Canada is the No. 1 market for U.S. agricultural exports. In 2007, U.S. agricultural exports to Canada reached a record $14.1 billion. U.S. agricultural exports to Canada accounted for 16 percent of total U.S. food and agricultural product exports of $89.9 billion. Consumer-oriented agricultural products accounted for 76 percent of total U.S. food and agricultural product sales to Canada in 2007, with fresh and processed fruits and vegetables, snack foods, breakfast cereals, processed horticultural products, and red meat products as the category leaders. American products accounted for almost 60 percent of total Canadian agricultural imports in 2007.
During 2007, a number of consumer oriented agricultural categories posted record sales to Canada. The top 5 categories are fresh vegetables ($1.4 billion), fresh fruit ($1.3 billion), snack foods ($1.2 billion), red meats, fresh, chilled or frozen ($887 million), processed fruits and vegetables ($831 million) and fruit and vegetable juices ($532 million). Combined items in these categories accounted for more than half of total U.S. exports consumer-oriented agricultural products to Canada.
Canada is also an important market for U.S. fish and forestry exports. Canada is the No. 2 market for U.S. fish and seafood exports and sales during 2007 reached $711 million. Despite being a major producer and world exporter of forest products, Canadian imports of U.S. forest products reached $2.3 billion in 2007. Combined, total U.S. farm, fish and forestry product exports to Canada reached a record $17.0 billion during 2007. Total bilateral agricultural trade between the U.S. and Canada reached $29.3 billion in 2007, more than $80 million per day.
Under the tariff elimination provisions of the North American Free Trade Agreement (NAFTA), the majority of U.S. agricultural products have entered Canada duty-free since January 1, 1998. On December 4, 1998 the United States and Canada signed a Record of Understanding, an agreement to further open Canadian markets to U.S. farm and ranch products. Some tangible benefits of the agreement are already accruing to the U.S. agricultural industry.
Canadian consumers enjoy a high disposable income, coupled with a growing interest in global cuisine and the country's wide ethnic diversity that provides broad food marketing opportunities. Canada's grocery product and foodservice trade have been quick to seize opportunities under NAFTA by expanding their geographical sourcing area to include the United States. The familiarity and confidence in Canadian based U.S. chains (hotels, restaurants and fast food) have helped to increase the demand for high value U.S. foods. Since U.S. food products match Canadian tastes and expectations there have been significant gains in the Canadian market for U.S. consumer ready foods.
On the basis of current market trends and conditions, the following sectors are considered to be best prospects for U.S. exports of food and agricultural products to Canada:
2. Snack Food
3. Fresh Vegetables
4. Fresh Fruit
5. Organic Food
6. Red Meats
7. Processed Fruit and Vegetables
1. Food Service
Despite prospects for a general decline in total food service sales in Canada during 2009 due to a weaker economy, U.S. food sales to that sector are forecast to continue to increase albeit at a lesser rate than in previous years. According to the Canadian Restaurant and Foodservices Association, Canada's food service sector market is forecast to decline by about 2.5 percent during 2009 reflecting an economy in recession; stagnant income growth and rising unemployment that will be reflected in consumer cut backs on discretionary spending. However, most of the decline at food service is expected to impact local production with sales of U.S. food products to Canada's food service industry continuing to demonstrate year-to year increases increase due to strong interaction between American raw product suppliers and U.S. fast food franchises in Canada and the growing presence of major U.S. foodservice distributors in Canada. Also, reduced Canadian livestock inventories have increased both Canadian retail and foodservice demand for high value U.S. fresh and frozen meats. A highly efficient truck-based transportation and distribution system allows the Canadian food service industry to procure U.S. food product offerings directly from U.S. manufacturers in a timely fashion and consistent in quality and supply.
2. Snack Foods
Like Americans, Canadian consumers love snack foods. According to a recent study by Agriculture and Agri-Food Canada, snack foods are one of the fastest growing product categories in the Canadian food market and are widely available in all retail channels across the country, including major chain grocery retailers, mass merchandise outlets, corner stores, drug stores, gas stations and vending machines as well as at movie theaters and sporting events. Whereas imports accounted for less than 10 percent of the Canadian snack food market in the early 1990's, the integration of the North American market under the North American Free Trade Agreement (NAFTA) has resulted in significant import penetration by U.S. snack food manufacturers. Canadian snack food imports now comprise an important share of the total market. The demand in Canada for U.S. snack foods appeared immune to recessionary pressures during 2008 and is estimated to have increased 18 percent from the 2007 record level reaching almost $1.4 billion. U.S. salted snack food exports to Canada include popcorn, corn chips, potato chips, and other savory snack foods while the sweet snack food category is comprised of chewing gum, sugar candy and chocolate confectionery, cookies, waffles, crisp breads, and other biscuit and baked snack products. The category excludes nuts.
