Synthesis Agri-Food Insights
October 21, 2009 Volume 1, Issue 6
Helping you understand agriculture's challenges and
opportunities by analyzing the issues and sharing their insights - the Synthesis consulting team Rob Hannam, Mary Lou McCutcheon, Julien DenTandt, Peter Hannam and Heidi
Dancho.
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Canada's trade troubles
The Canadian agricultural sector is
heavily dependent on export markets - which has led to both prosperity and
problems. Trade issues are dominating agricultural news headlines and causing
headaches for many in the industry.
In Canada, two different trade limitations
have come to the forefront lately, each affecting a different commodity, yet both
impacting the bottom line for farmers and agribusiness.
Canada is challenging the United
States' country of origin labeling (COOL) law at the World Trade Organization
(WTO). The US requirement of food manufacturers to label food origins has made
processors of pork and beef leery of slaughtering cattle and pigs from Canada
or who have spent part of their lives north of the border.
This has
significantly impacted cross-border trade in live animals and reduced the
prices Canadian farmers receive for their livestock. The WTO dispute resolution
process is a lengthy and time-consuming one, which means farmers won't soon see
a settlement to this issue.
A genetically modified (GM) flax
variety was developed and approved in Canada in the 1980s. However, to protect
Canada's flax trade with the European Union, which does not allow GM imports,
the Flax Council of Canada took extensive steps to ensure that no GM flax would
be produced in Canada, and the variety in question was subsequently
de-registered by the Canadian Food Inspection Agency.
In September of this
year, however, GM markers were discovered in Canadian flax shipments to Europe,
leading to an abrupt halt to flax trade between Canada and the EU. The EU
represents 70 percent of Canada's flax trade.
Some of the easy answers - like
reducing our dependence on export markets - aren't as easy as they sound, says
Mary Lou McCutcheon, a consultant with Synthesis Agri-Food Consulting in
Guelph, Ontario.
"Canada's ability to produce more
food than it can consume has led to the development of global export markets
and opportunities for our agriculture and food sector," explains McCutcheon. "This
is a significant part of our nation's economy."
According to statistics from
Agriculture and Agri-Food Canada, Canada's agri-food exports in 2008 totaled
more than 38 billion dollars. Canadian agri-food products went to 195 different
countries around the world.
"People all over the world depend on food and
food products from Canada and these export markets are also crucial for our
agricultural sector here at home," says McCutcheon. "There are many Canadian
businesses and jobs outside of primary agricultural production that depend on
this trade as well, so simply reducing our output isn't a viable option."
Diversifying
marketing options is one way that Canadian farmers can shield themselves
somewhat from trade impacts. This could be anything from growing some niche
products or varieties to satisfy a special need market or diverting some
production into the local market. Buying local is popular, says McCutcheon, and
consumers are hungry for local foods. However this solution will not work for
everyone.
It's also
important that the agricultural sector be aware of what's happening in the
world around them and to have a plan in place for dealing with worst case
scenarios.
"Agriculture is truly a global industry, and we
need to see our farms and businesses in the greater global context," says
McCutcheon. "Issues and developments halfway around the world can have a great
impact on us locally and they can catch us off guard if we aren't aware of the
bigger picture."
Insights - So what needs to be done?
Use
COOL as a marketing tool. Labelling allows farmers and food
producers to promote benefits and attributes of their products to consumers
worldwide. Perhaps Country of Origin Labelling should be used as a marketing
tool instead of being mandatory legislation.
Produce
and market higher value products. Canada is a formidable
producer of raw materials but it is this dependence on commodity production
that also leaves us vulnerable. Canada's
agri-food sector should expand its processing capacity and produce higher value
products. Developing value-added
processing and manufacturing will mean more businesses and jobs in Canada and
allow for the development of a distinctive "Canada Brand" identity.
Faster
trade dispute resolution processes. Whenever trade barriers are
put in place or a trade dispute arises, farmers are affected immediately
through restricted market access and lower prices. Currently, launching a trade
challenge, whether through the WTO or the North American Free Trade Agreement
(NAFTA), is costly and time-consuming, often lasting years and costing those
involved millions of dollars.
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Sincerely,
Rob, Mary Lou, Peter, Julien and Heidi
Synthesis Agri-Food Consulting
"Our Passion is Problem Solving"
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