends in Foreign Direct Investment and the Top
  1000 Firms. Working Paper No. 1, January 1994, Industry
  Canada.
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                 China-Canada Cooperation in Agriculture

				
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