3. Fresh Vegetables
U.S. exports of fresh vegetables to Canada are estimated at a record $1.5 billion in 2008, making Canada the number one market for American exports in this product category. On a per capita basis, Canada has one of the highest consumption rates of fresh vegetables in the world. Demand for U.S. vegetables is enhanced due to the short Canadian domestic growing season for vegetables in Canada's northern climate. In recent years, Canadian immigration has been dominated by new arrivals from Asia, where traditional dietary habits also include significant amounts of fresh vegetables. In recent years, food safety issues have risen to the forefront and Canadian consumers show a high level of confidence in the safety of U.S. fresh vegetables. In addition, fresh vegetable consumption is recommended in Health Canada's latest food guide for Canadian consumers. Under NAFTA, American fresh vegetable exports enter Canada duty free. A modern transportation and wholesale dealer network provides Canadian buyers with prompt delivery.
4. Fresh Fruit
Imports of fresh fruit from the United States during 2008 are estimated to have reached $1.5 billion registering nearly a 15 percent increase over the year earlier level. Canada is heavily dependent on imports of fresh fruit to meet total market demand due to the Canadian climate which limits the length of the growing season and the species of fruits that can be grown. During 2008, U.S. exports to Canada captured half of the Canadian import market demand for fresh fruit. Strong U.S. sales gains have been made for fresh strawberries, other berries, grapes, and citrus. An aging Canadian population has contributed to an increased interest in healthy alternatives with regard to diet, a development that is leading to increased demand for quality produce. Major U.S. growers and shippers retain membership in Canada's national produce marketing association which is an important advocate for the industry in Canada on food safety and trade issues and is active in promoting increased fresh fruit consumption among Canadians.
5. Organic Food
While representing only about 2.0-2.5 percent of total Canadian retail food sales, the organic retail market in Canada is currently estimated at $1.1-1.3 billion with strong annual growth rates near 20 percent. The main categories by organic food sales are: fresh vegetables at 25 percent of all organic food sales, beverages (excluding milk) 18 percent, fresh fruits 13 percent and dairy 11 percent. Raw meats represent about 3 percent of sales. At the sub-category level, the largest segments are: soy drinks, bagged salads, ready-to-eat cereals, refrigerated yogurt and bagged broad-leaf vegetables. The majority of Canadian produced organic products are exported as bulk grain and oilseed products. As a result, the Canadian market relies on U.S. organic food suppliers for the majority of fresh and processed organic foods. The proportion of Canadians who regularly purchase organic foods is steadily increasing and virtually every major supermarket chain offers organic produce and other prepackaged organic items. Several U.S.-based organic retailers have recently opened stores in Canada's largest cities, and a major U.S. mass-market retailer includes organic foods in each of its expanding network of super stores.
According to a recent study, organic foods are the only significant growth area in Canadian food retailing, with growth rates far in excess of other food categories (typically 20-25 percent for organic compared to 1-4 percent for other categories). As a result, there are increased opportunities to market U.S. organic foods to a wider demographic. On January 1, 2007 Canada became the first country in the world to introduce Harmonized Trade System codes to officially record imports of organic products. The goal is to eventually develop a full list of codes to track both Canadian import and export trade in all significant organic agricultural products. Given that Canada is heavily dependent on imports of organic food from the United States, the tracking of Canadian imports of organics is expected to provide, for the first time, an accurate measure of the importance of U.S. organic food exports in the Canadian market. Overall, the U.S. organic industry remains well poised to capitalize on the increasing demand for organic foods in Canada.
6. Red Meats
Sales of U.S. fresh or frozen red meats to Canada are on pace to surpass the $1.0 billion level for the first time during 2008, registering an almost 20 percent gain over the previous year. The dynamics of North American beef trade have changed since the detection of a case of bovine spongiform encephalopathy (BSE) in Canada in May 2003. Since that time, a cost-price squeeze in the livestock sector related to high energy and feed costs has resulted in significant declines in Canada's cattle and hog inventories that is reflected in reduced red meat output. In addition, U.S. red meat exports to Canada have benefitted from the relative strengthening in the value of the Canadian dollar compared to the period during the early and mid-2000's and from increased demand for U.S. red meats by Canada's retail and foodservice sectors.
7. Processed Fruit and Vegetables
The Canadian import market for processed fruits and vegetables is one of the fastest growing categories in the high value, consumer-oriented food product sector. U.S. sales in the category are forecast to surpass $1.0 billion in 2009 for the first time reflecting increased Canadian demand for frozen fruits and vegetables, sauces and condiments and tomato based sauces. Frozen fruit and vegetables are sold in a wide-range of product formats such as mixed frozen vegetables, ready-to-heat stir fries, and french fries. Frozen fruit and vegetables are being increasingly incorporated as ingredients by Canadian food manufacturers in ready-to-serve meals including TV dinners, pizza and other entrées. Consumer demand for convenient products, as well as smaller serving sizes, is driving the development of a wide range of ready-to-cook and -eat fruit and vegetable products that are benefitting U.S. sales.