An Overview of the Canadian Agriculture and Agri-Food System

An Expert's View about Agriculture and Animal Husbandry in Canada

Posted on: 25 Mar 2010

This 2009 report provides an economic overview of the Canadian agriculture and agri-food system. It is meant to be a multi-purpose reference document to provide: an introduction to the agriculture and agri-food system; a snapshot of structural changes that are occurring throughout the system in response to various factors; and background data and information to inform public discussions on challenges and opportunities facing the Canadian agriculture and agri-food system.

An Overview of the Canadian Agriculture and Agri-Food System 2009 An Overview of the Canadian Agriculture and Agri-Food System 2009 Project Manager Kathleen Kittson Project Team Julie Smith, Nasreen Islam and other members of the Agri-Food Industry and Competitive Analysis Section. This publication comprises data and analysis provided by all four divisions of the Research and Analysis Directorate as well as contributions from other Divisions and Branches of Agriculture and Agri-Food Canada particularly the Food Value Chain Bureau. August 2009 Research and Analysis Directorate Strategic Policy Branch Agriculture and Agri-Food Canada Note to Readers This publication reflects the latest data available as of August 2009. Due to rounding, totals may not add to the sum of their components. IMPORTANT NOTICES Copyright/Permission to Reproduce Materials in this publication were produced and/or compiled by Agriculture and Agri-Food Canada for the purpose of providing Canadians with direct access to information about the programs and services offered by the Government of Canada. The material in this publication is covered by the provisions of the Copyright Act, by Canadian laws, policies, regulations and international agreements. Such provisions serve to identify the information source and, in specific instances, to prohibit reproduction of materials without written permission. Non-commercial Reproduction Information in this publication has been provided with the intent that it be readily available for personal and public non-commercial use and may be reproduced, in part or in whole and by any means, without charge or further permission from Agriculture and Agri-Food Canada. 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In such cases, some restrictions on the reproduction of materials or graphical elements may apply and it may be necessary to seek permission from the rights holder prior to reproducing the material. © Her Majesty the Queen in Right of Canada, 2009 Publication 11054E ISSN 1708-4164 ISBN 978-1-100-14039-1 Catalogue A38-1/1-2009E-PDF Project 09-017-r Electronic versions of Research and Analysis publications are available on the Internet at: http://www.agr.gc.ca/pol/pub Aussi disponible en français sous le titre : « Vue d?ensemble du système agricole et agroalimentaire canadien » T ABLE OF CONTENTS Foreword. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xiii Highlights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . xv Section A Special Feature . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 A1. Benchmarking Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3 Section B The Agriculture and Agri-Food System and the Canadian Economy . . . 21 B1. GDP and Employment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 B2. International Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 B3. Productivity, R&D and Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47 Section C Components of the Agriculture and Agri-Food System . . . . . . . . . . . . . . 61 C1. Consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 C2. Food Distribution (Retail/Wholesale and Foodservice). . . . . . . . . . . . . . . . . 75 C3. Food, Beverage and Tobacco (FBT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 C4. Primary Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97 C5. Agricultural Input and Service Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . 113 C6. Natural Resource Use and Environmental Impacts . . . . . . . . . . . . . . . . . . . 121 Section D Government and the Agriculture and Agri-Food Sector . . . . . . . . . . . . 131 D1. Government Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 D2. Producer Support Estimates (PSE) and Agricultural Policies in Other Countries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 141 Glossary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .145 Acronyms. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 146 The System?s Components . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147 Farm Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150 Trade Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151 Government Support Categories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 152 Government Support Measures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 153 Economic and Statistical Terminology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 154 Data Sources and References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159An Overview of the Canadian Agriculture and Agri-Food System iii A1.26 Combined Corporate Tax Rates in Canada and the U.S., 1999-2008. . . . . . . . . . . . . . . . . . . . .19L IST OF CHARTS Section A Special Features A1 Benchmarking Competitiveness . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 A1.1 World Agricultural and Agri-Food Exports, 1999-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .4 A1.2 Destinations of Canadian Agricultural and Agri-Food Exports, 1999-2008 . . . . . . . . . . . . . . . . .4 A1.3 Export Orientation of Canada?s Primary Agriculture Sector and Food and Beverage Processing Industry, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5 A1.4 Destinations of Canadian Primary Agriculture Exports, 1999-2008. . . . . . . . . . . . . . . . . . . . . . .5 A1.5 Average Annual Growth in Canadian Crop Sales and World Market Size, 1998-2007 . . . . . . . .6 A1.6 Average Annual Growth in Canadian Livestock Sales and World Market Size, 1998-2007 . . . . .6 A1.7 Public R&D Support to the Agriculture and Agri-Food Sector, 1986-2008 . . . . . . . . . . . . . . . . .7 A1.8 Canadian and U.S. Total Factor Productivity Growth in Primary Agriculture, 1988-2005 . . . . . .7 A1.9 Destinations of Canadian Food and Beverage Manufacturing Shipments, 1999-2008 . . . . . . . .9 A1.10 Origins of Manufactured Food and Beverage Products Sold in the Canada-U.S. Market, 1999-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 A1.11 Destinations of Canadian Red Meat Processing Industry Shipments, 1999-2008 . . . . . . . . . . .10 A1.12 Origins of Red Meat Products Sold in the Canada-U.S. Market, 1999-2006 . . . . . . . . . . . . . . .10 A1.13 Destinations of Canadian Beverage Manufacturing Industry Shipments, 1999-2008. . . . . . . . 11 A1.14 Origins of Beverage Products Sold in the Canada-U.S. Market, 1999-2006. . . . . . . . . . . . . . . . 