As the value of the Canadian agriculture and agri-food economy continues to grow (agriculture and agri-food contributed more than $49 billion to gross domestic product (GDP) in 2019), the stakes and potential gains get higher for all participants in the sector. A recent report from RBC Royal Bank indicates that with proper support, the ag sector could contribute an additional $11 billion to Canada’s GDP by 2030, making it more productive than auto manufacturing and aerospace combined.
There’s one factor we believe will have the most significant impact on the health of the Canadian ag economy in the next couple of years, and likely beyond – trade.
The CUSMA Effect
International trade in Canadian agricultural products has been the single largest driver of the Canadian agri-food sector for decades. According to the Canadian Agri-Food Trade Alliance (CAFTA):
- Canada exports half of our beef/cattle, 70% of our soybeans, 70% of our pork, 75% of our wheat, 90% of our canola and 95% of our pulses
- More than 90% of Canada’s farmers are dependent on exports and about 40% of our food processing sector
- One in two jobs in crop production depends on exports and one in four jobs in food manufacturing
- Over the last 10 years in Canada, agriculture and agri-food exports have grown by 103%, boosting farm cash receipts by 46% over the same period.
There are a few major factors expected to influence trade in Canadian agricultural products this year. While the new Canada-United States-Mexico Agreement (CUSMA) is not fully ratified, it should be shortly. Like other trade agreements, the results will only be fully known over time. And as with all policy changes, there are expected to be winners and losers in each sector.
One sector that can expect to be negatively affected is the supply-managed dairy industry. In February, Saputo Inc. announced it will close two Canadian facilities, cutting nearly 300 jobs, as it looks to trim costs.
While this may or may not be related to CUSMA, it certainly seems like it may have played a role. How the new trilateral trade agreement impacts other sectors remains to be seen but certainly bears watching.
For more insights into key agri-biz and food industry trends, download your free copy of The 2020 Nourish Network Trend Report now.