OTTAWA, Dec. 3, 2012 /CNW/ - The Canadian food industry is economically viable, and would be even more competitive if federal and provincial governments allowed firms to operate in an open marketplace, according to a Conference Board of Canada report for its Centre for Food in Canada.
To help food companies grow and prosper, Canadian governments should gradually remove agriculture support programs and focus their attention on areas of public interest that are not properly addressed by competitive markets.
"The areas that require greater government attention include those in which Canada has had numerous high-profile challenges and shortcomings, including food safety, healthy food, diet-related chronic disease, and the environment," said Michael Bloom, Vice-President, Organizational Effectiveness and Learning at the Conference Board.
Taken as a whole, the sky is the limit for the food sector, and the biggest opportunities are international. Canada's population and demand for food are growing slowly compared to less-developed countries, and most of these countries are net importers of food.
Canada starts from a strong position: it is already one of only a handful of countries that is a major net exporter of food. Canadian governments and food companies face the strategic choice of whether to position themselves to capture rapidly growing foreign demand or focus on serving the slow-growing Canadian market.
The report, The Sky's the Limit: The Viability of Canada's Food Economy, highlights product areas where Canada is internationally competitive as an exporter, including, wheat, rapeseed (canola), cattle, and lentils.
Six actions could further improve the viability of Canada's food economy.
Expand the sources of capital - Too little non-bank capital flows into the agricultural sector at present. Part of the challenge to increasing the capital available to agriculture is to overcome the view that farms should only be family businesses. The report's case studies illustrate how agricultural enterprises can create innovative partnerships with capital investors. Canada has a well-developed financial sector and having capital funds invest more in primary agriculture would give the industry a much-needed boost.
Borrow approaches from other sectors to expand internationally - Companies in the energy, forestry, and mining industries are focusing on new markets; the food sector can learn from the experience of these commodity-based businesses.
Improve firm and farm performance by enhancing management capacity— Agriculture is one of the most highly regulated and planned sectors of the Canadian economy, with numerous significant subsidies and trade barriers. Nevertheless, the majority of food companies operate in competitive markets, where management decisions have greater influence on a firms' bottom-line performance. Thus, the viability of Canadian food companies depends much on the competence of food company management. Government policy, meanwhile, should remove barriers that prevent successful food companies from expanding their operations.
Reform government support programs - Since 2003, Canadian consumers and governments provided an estimated $81.9 billion in total support to the agricultural sector, including $20.7 billion in market price support to milk producers. As described in another Conference Board report, Canada's Supply-Managed Dairy Policy: How Do We Compare?, these programs serve neither the industry nor Canadian consumers well.
Channel government efforts to address public interest issues that build trust in the food system - Ideally, government efforts and spending should be focused on areas of genuine public interest that are insufficiently addressed by markets, such as food safety and environmental performance. Canadians expect safe and healthy food - governments should work with the industry to build trust in the food system.
Improve Canadians' economic literacy - Canadians need to be made aware that the country's food output is growing rather than falling, that Canada is one of the few long-term net exporters of food, and that rising exports would not put Canadians' food security at risk because food suppliers will naturally find benefits in servicing the domestic market first.
The report is one of 20 being prepared by the Conference Board's Centre for Food in Canada. The principal goal of the Centre is to engage stakeholders from business, government, academia, associations, and communities in creating a Canadian Food Strategy —one that will meet the country's need for a coordinated, long-term strategy on industry prosperity, healthy and safe food, consumer security, and environmental sustainability. View video commentary about the Canadian Food Strategy.
View video commentary by Michael Grant, Director of Research, Centre for Food in Canada.
Link to publication: http://www.conferenceboard.ca/e-library/abstract.aspx?did=5129
Video with caption: "Viability of Canada's food economy ". Video available at: http://www.youtube.com/watch?v=LTW98b0Xgvg
Video with caption: "Canadian Food Strategy". Video available at: http://www.youtube.com/watch?v=-3OU2Efpx98
Image with caption: "Public views of government support of farmers (CNW Group/Conference Board of Canada)". Image available at: http://photos.newswire.ca/images/download/20121203_C5383_PHOTO_EN_21444.jpg
SOURCE: Conference Board of Canada
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