11 A1.15 Destinations of Canadian Bakery and Tortilla Manufacturing Industry Shipments, 1999-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 A1.16 Origins of Bakery and Tortilla Products Sold in the Canada-U.S. Market, 1999-2006 . . . . . . . .12 A1.17 Destinations of Canadian Grain and Oilseed Milling Industry Shipments, 1999-2008 . . . . . . .13 A1.18 Origins of Grain and Oilseed Products Sold in the Canada-U.S. Market, 1999-2006 . . . . . . . .13 A1.19 Destinations of Canadian Fruit and Vegetable Preserving and Specialty Food Manufacturing Industry Shipments, 1999-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 A1.20 Origins of Fruit and Vegetable Preserving and Specialty Food Products Sold in the Canada-U.S. Market, 1999-2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14 A1.21 Ratio of Canada-U.S. Short-Run Lerner Indexes for Grain and Oilseed Milling and Fruit and Vegetable Preserving Industries, 1999-2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 A1.22 Ratio of Canada-U.S. Short-Run Lerner Indexes for Bakery and Tortilla Manufacturing and Meat Product Manufacturing Industries, 1999-2006 . . . . . . . . . . . . . . . . .16 A1.23 Food Processing Variable Costs as a Share of Shipments in Canada and the U.S. 2002-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 A1.24 Food Processing Variable Costs as a Share of Meat Processing Shipments in Canada and the U.S. 2002-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 A1.25 Productivity Growth in the FBT Industries, Canada and the U.S., 1988-2005 . . . . . . . . . . . . . .18An Overview of the Canadian Agriculture and Agri-Food System v vi List of ChartsSection B The Agriculture and Agri-Food System and the Canadian Economy B1 GDP and Employment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 B1.1 Agriculture and Agri-Food System's Contribution to GDP, 2007 and 2008 . . . . . . . . . . . . . . . 24 B1.2 Agriculture and Agri-Food System's Contribution to GDP, 1997-2008 . . . . . . . . . . . . . . . . . . 24 B1.3 Agriculture and Agri-Food System's Contribution to Employment, 2007 and 2008 . . . . . . . . 25 B1.4 Agriculture and Agri-Food System's Contribution to Employment, 1997-2008. . . . . . . . . . . . 25 B1.5 Agriculture and Food Processing's Contribution to Provincial GDP, 2008 . . . . . . . . . . . . . . . . 26 B1.6 Provincial Contribution to Canadian Agriculture and Food Processing GDP, 2008 . . . . . . . . . 26 B1.7 Agriculture and Agri-Food System's Share of Provincial Employment, 2008 . . . . . . . . . . . . . . 27 B1.8 Provincial Contribution to Canadian Agriculture and Food Processing Employment, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 B2 International Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 B2.1 World Agricultural and Agri-Food Export Share by Country of Origin, 2008. . . . . . . . . . . . . . 30 B2.2 World Agricultural and Agri-Food Import Share by Country of Origin, 2008 . . . . . . . . . . . . . 30 B2.3 World Agricultural and Agri-food Trade by Commodity Group, 2008 . . . . . . . . . . . . . . . . . . . 31 B2.4 World Agricultural and Agri-Food Trade by Commodity Group, 1999-2008 . . . . . . . . . . . . . . 31 B2.5 Destinations of Canadian Agricultural and Agri-Food Exports, 2008 . . . . . . . . . . . . . . . . . . . . 32 B2.6 Destinations of Canadian Agricultural and Agri-Food Exports, 1999-2008 . . . . . . . . . . . . . . . 32 B2.7 Origin of Canadian Agricultural and Agri-Food Imports, 2008 . . . . . . . . . . . . . . . . . . . . . . . . 33 B2.8 Origin of Canadian Agricultural and Agri-Food Imports, 1999-2008 . . . . . . . . . . . . . . . . . . . . 33 B2.9 International Market Prices for Major Grains and Oilseeds, 1987-2008 . . . . . . . . . . . . . . . . . . 34 B2.10 International Market Prices for Live Animals and Red Meat Products, 1999-2008 . . . . . . . . . . 34 B2.11 Canadian Agricultural and Agri-food Export Sales (BICO), 2008 . . . . . . . . . . . . . . . . . . . . . . . 35 B2.12 Canadian Agricultural and Agri-Food Export Sales (BICO), 1990-2008 . . . . . . . . . . . . . . . . . . 35 B2.13 Canadian Agricultural and Agri-Food Import Sales (BICO), 2008 . . . . . . . . . . . . . . . . . . . . . . 36 B2.14 Canadian Agricultural and Agri-Food Import Sales (BICO), 1990-2008 . . . . . . . . . . . . . . . . . . 36 B2.15 Commodity Composition of Canadian Export Sales, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 37 B2.16 Commodity Composition of Canadian Export Sales, 1999-2008 . . . . . . . . . . . . . . . . . . . . . . . 37 B2.17 Canadian Grains and Grain Product Exports by Country, 2008 . . . . . . . . . . . . . . . . . . . . . . . 38 B2.18 Canadian Grains and Grain Product Exports by Country, 1999-2008 . . . . . . . . . . . . . . . . . . . 38 B2.19 Canadian Oilseeds and Oilseed Product Exports by Country, 2008 . . . . . . . . . . . . . . . . . . . . 39 B2.20 Canadian Oilseeds and Oilseed Product Exports by Country, 1999-2008 . . . . . . . . . . . . . . . . 39 B2.21 Canadian Livestock, Red Meat and By-Product Exports by Country, 2008. . . . . . . . . . . . . . . . 40 B2.22 Canadian Livestock, Red Meat and By-Product Exports by Country, 1999-2008 . . . . . . . . . . . 40 B2.23 Commodity Composition of Canadian Import Sales, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 41 B2.24 Commodity Composition of Canadian Import Sales, 1999-2008 . . . . . . . . . . . . . . . . . . . . . . 41 B2.25 Canadian Fruit and Vegetable Imports by Country, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 42 B2.26 Canadian Fruit and Vegetable Imports by Country, 1999-2008. . . . . . . . . . . . . . . . . . . . . . . . 42 B2.27 Canadian Beverage Imports by Country, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 B2.28 Canadian Beverage Imports by Country, 1999-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 B2.29 Canadian Grains and Grain Product Imports by Country, 2008 . . . . . . . . . . . . . . . . . . . . . . . 44 B2.30 Canadian Grains and Grain Product Imports by Country, 1999-2008 . . . . . . . . . . . . . . . . . . 44 B2.31 Canadian Imports of Organic Products by Type, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45 B2.32 Canadian Imports of Organic Products by Country, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 45An Overview of the Canadian Agriculture and Agri-Food System B3 Productivity, R&D and Innovation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 B3.1 Productivity Growth in the FBT Industries, Canada and the U.S., 1988-2005 . . . . . . . . . . . . . .48 B3.2 Total Factor Productivity Growth for Canadian Food Processing and Total Manufacturing, 1988-2005. