Canadian food, beverage sector problems need national solution

Opinion

Waking up as a Canadian this morning feels pretty much the same as it did yesterday. The sun still rose and that first cup of coffee tastes just as good.

The difference, of course, is that we’re all a little poorer.

Regardless of whether the U.S. moved forward today with steep tariffs on Canadian imports as threatened or whether they are applied tomorrow or in the future, the Canadian economy is already suffering from crippling tariff fatigue.

In some ways, the uncertainty surrounding the U.S. government’s next move is worse than any financial pain it inflicts on Canadian industry and American consumers. It’s already forcing the hand of companies in Canada’s food and beverage processing sector.

News reports surfaced this week about Canadian-born food companies whose growth depends on expanding sales into the U.S. market. They are now planning to move operations south of the border. That would take jobs and all associated economic activity with them — which is exactly what the U.S. wants.

Barring a concerted and strategic effort on the part of our federal and provincial governments, industry and consumers, the future of our food sector — Canada’s largest manufacturing sector and one pivotal to national security — is about to be kidnapped.

It was seeping south even before this.

Canadian producers, especially in the livestock sector, are highly dependent on access to the U.S. market for feeding and processing. Farm Credit Canada said in an analysis this week Canada exports 22 per cent of its total hog production, with exports to the U.S. making up 99 per cent of all exports.

Sixty per cent or four million pigs annually are weanlings sold to the U.S. for fattening and slaughter. The majority of them, 2.6 million piglets, come from Manitoba producers.

One-quarter of Canada’s hog exports are market-ready hogs ready for slaughter and that number has been rising over the past four years due to the loss of processing capacity in Canada.

The story for cattle is similar, but more complicated.

“A calf could be born in Alberta, sent to Montana to graze, sent back to Alberta for fattening in a feedlot, and then shipped back to the U.S. for slaughter,” the FCC report says.

Imagine trying to figure out the tariff impact of that.

Unlike with grain, which can be stored indefinitely or put on a ship to somewhere else, live animals need to move through the supply chain until the production pipeline can be adjusted. That means the additional costs of tariffs will have to be absorbed. History suggests producers become the sponge.

It’s well-documented Canada’s food and beverage processing sector has been losing ground in productivity and competitiveness. Statistics Canada reported in December the sector’s investment in product, process, organizational and marketing innovations has been declining at a time when the industry openly acknowledges it needs to increase. Investments in process innovation declined the most.

“Canada’s food and beverage manufacturers lag significantly behind some of our international peers in automation, technology adoption and operational efficiency,” Food and Beverage Canada CEO Kristina Farrell told a recent Canadian Agri-Food Policy Institute webinar. “It directly impacts our ability to compete globally, especially as input costs rise and margins tighten.”

She cited key vulnerabilities such as the industry’s structure, which is dominated by small- to medium-sized enterprises that lack the scale to go global, and the sector’s over-reliance on the increasingly uncertain U.S. market.

Farrell said external factors aren’t the only ones holding Canada back. She cited internal ones such as inadequate infrastructure in housing, child care, transportation and labour, as well an inefficient regulatory framework.

“These challenges aren’t necessarily new, but the urgency to address them has never been greater. We need to shift toward a forward-looking policy framework that prioritizes enhancing productivity and competitiveness across the industry, both in primary agriculture and in food and beverage manufacturing,” Farrell said.

Reacting to tariffs may be necessary, but it isn’t a strategy.

Instead of pointing fingers and scurrying around like gophers beneath a hawk’s shadow, it’s time to focus on the things that are within our power to change.

Laura Rance is executive editor, production content lead for Glacier FarmMedia. She can be reached at lrance@farmmedia.com