Protein Industries Canada wants to see another 2.5 million tonnes of food ingredient manufacturing in Canada by 2035.
That is the main target in the organization’s new roadmap outlining how to create a $25 billion crop processing industry.
It would require the construction of 10 to 15 new food ingredient manufacturing plants over the next decade, on top of the existing handful.
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That, in turn, would require $6 to $9 billion of private sector capital investment.
The problem is that capital isn’t flowing into the food processing sector, said PIC chief executive officer Bill Greuel.
Capital goes where it can generate the highest returns and that is not the agriculture and food processing sector.
Food ingredient manufacturing is profitable. But it takes too long to generate returns on investment, Greuel said.
It takes two to three years to get the facilities permitted, built and commissioned and that is too long of a delay for most investors.
“That’s the crux of the issue on the capital side, is that it just doesn’t fit with the investment thesis of most capital providers today,” he said.
That is why PIC wants to work with federal lending institutions such as Farm Credit Canada, Export Development Canada and the Business Development Bank of Canada to see if they can provide the long-term, patient capital required for such projects.
“I think they’re all intrigued,” said Greuel.
He hopes together they can design the financial instruments needed to close the capital gap.
The Canada Infrastructure Bank is another institution that could be helpful. It manages $15 billion of capital slotted for large-scale infrastructure projects.
“Today, they’re not funding projects like ingredient manufacturing,” he said.
The other big obstacle is the lack of federal and industry funding for research and innovation.
Canada’s General Expenditure on Research and Development (GERD) lags behind other G7 countries and its OECD counterparts by an average of 40 percent.
What money that is available is disproportionately spent on funding invention at universities rather than innovation and downstream commercialization of Canadian intellectual property, he said.
“Most other jurisdictions in the world have far better support for private sector companies to de-risk investment in innovation,” said Greuel.
He said the federal government has invested $350 million in PIC over 10 years and it needs to take the next step to help commercialize some of the technology and intellectual property developed with that money.
Farmers would be big beneficiaries of a bolstered food ingredient manufacturing sector.
Having domestic buyers increases competition for their crops and saves them $45 to $75 per tonne in transportation fees to get their crops to port position.
“Now, of course, the constituent ingredients have to get shipped, so it’s not total savings to the sector,” said Greuel.
But having a domestic outlet for crops can reduce trade disruptions caused by tariff and non-tariff barriers because food ingredients don’t suffer the same level of scrutiny as exported crops.
He thinks the main beneficiaries of this strategy will be protein crops like yellow peas, canola and fababeans.
“Fababeans is an interesting one. It is getting a lot of attention from processors and from food companies,” said Greuel.
Other items on PIC’s wish list include “a co-ordinated suite of globally competitive incentives,” modernization of plant-based food regulations to align with other jurisdictions and increased access to transportation infrastructure, utilities, research and development centres and toll-processing and co-manufacturing facilities.
It would also like to see the promotion of Canadian-made plant-based ingredients and food products in target markets like the European Union, Singapore and South Korea.
Greuel acknowledged that 2035 is a short horizon to accomplish the goal of building 10 to 15 new processing plants, but time is of the essence.
“Other countries and other jurisdictions are being very competitive in this space,” he said.