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 B3.3 Canadian and U.S. Total Factor Productivity Growth in Primary Agriculture, 1988-2005 . . . . .49 B3.4 Stages of Technology Development or Innovation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .50 B3.5 Extent of Innovation in Food Manufacturing, 2005-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51 B3.6 Obstacles to Adoption of Advanced Technologies in Food Manufacturing, 2005-2007 . . . . . .51 B3.7 Private Sector R&D Expenditures in the Agriculture and Agri-Food Sector, 1980-2008 . . . . . .52 B3.8 Private Sector R&D Expenditures as a Share of GDP by Industry, 1980-2005 . . . . . . . . . . . . . .52 B3.9 Public Agricultural R&D Spending Worldwide, 1981 & 2000 . . . . . . . . . . . . . . . . . . . . . . . . . .53 B3.10 Public R&D Support to the Agriculture and Agri-Food Sector, 1986-2008 . . . . . . . . . . . . . . . .53 B3.11 Biomass Inputs Used by Bioproduct Firms, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54 B3.12 R&D Expenditures on Bioproducts by Firm Size, 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .54 B3.13 Ranking of Reasons Bioproduct Firms Give for Contracting Out R&D, 2006. . . . . . . . . . . . . . .55 B3.14 Number of Functional Food and Natural Health Product Lines, 2007 . . . . . . . . . . . . . . . . . . . .56 B3.15 Health Purposes Addressed by Functional Food and Natural Health Products Firms, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .56 B3.16 Number of Functional Food, Natural Health Product and Service-Only Firms, 2007 . . . . . . . .57 B3.17 Average Revenues of Functional Food and Natural Health Product Firms, 2007 . . . . . . . . . . . .57 B3.18 R&D Expenditures as Percentage of Revenues in Functional Food and Natural Health Product Firms, 2006 and 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .58 B3.19 Perceived Obstacles Affecting the Competitiveness of Functional Food and Natural Health Product Firms, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .59 Section C Components of The Agriculture and Agri-Food System C1 Consumers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .63 C1.1 Distribution of Personal Expenditure on Goods, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 C1.2 Distribution of Personal Expenditure on Services, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .64 C1.3 Personal Expenditures on Food, 1981-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 C1.4 Average Personal Expenditures on Food as a Share of Total Personal Expenditures, 1981-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .65 C1.5 Share of Household Expenditures on Food and Non-Alcoholic Beverages in Selected OECD Countries, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 C1.6 Real Per Capita Personal Disposable Income, 1981-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .66 C1.7 Distribution of Gross Household Income by Quintile, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . .67 C1.8 Share of Household Food Expenditures by Income Quintile, 2007 . . . . . . . . . . . . . . . . . . . . . .67 C1.9 Per Capita Consumption of Dairy Products, Fruits and Vegetables and Fats and Oils, 1990-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .68 C1.10 Per Capita Consumption of Beef, Pork and Poultry, 1990-2008 . . . . . . . . . . . . . . . . . . . . . . . .68 C1.11 Consumption of Red Meat by Country, 1998-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 C1.12 Consumption of Vegetable Oils by Country, 1998-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .69 C1.13 Global Consumption of Dairy Products, 1999-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 C1.14 Consumption of Wheat by Country, 1998-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .70 C1.15 Consumer Food Price Indices (CPI) for Food and All Items, 1982-2008 . . . . . . . . . . . . . . . . . .71 C1.16 Canadian Retail Food Price Inflation by Category, 2007 and 2008 . . . . . . . . . . . . . . . . . . . . . .71 C1.17 Percentage Reporting the Following Actions Due to the Rising Cost of Living in 2008 . . . . . .72 An Overview of the Canadian Agriculture and Agri-Food System vii List of Charts viii List of ChartsC1.18 Percentage Responding ?very or somewhat important? to the Following Grocery Product Issues, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72 C1.19 Organic Food Sold in Canadian Supermarkets, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73 C1.20 Retail Market Channels of Organic Food Sales Estimates, 2006 . . . . . . . . . . . . . . . . . . . . . . . . 73 C2 Food Distribution (Retail/Wholesale and Foodservice) . . . . . . . . . . . . . . . . . . . . . 75 C2.1 Number of Canadian Food Stores and Average Sales, 1990-2008 . . . . . . . . . . . . . . . . . . . . . . 76 C2.2 Share of Canadian Food Store Sales Chains vs. Independents by Region, 2008 . . . . . . . . . . . 76 C2.3 Average Profit Margin Ratio for Food and Beverage Retailers, 1999-2008 . . . . . . . . . . . . . . . . 77 C2.4 Food and Beverage Sales by Food Retail Channel, 1998 vs. 2008 . . . . . . . . . . . . . . . . . . . . . . 78 C2.5 Private Label Share of Grocery Sales by Department, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . 78 C2.6 Commercial Foodservice Sales and Number of Establishments, 1998-2008 . . . . . . . . . . . . . . 79 C2.7 Commercial Restaurant Bankruptcies, 1991-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79 C2.8 Foodservice Market Share Chains vs. Independents, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 C2.9 Market Share by Foodservice Category, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80 C2.10 Profit Margins for Foodservice and Drinking Establishments, 1999-2007 . . . . . . . . . . . . . . . . 81 C3 Food, Beverage and Tobacco (FBT) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83 C3.1 Food Processing Input Composition and Output Disposition, 2005 . . . . . . . . . . . . . . . . . . . . 84 C3.2 Distribution of Total Manufacturing GDP by Sector, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85 C3.3 Distribution of Total Manufacturing Employment by Sector, 2008 . . . . . . . . . . . . . . . . . . . . . 85 C3.4 Value of Food and Beverage Manufacturing Shipments, 1992-2008 . . . . . . . . . . . . . . . . . . . . 86 C3.5 Growth in Shipment Value in Real Dollars by Food and Beverage Processing Industry, 1995-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86 C3.6 Distribution of Food Processing Shipments and Number of Establishments by Employment Size, 2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87 C3.7 Concentration Ratio (CR4) in The Food Processing Industry, 2006 . . . . . . . . . . . . . . . . . . . . . 87 C3.8 Food and Beverage Processing Export Intensities, by Sub-Industry, 2008 . . . . . . . . . . . . . . . . 88 C3.9 Food and Beverage Processing Import Intensities, by Sub-Industry, 2008. . . . . . . . . . . . . . . . 88 C3.10 Share of Sub-Industry Exports of Total Food and Beverage Exports, 2008. . . . . . . . . . . . . . . . 89 C3.11 Destinations of Meat Processing Industry Exports, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89 C3.12 Destinations of Grain and Oilseed Milling Industry Exports, 2008. . . . . . . . . . . . . . . . . . . . . . 90 C3.13 Destinations of Seafood Industry Exports, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90 C3.14 Variable Input Costs in Food Manufacturing, 2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 C3.15 Raw Material Price Index, 1999-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 91 C3.16 Average Weekly Earnings in Food and Beverage and Total Manufacturing, 1991-2008 . . . . . 92 C3.17 Composition of Labour Force in Food and Beverage Manufacturing by Education Level, 1991-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92 C3.18 Capital Investment in the Canadian Food Processing Industry, 1961-2008 . . . . . . . . . . . . . . . 93 C3.19 Capital Stock in the Canadian Food Processing Industry, 1961-2008 . . . . . . . . . . . . . . . . . . . 93 C3.20 Profit Margin Ratio in Food and Total Manufacturing, 1999-2008 . . . . . . . . . . . . . . . . . . . . . . 94 C3.21 Debt to Equity Ratio in Food and Total Manufacturing, 1999-2008. . . . . . . . . . . . . . . . . . . . . 94 C3.22 Stock of FDI in the Canadian Food Processing Industry by Country of Origin, 2000-2008. . . 