Decline in food manufacturing | Official says processed food sector is failing to compete but it is too early to lay blame
A new food industry report reveals that while Canada’s trade surplus in agricultural commodities is soaring based on strong commodity prices, the trade balance for processed foods is deeply in deficit.
Perhaps because of a higher Canadian dollar value and the impact of United States country-of-origin rules, the trade balance in live animals has dropped by one-third to $5.3 billion last year.
An Oct. 5 report from the federal government-supported Canadian Agri-Food Policy Institute said trade in food and beverage products has been running an increasing deficit during the past decade.
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”Since 2004, its trade deficit has risen to nearly $6.5 billion,” said the report.
Vegetables, grain and oilseeds recorded a $10.5 billion trade surplus last year.
“There are a number of factors and it is too early to say exactly what is happening and why,” said CAPI president David McInnes. “We need to do more research but clearly across the board, the processed food sector is experiencing a deficit.”
He said the data do not indicate if part of the issue is increased sales of processed food into the Canadian market.
“This report really sets the stage for other questions,” he said. “Why is this happening? Some sectors are doing well and others not so well. Why? The more you dig down into the data the more revealing it is, so that is what we have to do.”
Industry analysts argue part of the reason for the deficit in the processed food trade is Canada’s stronger dollar but also the extreme decline in the food manufacturing sector in Ontario.
Over the past decade, many plants owned by multinationals have closed in Ontario — the food processing centre of Canada — and moved production to the United States or lower-cost countries off shore.
Agricultural groups also argue that mislabelled or fraudulent food imports have undercut Canadian food sales.
McInnes said the message is clear; that there is a competitiveness problem with Canada’s processed food industry but it is too early to accurately diagnose the causes.
“I think the overall message is that we really need to dig deeper to get better data to explain what is going on,” he said.
CAPI plans a series of reports over the next several years on factors that are affecting competitiveness in the food sector.
He said part of the debate will be whether Canada, as it once did, should set a target for its percentage of world food trade.
“Targets can be incentives but the results may not represent what they appear to represent,” he said.
