Still A Global Breadbasket

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By Peter G. Hall *
Vice-President and Chief Economist Export Development Canada

Have a rich, steady supply of food? Then you're in hot demand these days. The relentless, searing growth of emerging markets has put a significant strain on global food stocks. Pressure is coming from the burgeoning emerging market middle class, that new group of nouveaux riches that are climbing the consumption ladder - and starting with food. Given this continued surge of growth, what are the prospects for Canada’s significant food industry?

Statistics for the growth of the emerging market middle class are nothing if not impressive. Tens of millions are being added to the ranks of these aspiring consumers every year. Brazil adds roughly 5 million per annum, according to its numbers. India sees increases in the 20-million range and expects up to 30 million annually in short order. China is said to add the equivalent of Canadian population to its middle class every year. Increased meat-eating among this set is the key pressure-cooker for world food. It's stoking demand for raw and processed foods, boosting prices, and heating up the call for fertilizers and agricultural equipment. And it's not going away anytime soon.

Good news - Canada is participating in the global feeding frenzy. Growth of food exports is ahead of the overall average over the past 12 years. The distribution of growth mirrors total Canadian trade. The US is our largest single customer, at half of our food shipments in 2012. However, back in 2000, the share was 61 per cent. This large drop reflects a decade of moderate, 3 per cent annual gains.

So, where is the growth coming from? When it comes to trend performance, other OECD nations are a mixed bag; some are stronger than average, many are weaker, but only one developed nation (the Netherlands) gets close to a spectacular growth rating. What is more, among the top 20 food export destinations, only 7 spaces are taken by developed countries, and most are in the lower half of the list. Significantly, moderate growth cost Japan its commanding lead of second position.

It's no surprise that the dynamism of this trade really comes from emerging markets. Of these, China is a standout. Clocking in at 18 per cent, average annual growth has increased China's share of Canadian food exports to 11 per cent from just 3 per cent in 2000. Annual growth to Russia is explosive, at 32 per cent, moving it from 51st rank to 6th in the past 12 years. Consistent, double-digit growth vaulted India and the UAE into the top-10 in the same period. A diverse group of additional fast-growth countries are also climbing the ranks.

Of the major sub-categories in the agri-food world, shipments of livestock, although ranked third of the four main categories, are tops in growth to non-OECD countries, averaging 16 per cent annually since 2002. Next comes processed food - a $4.6 billion industry in 2012, and averaging 13 per cent annual growth. The largest category is crops, but it's also the slowest partner, with 7.5 per cent annual gains. Beverage manufacturing is the smallest sub-sector, but is growing 8.2 per cent annually to emerging markets, against an annual decline of 4 per cent to OECD countries.

From these stats, it's easy to see that growth of emerging market food exports is strong, and well-diversified. Canada's food producers are thus well-placed to participate in a new wave of emerging market consumption in the next cycle. Wanting to strengthen their domestic economic bases, new policies in emerging markets are encouraging greater consumer spending. If this bears fruit, demand for agri-food products faces a bright future.

The bottom line? If Canada is a global breadbasket now, that role is only likely to increase in the coming decades. Given global developments, it's good to be in food.


JULY 2018

Vol. 12 - No. 12


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