95 C3.23 Stock of FDI in the Canadian Beverage Processing Industry by Country of Origin, 2000-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95 C3.24 Accumulated Outward Investment in the Food Processing Industry by Country of Destination, 2000-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96An Overview of the Canadian Agriculture and Agri-Food System C4 Primary Agriculture . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .97 C4.1 Disposition of the Value of Agricultural Production, 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .98 C4.2 Number and Size of Farms in Canada, 1941-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .99 C4.3 Distribution of Farms by Province, 2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .99 C4.4 Farm Market Receipts by Commodity Share, 1990 and 2008 . . . . . . . . . . . . . . . . . . . . . . . . .100 C4.5 Regional Farm Market Receipts by Commodity Share, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . .100 C4.6 Canada Corn, Wheat and Soybean Prices, 1982-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 C4.7 Cattle Price Cycle, 1980-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101 C4.8 Farm Market Receipts by Commodity, 2000-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .102 C4.9 Regional Farm Market Receipts, 2008 Relative to Five-Year Average . . . . . . . . . . . . . . . . . . . .102 C4.10 Farm Operating Expenses, 1991-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .103 C4.11 Realized Net Market Income and Program Payments, 1991-2008 . . . . . . . . . . . . . . . . . . . . . .103 C4.12 Net Value-Added in Agriculture, 1991-2009. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104 C4.13 Distribution of Net Value-Added, 2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .104 C4.14 Distribution of Gross Farm Receipts by Revenue Class, 1986-2006 . . . . . . . . . . . . . . . . . . . . .105 C4.15 Share of Farms and Gross Farm Revenues by Revenue Class, 2006 . . . . . . . . . . . . . . . . . . . . .105 C4.16 Average Net Operating Income by Revenue Class, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . .106 C4.17 Average Net Operating Income by Province, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 C4.18 Average Net Operating Income by Farm Type, 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 107 C4.19 Average Income of Farm Families by Source of Income, 2009. . . . . . . . . . . . . . . . . . . . . . . . .108 C4.20 Average Income of Farm Families by Source of Income, 2004-2009 . . . . . . . . . . . . . . . . . . . .108 C4.21 Average Total Net Worth by Farm Type, 1995-2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .109 C4.22 Average Farm Total Net Worth by Province, 2005-2007. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .109 C4.23 Average Assets, Liabilities and Net Worth by Farm Type, 2007 . . . . . . . . . . . . . . . . . . . . . . . . 110 C4.24 Average Quota Value of Supply-Managed Farms, 1997-2007 . . . . . . . . . . . . . . . . . . . . . . . . . 110 C4.25 Debt to Asset Ratios for All Farms, 1995-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 111 C4.26 Financial Position of All Farms with Revenues of $250,000 and Over, 2007 . . . . . . . . . . . . . . 111 C4.27 Rates of Return for Grain and Oilseed Farms, 1997-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 C4.28 Rates of Return for Hog Farms, 1997-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 112 C5 Agricultural Input and Service Suppliers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 113 C5.1 The Value Chain of Agriculture-Specific Input and Service Suppliers . . . . . . . . . . . . . . . . . . . 114 C5.2 Farm Net Operating Expenses and Depreciation, 2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 C5.3 Farm Input Prices and Farm Product Prices, 1971-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115 C5.4 Farm Expenses on Machinery Fuel, 1990-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 C5.5 Anhydrous Ammonia & Natural Gas Prices, 1991-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 116 C5.6 Farm Input Price Index (FIPI) for Fertilizer, 1998-2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 117 C5.7 Fertilizer Prices by Region, 1999-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .118 C5.8 Fertilizer Prices in Western Canada, 2001-2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 C5.9 Canadian and World Feed Grain Prices, 1991-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 C5.10 Canadian Feeder Calf Prices, 1991-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 119 C6 Natural Resource Use and Environmental Impacts . . . . . . . . . . . . . . . . . . . . . . . . .121 C6.1 Share of Agricultural Land and Land in Forest to Total Land, 2001 . . . . . . . . . . . . . . . . . . . . . 122 C6.2 Annual Average Rate of Conversion of Farmland to Urban Use by Province, 1966-2001 Avg. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 122 An Overview of the Canadian Agriculture and Agri-Food System ix List of Charts C6.3 Annual Average Rate of Conversion Between Forest and Farmland by Province, 1996-2001 Avg. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 123 C6.4 Share of Agricultural Land by Habitat Capacity Category, 1986, 1996 and 2006 . . . . . . . . . 123 C6.5 Canadian Land Use, 1971-2006. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .124 C6.6 Canadian Agricultural Land Use, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .124 C6.7 Tillage Practices, 1991-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 C6.8 Soil Conservation Practices, 2001-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 125 C6.9 Area-Weighted Mean Annual Soil Cover Days, 1981-2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 126 C6.10 Breakdown of Total Cropland Area by Erosion Risk Classes, 1981-2006. . . . . . . . . . . . . . . . . 126 C6.11 Agricultural Water Withdrawal Relative to Water Uses for Other Sectors in Canada, 1998-2002 Avg. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 127 C6.12 Distribution of Total Agricultural Water Use by Type, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . 127 C6.13 Total Agricultural Water Use by Province, 2001 and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 C6.14 Irrigated Areas by Province, 2000 and 2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 128 C6.15 Percent of Farms with Wetlands and Waterways that Maintained a Riparian Buffer by Province, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 C6.16 Percent of Grazing Livestock Farms with Controlled Access to Surface Water by Province, 2001 and 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129 C6.17 Percent of Farmers with an EFP, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 130 C6.18 Percent of Farms that Adopted a BMP from their EFP, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . 130 Section D Government and the Agriculture and Agri-Food Sector D1 Government Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 133 D1.1 Government Expenditures in Support of the Agriculture and Agri-Food Sector, 1985-86 to 2008-09. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 D1.2 Government Expenditures in Support of the Agriculture and Agri-Food Sector and as a Share of Agriculture GDP, 1985-86 to 2008-09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . 