Canadian food sector strong enough to go it alone, says Conference Board

OTTAWA – Canada’s food industry would do fine – better in fact – if supply management and other government supports were eliminated, a new report from the Conference Board argues.

While it’s not the first time the Ottawa-based think-tank has called for market liberalization of Canada’s protected agricultural sector, the report calls on producers to look to the demand explosion in emerging markets for growth, and not simply protecting their domestic turf.

It notes the major source of growth in the word’s food demand is in countries that are already net food importers.

“The Canadian food industry’s prospects are better than ever: the sky is the limit,” the report issued Monday states.

“We know, for instance, that most of the two billion additional people that the world will add between now and 2050 will be in developing countries.

“These countries are getting richer, increasing their average calorie consumption, and relying more on meat and less on starches for their dietary needs.”

The report comes as Canada is being asked by trading partners to dismantle supply management systems that protect domestic producers of eggs, milk and poultry. Eliminating or reforming the system is a key demand of the European Union in free trade talks with Canada.

The think-tank says Canada is well-positioned to take advantage of the expected explosion in demand, but it faces a strategic cross-roads.

The status-quo is sustainable, it says. But the industry could do better by deregulating and competing for the growing global market.

Canadian cheese maker Saputo Inc. chief executive Lino Saputo Jr. said he had not read the report, but added the company would do fine even if the supply management system is dismantled. On Monday, Saputo announced it is seeking to expand its U.S. business by acquiring Morningstar Foods for US$1.45 billion.

“There are some benefits to Canada’s supply management system today. We have more stability in Canada,” he said.

“But the downside of course is that our growth is limited. If tomorrow morning the supply managed system will no longer exist in Canada and the markets would open up between Canada and the United States, I don’t think that there’s any better company set up or strategically oriented to take advantage of the opening up of the border.”

The Conference Board argues that Canada is one of the most protectionist countries in the world in terms of support systems it has put in place for its farmers. Consumers and governments provided about $82 billion in total support for the agricultural sector since 2003, with almost $21 billion going to milk producers, the think-tank calculates.

The think-tank says government attention and money would be better spent addressing well-known and serious problems in the food industry, including food safety, diet-related chronic disease and the environment.

In an earlier research paper, the think-tank noted that many other countries, including New Zealand and Australia, have moved to liberalize their agricultural sectors, with good results.

Like Canada, those countries have seen the number of farms decrease. But whereas Canada’s production has remained stable, New Zealand and Australia have increased production since moving to a more market-based approach.

The Conference Board makes six recommendations it says will help grow the country’s $155-billion food economy.

These include reform of the support programs, improving farm performance by removing barriers to getting bigger and more efficient, expanding sources of capital investment, and adopting approaches used by other commodity-based industries to expand internationally.