COVID-19 continues to influence all elements of society and the Canadian economy, and nowhere are the impacts more pronounced and varied than within the agri-food sector. We will not be ‘returning to normal’ as we largely did after epic tragedies like 9/11, Hurricane Katrina, and others. But what will a new normal look like in ag and food?
For decades, the North American agri-food sector has expanded in size and productivity, while contracting its footprint and resource use. According to the latest Canadian Census of Agriculture, the number of farm operators has declined from 480,000 in 1961 to 194,000 in 2016. But the average farm size grew from 359 acres in 1961, to 820 acres in 2016, with many farm operations significantly above these averages. Consolidation in some sectors has been even more dramatic. For example, the number of dairy operations in Canada has declined from 174,000 in 1967 to just over 10,000 in 2019. The food processing and retail sectors have also seen significant rationalization.
Is bigger better?
While efficiencies and economies of size and scale are clearly a driver of this trend, this type of concentration poses a unique challenge in the current pandemic. Now, when production is interrupted – at a major processor or within a sector such as egg production – the effects are immediate and at times dramatic: empty shelves and refrigerator cases at the grocery store, increased prices, decreased selection and even permanent loss of capacity.
While we don’t expect wholesale changes in the primary production, processing, and retailing sectors, we may see the rate of consolidation slow. Consumers might feel more comfortable paying a bit more to buy local, potentially from smaller local stores stocked by smaller, local producers. This is a trend that we have been watching already. Could COVID accelerate the ‘go local’ trend, much like what has happened in the craft beer sector? Could we see more consumers changing to a ‘small is beautiful’ mentality? And how significant could this movement be?
Cheaper is definitely better
Farmers, like consumers, love a good deal. With agricultural margins often tight, watching the pennies is a good way to mitigate risk and improve the bottom line. To this end, many aspects of the Canadian ag economy are now outsourced to less expensive jurisdictions. Things like crop protection products, machinery, equipment, implements and even clothing now come from away.
With logistics and distribution heavily impacted by the pandemic, many in the agricultural value chain have been forced to look for alternate, more local suppliers. Will this become a trend that Canadian manufacturers can take advantage of? Canadian companies have an inherent exchange rate advantage vis-à-vis the United States. Can we leverage this into greater domestic manufacturing capacity, leading to greater security of supply, and even into enhanced export opportunities?
Two words that Canadians have suddenly become familiar with over the past four months are “logistics” and “distribution.” Logistics is the process of planning and executing the efficient transportation and storage of goods from point of production to point of consumption. Something most of us never thought about too much, unless we were stuck behind a slow-moving truck on the 401.
Like supply chain issues, the pandemic has altered distribution chains across the agri-food sector, leading to shortages and interruptions in both production and availability of goods. It’s easy to become impatient when the mechanics of distribution interrupt our daily lives. But, perhaps giving truckers and train engineers more respect for the vital role they play in keeping our economy moving will be something else that comes out of this crisis.
Workers make the ag and food sector function
Low-wage workers clearly play a vital role across the agri-food system. Over the past few months, the importance of migrant workers has become increasingly evident, especially in specific sectors of agriculture, such as fruit and vegetable production. Put simply, without access to this source of consistent and reliable farm labour, crops don’t make it out of the field. COVID has shone a light on not only the low wages paid to these essential workers but also the living conditions some of them face every year. Will a Bill of Rights for farmworkers emerge as one positive from the current mess?
It’s tough to know if any of these trends or impacts will take hold, especially as we remain in the midst of the pandemic, and new realities seem to emerge daily. Safeguarding our food supply clearly needs to be a priority as we live and learn from the COVID-19 experience, and prepare for the next challenges.