134 D1.3 Government Expenditures in Support of the Agriculture and Agri-Food Sector by Province, 2008-09. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 D1.4 Government Expenditures in the Agriculture and Agri-Food Sector as a Share of Sector GDP by Province, 2008-09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 135 D1.5 Federal Government Expenditures in Support of the Agriculture and Agri-Food Sector by Major Category, 2008-09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 D1.6 Provincial Government Expenditures in Support of the Agriculture and Agri-Food Sector by Major Category, 2008-09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 136 D1.7 Government Research Expenditures on Agriculture and Agri-Food, 1990-91 to 2008-09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .137 D1.8 Support to Farm Producers Through Tax Rebates and Exemptions, 1991-92 to 2008-09 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 D1.9 Combined Federal/Provincial Corporate Income Tax Rates for Manufacturers and Processors, Ontario and Quebec, 1960-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 138 D1.10 Stock of Public Engineering Infrastructure by Level of Government, 1961-2008 . . . . . . . . . . 139 D1.11 Stock of Provincial Government Engineering Infrastructure by Province, 1961-2008 . . . . . . 139 D1.12 Stock of Local, Municipal and Regional Government Engineering Infrastructure by Province, 1961-2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 140 An Overview of the Canadian Agriculture and Agri-Food System x List of Charts D2 Producer Support Estimates (PSE) and Agricultural Policies in Other Countries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .141 D2.1 Percent of PSE in Selected Countries, 1986-2008. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .142 D2.2 Composition of Support to Producers, Canada, 1986-1988 and 2005-2008 . . . . . . . . . . . . .142 D2.3 Composition of Support to Producers in the EU, 1986-1988 and 2006-2008. . . . . . . . . . . . .143 D2.4 Composition of Support to Producers in the U.S., 1986-1988 and 2006-2008. . . . . . . . . . . .143 An Overview of the Canadian Agriculture and Agri-Food System xi List of Charts F OREWORD This 2009 report provides an economic overview of the Canadian agriculture and agri-food system. It is meant to be a multi-purpose reference document to provide: ? an introduction to the agriculture and agri-food system; ? a snapshot of structural changes that are occurring throughout the system in response to various factors; and ? background data and information to inform public discussions on challenges and opportunities facing the Canadian agriculture and agri-food system. Charts and tables with brief accompanying texts are used to summarize information and to provide base performance indicators. The 2009 report begins with a special feature which describes indicators to benchmark competitiveness of the Canadian agriculture and agri-food sector at the beginning of Growing Forward. This includes indi- cators of long run sales growth in domestic and international markets and relative profitability. It also presents some of the key factors determining competitiveness in the sector. It continues by reviewing each segment of the system, going upstream from consumers to food distribu- tion, food and beverage (FB) processing, primary agriculture, and input suppliers. It also contains a sec- tion that considers the natural resources available in Canada and the environmental impacts of agriculture on those resources. It concludes with a review of government expenditures in support of agri- culture, including international comparisons of measures of support. It describes the Canadian agriculture and agri-food system as a highly complex, integrated, internation- ally competitive and growing part of the Canadian economy. It is a resilient system, responding to the challenges and opportunities it faces by restructuring and adapting to changing consumer demands, advancing technology, increased demand for bioproducts and functional foods and natural health (FFNH) products, North American integration and globalization. An Overview of the Canadian Agriculture and Agri-Food System xiii culture and agri-food sector has been decreasing over time as a share of output, but this share still remains higher than in the U.S. Private R&D spending as a share of GDP in the food manufacturing industry continues to be significantly lower than that of total manufacturing and below that in other countries. H IGHLIGHTS ? The agriculture and agri-food system encompasses several industries including the farm input and service supplier industries, primary agriculture, food, beverage and tobacco (FBT) processing, whole- sale, distribution and retail food industries and foodservice. ? It continues to play an important role in the federal and provincial economies, making a significant contribution to Gross Domestic Product (GDP) and employment. In 2008, it directly provided one in eight jobs and accounted for 8.1% of total GDP. ? While primary agriculture accounts for a small share of the total economy, it is at the heart of the agri- culture and agri-food system. Any changes in commodity markets can therefore have impacts on the performance of primary agriculture and the whole supply chain. ? The performance of the agriculture and agri-food system has been heavily influenced by develop- ments over the past two years, which saw crude oil and commodity prices rise sharply to record levels in July 2008, followed by price declines in 2009 in the wake of a serious global financial crisis and recession and record crops. ? Increased volatility in commodity markets and exchange rates have added to the heightened increased uncertainty associated with marketing agriculture and agri-food products in Canada and around the world. ? Export opportunities are critical for the growth of most Canadian agriculture and agri-food industries. In 2008, Canada was the fourth-largest exporter and sixth-largest importer of agriculture and agri- food products in the world, with exports and imports valued at $38.8 billion and $24.9 billion, respectively. Recent volatility in commodity markets and the exchange rate have affected Canada?s trade. ? The agriculture and agri-food system has become more internationally focussed with Canada's share of world agriculture and agri-food trade increasing over the past 15 years in response to trade liberali- zation and global economic growth. The composition of the agriculture and agri-food system's trade has also changed with increasing exports of higher value-added goods that meet changing global demands and societal concerns. ? The prosperity of the sector depends on its ability to remain competitive and viable. Competitiveness is a comparative notion defined as the ability to produce profitably and to maintain long-run viability in relation to competitors for relevant markets. Competitiveness indicators such as long-run sales growth in domestic and international markets and relative profitability measures prior to Growing Forward, show how Canada remained relatively competitive in markets for agriculture and agri-food processing products in 2008. ? Innovation is a key factor in determining competitiveness, with public and private spending on research and development (R&D) ? a