Canadian Agri-Food Export Opportunities in a COVID-19 World
Canada is the world’s fifth largest agri-food exporter, exporting half of its production, for an annual export value of C$56 billion. The OECD forecasts increasing global demand for food products, providing opportunities for continued growth of Canada’s export market. Canada’s long, complex, internal supply chains stretch beyond its borders across the globe, terminating in a large array of countries with differing technical abilities, importing supply chains and business cultures. They operate in an internationally competitive environment that is subject to a wide variety of shocks — agronomic, logistical and political.
The shock delivered by the rapid spread of the COVID-19 pandemic, however, was unprecedented in its swiftness and in the magnitude of its disruptive effects. It represented a major test of the resiliency of Canadian agri-food supply chains, in both provisioning the domestic market and servicing export customers. If the ultimate measure of resilient food supply chains is providing safe, reliable availability of food to the population, so that shortages and scarcity are avoided to the greatest degree possible, it is clear that Canadian agri-food supply chains have proven to be highly resilient to the shocks COVID-19 presents. At first, there were no published reports or peer-reviewed documents to support this — it was too soon — but the fact that shortages of specific food products were temporary and within a few weeks, product availability and selection in Canadian grocery stores returned to preCOVID-19 levels provides ample evidence. Food security in Canada was maintained.
While the pandemic has not yet run its course, in a few months Canadian agrifood supply chains returned to the high levels of efficiency they possessed prior to COVID-19, as evidenced by the lack of shortages at grocery stores, and were ready to take advantage of any export opportunities that may present themselves as those markets and our competitors deal with COVID-19.
Agri-food supply chains cannot adjust to shocks instantaneously. The food arriving today is the result of decisions taken months or even years ago. It is a flow that cannot be increased, slowed or diverted easily. Adjustments to shocks take time and may have widespread consequences. COVID-19 brought shocks to both the domestic agri-food market, and the international export market for Canada.
COVID-19 brought two major shocks to the domestic market — a supply shock for some industries due to the direct effect of illness among the workforce and the indirect effect of border closures on the movement of agricultural workers. The demand shock arose from declining incomes as large parts of the rest of the economy shut down and the shift from meals consumed outside the home to in-home consumption required a major repositioning of some supply chains. While there were short-run shortages of some foods, there were always sufficient substitutes on the shelves so that there was a plentiful and diverse selection of food available at all times. For example, even at the height of the initial shock, if a particular cut of beef or chicken was not available, other cuts were; or if no beef was available, other protein sources from chicken to tofu were plentiful. Even then, such shortages were short-lived. There was no food availability problem and food prices were relatively stable during the onset of the pandemic and initial lockdown. Often, where there were problems of access, it was more an issue of consumers having the wherewithal to purchase food rather than a lack of supply. In short, Canadian agrifood supply chains — from farmers through to consumers — proved to be resilient in keeping Canadians fed and up to the challenges brought by COVID-19.
Canada’s export supply chains, given their distance from markets, did not directly feel the disruptions being felt from COVID-19 in their destination markets. Changes like the shift from eating in restaurants to eating at home in those markets were largely masked from Canadian supply chains, given the point at which Canadian agri-food products enter foreign markets and the transportation lags involved. After all, unlike other sectors of an economy that can be shut down in a pandemic, people still need to eat. Disruptions to supply were overcome relatively quickly; thus, Canadian international agri-food chains proved to be resilient and adept at finding work-arounds when problems arose. Secondary disruptions are also apparent due to primary producers feeling economic and operational pressure from the adjustments and stoppages in the supply chain; for example, beef farmers holding back cattle, or potato farmers holding excess unused stock originally intended for the hospitality/restaurant industry.
This proven resiliency will be a considerable asset. Canadian agri-food chains were already efficient and internationally competitive, as evidenced by their consistent export performance. Their resilience has allowed them to remain so. Our major agrifood competitors however, may not prove to be as resilient. Thus, Canadian firms may have opportunities to increase exports as competitors struggle with COVID-19. Some of Canada’s competitors have imposed export restrictions, resulting in underserved markets that can be accessed by Canadian supply chains. Others may struggle to maintain their production and quality levels or to move and transport product, given illness in their labour forces or disruptions to the movement of foreign workers. Importers may see high illness levels in a supplier nation and choose to source from elsewhere. It will be up to Canadian firms and industry associations to monitor the evolution of international competitors’ responses to COVID-19 and how import supply chains in destination markets are coping with it. If domestic supply chains within foreign markets falter, then opportunities for Canadian firms will likely arise. Research into the responses in important markets can assist firms in their monitoring.
The ability of Canadian agri-food chains to take advantage of new export opportunities arising from COVID-19 is premised on those supply chains retaining their high levels of pre-pandemic international competitiveness. Governments need to resist the temptation to deal with what were short-term difficulties in the domestic market by lumbering agri-food supply chains with efficiency-reducing regulations. Encouraging the establishment of smaller, less efficient meat-packing plants is one example (Carlberg 2020). While there may well be future pandemics or other major disruptive shocks, there is no reason to believe they will create the same type of challenges. Current packing plants are efficient and resilient (Brocklebank et al. 2008; Khorana et al. 2015); they are part of supply chains that will be able to take advantage of new opportunities created by COVID-19 as they arise.
Other, more chronic problems such as the international movement of seasonal workers should have permanent and feasible solutions devised to enhance international competitiveness (Falconer 2020a; Falconer 2020b). To maximize this opportunity, short-term economic pain due to COVID-19 impacts should be mitigated with policies such as bridge financing for producers and processors to ensure the primary agriculture production system in Canada is working at optimum capability. Assistance in monitoring competitors and export markets (both current and potential) as well as funding research into opportunities arising from COVID-19 would be helpful. Finally, continued support of the rules-based international trade system and its institutions will facilitate trade growth. Canadian international agri-food supply chains have proven that they can bounce back from the serious challenges of COVID-19. They should now be allowed to use that resilience to garner any new opportunities to export that arise. By 2050, the world’s population is forecast to be nearly 10 billion people, all of whom will require food. Canada is one of the few countries in the world with the capacity to produce significantly more food than its domestic needs and is well placed to take advantage of the opportunities presented by a growing global population.
By May T. Yeung and William A. Kerr
Published February 2021.