The federal government is busy negotiating trade agreements that will boost sales of Canadian grains and oilseeds, but it has no plan for how it will get those products to customers, says an industry analyst.
Exporters are already having difficulty getting product to market at current levels of demand, said Marlene Boersch, managing partner in Mercantile Consulting Venture.
She said the federal government appears to have no export policy other than signing trade agreements.
“We have absolutely no agenda as to how we are going to accommodate that (new demand) internally in terms of infrastructure,” said Boersch.
“Do we actually have an agricultural policy other than Growing Forward, which is a little bit of money here and there and everywhere?”
Agriculture minister Gerry Ritz said the government has a plan in place.
“Our government’s long-term vision for exports includes delivering marketing freedom, opening new markets through free trade agreements, modernizing the (Canadian) Grain Commission and variety registration, adopting and implementing UPOV 91 and strengthening Canada’s rail system through (Bill) C-30 and the CTA review,” he said in an e-mail.
“The facts are clear, that our efforts to date have been successful, with agriculture exports hitting a record $56.4 billion in 2014.”
Ritz said the government will work with members of Canada’s logistics supply chain to ensure industry is building enough capacity to increase exports into key markets.
“We will continue to work with industry to grow Canada’s agricultural exports to unprecedented heights,” he said.
But Boersch sees no real vision coming from Ottawa.
The government should be polling all the major export-oriented industries to determine what their infrastructure requirements will be over the next 10 years and exploring innovative ways to reduce the burden on the transportation system and ports, she said.
“How about, for crying out loud, looking at our supply management because wow, couldn’t you use more feed grains domestically and then export the little chickens.”
Boersch noted that Brazil has built a $10 billion business exporting poultry to Asia.
“They’re like us. They have an excess of feed grains,” she said.
Boersch said feeding chickens would be the simplest way to move up the value chain and reduce the strain on Canada’s rail transportation system because it takes less volume to ship chickens than it does to ship the grain they eat.
“Why in the world aren’t we doing that? Because we’re protecting our chicken producers for 32 million flipping customers and there’s a world with billions of people out there. It’s insane. It honestly is so short-sighted, I can’t speak,” she said.
Mike Dungate, executive director of Chicken Farmers of Canada, said the quantity of chicken exported from Canada has nothing to do with supply management.
Chicken has the shortest shelf life of any meat, which means it has to be shipped frozen.
“And at that point the value drops dramatically,” he said.
Brazil and the U.S. are by far and away the world’s largest exporters of chicken. Those two countries have a huge competitive advantage over Canada because of the Canadian winter.
Chicken barns in Brazil and the U.S. consist of wire with a roof on it and some flaps that roll down in case it gets cool.
“We can’t do that. We have to have a fully insulated barn,” said Dungate.
Canadian chicken barns have heated cement floors and ventilation. That increases the cost of production. Labour is also more expensive in Canada.
And then there are the economies of scale to contend with, with U.S. chicken operations being 16 times the size of Canadian barns.
“If exporting was really profitable for our guys and a better opportunity than what they’re doing now, they would do it,” said Dungate.
Instead, Canada’s chicken farmers are content supplying the domestic market with fresh chickens, which is what Canadian consumers want, he said. There are some exports because Canadian consumers prefer white meat, so some of the dark leg meat is frozen and exported.
Canada exported 191 million kilograms of chicken out of the 1.1 billion kilograms produced in 2013 and imported 190 million kilograms of largely white meat.
Boersch said another policy idea worth considering is having the government build a public terminal on the West Coast that will allow smaller shippers to export grain without having to deal with one of the big elevator companies.
“There’s lots we could do, but we just don’t tackle it. We keep doing the same thing over and over again.”