major input into innovation. Public R&D spending in the agri-An Overview of the Canadian Agriculture and Agri-Food System xv xvi A Highlights? The agriculture and agri-food sector is benefitting from the development of innovative products such as bioproducts and functional foods and natural health (FFNH) products that provide excellent market opportunities to diversify and introduce new products that respond to societal concerns in an increas- ingly-competitive global market. ? Changing consumer and societal demands are influencing changes throughout the whole agriculture and agri-food system. Consumers are demanding more variety, more convenience, more environ- mentally-friendly and healthier food choices, accompanied by proper assurances of quality and safety. ? Canadians enjoy some of the lowest food costs in the world, with food from stores accounting for only 10% of personal household expenditures in recent years. ? The food, beverage and tobacco (FBT) processing sector is a group of industries that transforms pri- mary production, and is the second most important manufacturing sector in Canada. It is important for the agriculture industry, since 44% of agricultural production is used as raw material inputs by this industry. ? FBT processing experienced growth in 2008 leading to higher GDP, but higher input costs are squeez- ing margins due to higher prices and volatile exchange rates and forcing the sector to adjust their business strategies. ? In response to challenges and changing market conditions, the agricultural sector has gone through considerable transformation and has continued to restructure towards fewer, larger farms. There is also an increasing number of farms diversifying production, growing organic products and adopting environmentally-friendly production methods. ? Canadian farms differ by size, scale, farm type and typology, while farm operators differ by manage- ment skills and business strategies. Therefore, differences in performance between farms can be explained by this diversity. Some farm families rely more on off-farm income to help them manage uncertainty due to production and marketing risks. ? Input suppliers and service providers also perform important functions in the agriculture and agri- food system. In 2008, producers spent over $38 billion in operating expenses, with commercial feed constituting the largest part of expenses. In addition to already large input expenses, recent increases in the costs of fuel, fertilizer and pesticides are putting added pressure on farmers. Higher feed costs due to sharply higher grain and oilseed prices in 2008 added to the financial pressures for livestock farms in particular. ? Total government (federal and provincial) support to the agriculture and agri-food sector increased slightly from 2007-2008 to reach an estimated $7.9 billion in 2008-2009 or 30% of total sector GDP. ? Program payments continue to account for the largest portion of both federal and provincial govern- ment expenditures in support of the sector in 2008-2009, followed by spending on research and inspection. ? Government support to the sector varies across provinces. On the basis of government support as a percentage of agriculture and agri-food GDP, farmers in Newfoundland and Labrador, Quebec, Nova Scotia and Manitoba received the most support. ? Agricultural policies in Canada and other countries have evolved over time. Some countries have made major reforms to their agricultural policies, leading to reductions in levels of support and modi- fications to the types of support provided. ? Canada's Producer Support Estimate (PSE) for all commodities was estimated at 13% in 2008, com- pared to 7% for the U.S. and 25% for the EU. In 2008, the percentage PSE declined for the main OECD countries mainly because of increased gross farm receipts and reduced market price support due to higher world prices.n Overview of the Canadian Agriculture and Agri-Food System S ECTION A Special Feature1 S ECTION A1 Benchmarking CompetitivenessThe new agricultural policy framework, Growing Forward, has established policies and programs that will be in place until 2012/2013. A strategic outcome at which Growing Forward is aimed is a competitive and innovative sector. This section provides information that can be used to benchmark the competitiveness of the sector prior to the introduction of Growing Forward. Competitiveness is a comparative notion defined in this section as ?the ability to produce profitably and to maintain long-run viability, in relation to competitors, for relevant markets?. There are several types of indicators that could be used to quantify competitiveness according to this definition. Possible indicators of competitiveness include long run sales growth in domestic and international markets and sustained profitability relative to key competitors. Potential factors, or determinants, that may explain competitiveness are also discussed. These include changes in relative variable costs, relative total factor productivity growth and relative growth in public R&D investments. This section quantifies these indicators and determinants of competitiveness for the agriculture and agri-food sector as a whole, the primary agriculture sector and the food and beverage processing industry. 3 The ability of Canada's agriculture and agri-food sector to maintain a presence in world markets is one indicator of competitiveness 4 Section A1Chart A1.1 World Agricultural and Agri-Food Exports ? Canada?s share of world agricultural 1999-2008 and agri-food trade remained relatively 800 constant, around 5.5%, as our exports ROW grew in line with world exports to Canada 700 Brazil US$38.8 billion between 1999 and 600 EU 2008. U.S. 500 This is in contrast to the U.S., which saw its 400 share of world exports decline over time even 300 as its exports grew. Other countries, such as 200 Brazil, saw their share of world exports expand. Brazil?s exports totalled US$58 billion 100 in 2008. 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Global Trade Atlas and AAFC calculations. Notes: 1) Excludes intra-EU trade. 2) Excludes fresh seafood. Chart A1.2 ? On average, roughly half of Canada's Destinations of Canadian Agricultural and Agri-Food Exports 1999-2008 total agricultural and agri-food exports ROW were destined for the U.S. 45 U.S. 40 Japan Canada?s agricultural and agri-food exports 35 EU increased over the past decade to $38.8 billion Mexico 30 in 2008. China 25 On average, processed products accounted 20 for 57% of total agricultural and agri-food 15 exports, although this share fell in 2007 and 10 2008 due to higher world prices for bulk 5 commodities. 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Statistics Canada and AAFC calculations. US$ Billion Billion $ An Overview of the Canadian Agriculture and Agri-Food System The definition of relevant markets and competitors is critical in interpreting measures of competitiveness for both primary agriculture and food and Benchmarking Competitivenessbeverage processing Chart A1.3 Export Orientation of Canada's Primary Agriculture Sector ? Measures of export orientation indicate and Food and Beverage Processing Industry that export markets have been 2008 relatively more important for the 60 primary sector than the food and beverage processing industry. 50 40 Just over 50% of Canada's primary agriculture production was exported in 2008 compared 30 to roughly 23% for the food and beverage pro- cessing industry. 20 10 Trade figures tell a compelling story about the competitiveness of Canadian primary agricul- 0 ture, given the importance of exports to the Primary Agriculture Sector Food & Bev. Processing Industry sector. Source: Statistics Canada and AAFC calculations. Chart A1.4 ? Canadian primary agriculture exports Destinations of Canadian Primary Agriculture Exports 1999-2008 grew rapidly in 2007 and 2008. ROW 25 China This export growth was due in large part to Mexico greater export values of grains and oilseeds at 20 EU a time of higher global prices for these Japan commodities. 15 U.S. The major export market has historically been 10 the U.S., although export growth occurred in other markets, such as Japan, the EU, China 5 and Mexico since 2005. 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Statistics Canada and AAFC calculations. Percent Billion $ An Overview of the Canadian Agriculture and Agri-Food System 5 Canada?s presence in international and domestic crop and livestock markets provide an indication of the primary agriculture sector?s competitiveness 6 Section A1Chart A1.5 Average Annual Growth in Canadian Crop Sales ? Canada's presence in world crop and World Market Size markets decreased on average between 1998-2007 1998 and 2007, indicating a decline in 3.0 competitiveness. 2.5 Canada exports crops to a diverse range of 2.0 countries around the world. While the size of this world crop market grew at an average 1.5 annual rate of 2.3%, Canadian crop sales to the combined domestic and export market 1.0 grew at an average annual rate of 1.1%. 0.5 0.0 World Market Canadian Sales Source: Food and Agriculture Organization of the United Nations (FAO). Chart A1.6 ? Canada maintained its presence in Average Annual Growth in Canadian Livestock Sales and World Market Size world livestock markets between 1998 1998-2007 and 2007, indicating that the sector 3.0 remains competitive 2.5 Canadian sales of livestock to the combined 2.0 domestic and export market grew at an average annual rate of 1.8%, which was the 1.5 same pace as growth seen in the world livestock market. 1.0 0.5 0.0 World Market Canadian Sales Source: Food and Agriculture Organization of the United Nations (FAO). PPeerrcceenntt PPeerrcceennttAn Overview of the Canadian Agriculture and Agri-Food System Potential factors determining the Canadian primary agriculture sector?s competitiveness includes relative R&D investments and productivity growth Chart A1.7 Public R&D Support to the Agriculture and Agri-Food Sector ? Canada's public R&D spending in the 1986-2008* agriculture and agri-food sector declined 1.8 Canada as a share of gross farm receipts from an 1.6 U.S. average of 1.6% between 1986 and 1992 1.4 to 1.3% between 1999 and 2008. 1.2 In the period from 1999 to 2008, Canadian 1.0 public sector R&D as a share of gross farm 0.8 receipts was higher than that in the U.S. The 0.6 average share in the U.S. has remained in the 0.4 0.7% range over the past twenty years. 0.2 0.0 1986-1992 1993-1998 1999-2008 Source: OECD Agricultural Policies in OECD Countries: Monitoring and Evaluation 2009. Note: *Data for 2008 is preliminary. Chart A1.8 Canadian and U.S. Total Factor Productivity Growth ? Average annual productivity growth in in Primary Agriculture Canadian primary agriculture has 1988-2005 2.5 Canada consistently lagged that of the U.S. and U.S. has fallen recently. 2.0 Over the period between 1988 and 2005, the 1.5 average annual productivity growth rate in Canada was about 1.2% versus 1.8% in the 1.0 U.S. When viewed in terms of the two sub- periods, productivity growth was similar to 0.5 the U.S. between 1988 and 1996, but considerably lower between 1997 and 2005. 0.0 1988-2005 1988-1996 1997-2005 All-Period Average Sub-Period Average Sub-Period Average Source: Statistics Canada and USDA (ERS). Note: These are geometric mean growth rates for gross output total factor productivity indexes. An Overview of the Canadian Agriculture and Agri-Food System 7 PPeerrcceenntt Gross Farm Receipts (%) Benchmarking Competitiveness The next set of charts examines the competitiveness of the Canadian food and beverage industry both as a whole and by sub-industry. The first chart on each page shows the destinations of Canadian shipments for the industry, where these are divided into shipments to Canada, the U.S. and the Rest of the World (ROW). In some cases, exports to the BRIC (Brazil, Russia, India and China) countries are also shown. The data shows that Canada has been the most important market, followed by the U.S., for most sub-industries. The second chart on each page focuses on the Canada-U.S. market, showing the apparent size of this market and the value of Canadian shipments sold within it. This gives a measure of potential sales and the Canadian industry?s presence within this market. Under NAFTA, Canadian firms have access to U.S. markets, whether or not they choose to compete there. This choice depends on the perceived risks (e.g., foreign exchange and regulations) that may result in higher or lower profits than those derived from selling domestically. For a given industry, the potential for sales changes as the overall Canada-U.S. market expands or contracts. The word ?apparent? refers to the fact that the size of the market here is an estimate. 8 An Overview of the Canadian Agriculture and Agri-Food System Section A1 The Canadian food and beverage manufacturing industry has competed mainly within the Canada-U.S. market Benchmarking CompetitivenessChart A1.9 Destinations of Canadian Food and Beverage ? Total Canadian food and beverage Manufacturing Shipments manufacturing shipments grew by 1999-2008 100 BRIC $24.4 billion between 1999 and 2008 ROW 90 to $87.7 billion, with $17.9 billion U.S. 80 accounted for by sales to the domestic Canada 70 market. 60 The U.S., with a domestic market worth 50 roughly US$600 billion, accounted for $3.3 40 billion in sales growth and continued to be the 30 most important destination for Canadian 20 processed food and beverage products. Taken 10 together, shipments to Canada and the U.S. 0 markets accounted for more than four-fifths of 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 all sales. Source: Statistics Canada and AAFC calculations. Chart A1.10 ? The apparent size of the Canada-U.S. Origins of Manufactured Food and Beverage Products Sold in the Canada-U.S. Market market grew by US$167 billion to 1999-2006 US$672 bil 800lion between 1999 and 2006. ROW 700 U.S. Canadian shipments to the Canada-U.S. mar- Canada 600 ket grew by US$26 billion to US$65 billion over this period, with most of this sales growth 500 occurring within Canada. 400 300 200 100 0 1999 2000 2001 2002 2003 2004 2005 2006 Source: Statistics Canada, U.S. International Trade Commission, U.S. Bureau of Economic Analysis and AAFC calculations. UUSS$$ BBiilllliioonn Billion $ An Overview of the Canadian Agriculture and Agri-Food System 9 By sub-industry, most Canadian red meat processing industry sales were destined for the growing Canada-U.S. market, although exports to other markets 10 Section A1increased as well Chart A1.11 Destinations of Canadian Red Meat Processing* ? Shipments rose by $3.9 billion to $16.3 Industry Shipments billion between 1999 and 2008 with BRIC 1999-2008 20 growth of $2.8 billion in domestic ROW 18 Japan shipments and growth of $1.6 billion in U.S. exports to non-U.S. markets, such as 16 Canada Japan and Russia. 14 12 While the U.S. was the primary export 10 destination for Canadian processed red meat 8 products, accounting for 10% of total 6 shipments in 2008, shipments to the U.S. fell 4 by $459 million between 1999 and 2008 to 2 $2.0 billion. 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Statistics Canada, Industry Canada and AAFC calculations. Note: *Includes animal slaughtering and processing. Chart A1.12 ? The apparent size of the Canada-U.S. Origins of Red Meat Products Sold in the Canada-U.S. Market 1999-2006 market grew by US$31.4 billion to U 120S$109.2 billion between 1999 and ROW 2006. U.S. 100 Canada Canadian firms took advantage of domestic 80 market growth to maintain an average 10% share of the Canada-U.S. market. By 60 maintaining its share in a growing market, Canada?s red meat processing industry 40 remained competitive. 20 0 1999 2000 2001 2002 2003 2004 2005 2006 Source: Statistics Canada, U.S. International Trade Commission, U.S. Bureau of Economic Analysis and AAFC calculations. UUSS$$ BBiilllliioonn Billion $An Overview of the Canadian Agriculture and Agri-Food System The beverage manufacturing industry has been a growing Canadian industry that produces primarily for the domestic market but has faced Benchmarking Competitivenesscompetition from non-U.S. imports Chart A1.13 ? Growth in Canadian beverage shipments Destinations of Canadian Beverage* Manufacturing Industry Shipments to the domestic market more than offset 1999-2008 12 declining sales to the U.S. over the past ROW decade. U.S. 10 Canada Total shipments grew by $1.3 billion to $9.5 8 billion between 1999 and 2008, despite exports to the U.S. falling by $558 million to 6 $766 million. 4 2 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Statistics Canada and AAFC calculations. Note: *Includes soft drinks and alcoholic beverages. Chart A1.14 ? The Canadian beverage manufacturing Origins of Beverage Products Sold in the Canada-U.S. Market* industry maintained an 8% share of the 1999-2006 apparent Canada-U.S. market, which 120 ROW grew in size by US$30 billion to US$99 U.S. 100 billion. Therefore, the industry appears Canada to have remained competitive. 80 Competition mainly came from outside of 60 Canada and the U.S. In 2006, imports from other countries accounted for 15% of sales in 40 the Canada-U.S. market, up from 10% in 1999. 20 0 1999 2000 2001 2002 2003 2004 2005 2006 Source: Statistics Canada, U.S. International Trade Commission, U.S. Bureau of Economic Analysis and AAFC calculations. Note: *Includes soft drinks and alcoholic beverages. UUSS$$ BBiilllliioonn US$ BillionAn Overview of the Canadian Agriculture and Agri-Food System 11 The Canadian bakery and tortilla manufacturing industry took advantage of growing markets in both Canada and the U.S. 12 Section A1Chart A1.15 Destinations of Canadian Bakery and Tortilla Manufacturing ? Shipments increased by $3.4 billion to Industry Shipments $7.9 billion between 1999 and 2008. 1999-2008 9 ROW About four-fifths of all sales were domestic, 8 U.S. Canada while one-fifth were sales to the U.S. These 7 shares remained fairly constant over the past 6 decade. 5 4 3 2 1 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Statistics Canada and AAFC calculations. Chart A1.16 ? The apparent size of the Canada-U.S. Origins of Bakery and Tortilla Products Sold in the Canada-U.S. Market market grew by US$10.5 billion to 1999-2006 ROW US$56.4 60 billion, with one-quarter of U.S. this growth occurring within Canada. Canada 50 With sales growth of US$2.2 billion in Canada 40 and US$631 million in the U.S., the Canadian industry?s share of the Canada-U.S. market 30 rose from 7% in 1999 to 10% in 2006. 20 A growing share in a growing market appears 10 to indicate that Canada?s bakery and tortilla industry has been increasingly competitive. 0 1999 2000 2001 2002 2003 2004 2005 2006 Source: Statistics Canada, U.S. International Trade Commission, U.S. Bureau of Economic Analysis and AAFC calculations. Billion $ US$ BillionAn Overview of the Canadian Agriculture and Agri-Food System Some industries, such as the grain and oilseed milling industry, were able to take advantage of opportunities in the U.S. when they appeared, such as during the recent period of high grain prices Chart A1.17 Destinations of Canadian Grain and Oilseed Milling ? Total shipments averaged $5.6 billion Industry Shipments annually between 1999 and 2006 before 1999-2008 BRIC 8 climbing to $7.8 billion in 2008. ROW 7 U.S. While exports to the U.S. as a percentage of Canada 6 total shipments increased gradually up to 5 2005, this proportion rose sharply from 29% 4 in 2006 to 40% in 2008. Over this two-year period, exports to the U.S. rose by $1.5 billion 3 to $3.1 billion in 2008. Domestic sales were 2 $4.0 billion in 2008. 1 0 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Statistics Canada and AAFC calculations. Chart A1.18 ? The Canada-U.S. market grew by Origins of Grain and Oilseed Products Sold US$12.3 billion to US$54 billion in the Canada-U.S. Market 1999-2006 between 1999 and 2006. Roughly US$1 70 ROW billion of this increase was accounted U.S. 60 for by the Canadian industry, with Canada domestic sales increasing by US$424 50 million and exports to the U.S. rising by 40 US$602 million. 30 A relatively stable 8% share of the Canada-U.S. 20 market indicates that Canada?s grain and oilseed industry has remained competitive. 10 0 1999 2000 2001 2002 2003 2004 2005 2006 Source: Statistics Canada, U.S. International Trade Commission, U.S. Bureau of Economic Analysis and AAFC calculations. An Overview of the Canadian Agriculture and Agri-Food System 13 US$ Billion Billion $ Benchmarking Competitiveness Canada's fruit and vegetable preserving and specialty food manufacturing industry took advantage of growth opportunities in both Canada and the 14 Section A1U.S. Chart A1.19 Destinations of Canadian Fruit and Vegetable Preserving ? Shipments grew by $2.5 billion between and Specialty Food* Manufacturing Industry Shipments 1999 and 2008 to $7.6 billion. Most of 1999-2008 8 BRIC this growth was accounted for by higher ROW sales within Canada and the U.S., but 7 U.S. exports to the rest of the world Canada 6 contributed to some of this growth. 5 The industry focussed increasingly on the U.S. 4 market with exports to the U.S., as a percentage 3 of total shipments, rising from 19% to 24% be 2tween 1999 and 2008. 1 Roughly two-thirds of industry shipments 0 were frozen food products. 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 Source: Statistics Canada and AAFC calculations. Note: *Includes frozen food. Chart A1.20 ? The apparent size of the Canada-U.S. Origins of Fruit and Vegetable Preserving and Specialty Food Products* Sold market grew by US$8.6 billion to in the Canada-U.S. Market US$61.9 billion between 1999 and 70 ROW 1999-2006 U.S. 2006 with US$2 billion of this growth 60 Canada occurring within Canada. 50 At the same time, the Canadian industry took 40 advantage of market growth in the U.S. with a US$731 million increase in
Posted: 25 March 2010

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