An Overview of the Canadian Agriculture and Agri-Food System 2016
This 2016 report provides an economic overview of the Canadian agriculture and agri-food system using the most recent data available. It is meant to be a multi-purpose reference document that presents:
- the agriculture and agri-food system in the context of the Canadian economy and international markets; and,
- a snapshot of the composition and performance of the agriculture and agri-food system as it evolves in response to challenges, opportunities and market developments.
The report begins with a special feature section on natural resource use and the environment. This section examines the impact of agriculture on the environment and quantifies greenhouse gas (GHG) emissions by Canada's various economic sectors, including agriculture. Historical levels of emission trends by agricultural sub-sector (for example, livestock and crop, land use, on-farm energy use) are provided, along with emissions/removals associated with land management changes. Projected GHG emissions for the agricultural sector through 2030 are given. The remainder of the section addresses Canada's agricultural use of land and water resources, including types of agricultural land cover, water use and consumption by sector, irrigation levels by province, farm size, farm type, and crop, as well as irrigation methods and sources of irrigation water.
The rest of the report looks at the agriculture and agri-food system's relevance to the Canadian economy, as measured by its share of the Canadian gross domestic product (GDP) and number of jobs in Canada. It also reviews the sector's performance internationally, in terms of its share of agriculture and agri-food trade to total world trade and a snap shot of each segment of the agriculture and agri-food system covering; primary agriculture, food processing, consumers and food distribution. The report ends with an overview of government support to agriculture.
The report describes the Canadian agriculture and agri-food system as a modern, complex, integrated and competitive supply chain that is important to the Canadian economy. It is a dynamic and resilient system that constantly adapts to changing consumer demands, technological advances and globalization.
Special feature – Natural resource use and the environment
- Agriculture can be both a source of and a sink for greenhouse gas (GHG) emissions. In 2013, agriculture was responsible for about 10% of national GHG emissions. Over the 1990-2013 period, Canada's agricultural GHG emissions remained relatively stable when considering all sources and sinks.
- The proportion of total land used for agricultural purposes in 2011 is small in Canada and has decreased slightly since 1971, down to 64.8 million hectares, or 7% of Canada's total land area.
- Agriculture accounts for a small proportion of Canada's overall water use, which refer to any utilization of water regardless of whether it is consumed or returned to its original source. However, agricultural consumption of water, water withdrawn but not directly returned to its original source, is substantial compared to other economic sectors. In 2009, agriculture consumed around two billion cubic meters, or 84% of its water use.
Importance of the system to the Canadian economy
- The Canadian agriculture and agri-food system (AAFS) is a complex and integrated supply chain that includes input and service suppliers, primary producers, food and beverage processors, food retailers and wholesalers, and foodservice providers. The activities along this supply chain generate significant economic benefits at both the national and provincial levels.
- In 2014, the AAFS generated $108.1 billion, accounting for 6.6% of Canada's gross domestic product (GDP). Of this, the food retail and wholesale industry accounted for the largest share (1.8%), followed by the food, beverage and tobacco (FBT) processing industry (1.7%). The AAFS GDP has increased annually since 2007, except during the economic recession of 2009.
- Employment in most industries in the AAFS continued on an upward trend. In 2014, the AAFS provided one in eight jobs in Canada, employing over 2.3 million people. The foodservice industry was the largest employer in the AAFS, accounting for 5.7% of all Canadian jobs.
- The performance of the sub-sectors within the AAFS depends on their ability to compete in both domestic and international markets over the long term.
- Canada was the world's fifth-largest exporter of agriculture and agri-food products after the European Union, the United States, Brazil and China in 2014. Canadian export sales grew by 12.0% over 2013 levels to $51.5 billion in 2014, increasing its share of total world agriculture and agri-food exports to 3.6%.
- It is estimated that approximately 58% of the value of primary agriculture production in Canada is exported, either as primary commodities or as processed food and beverage products.
- The U.S. remains Canada's most important agriculture and agri-food export destination, accounting for 51.4% of total Canadian exports. China accounted for 9.2% of Canadian agriculture and agri-food exports, and Japan, the E.U. and Mexico collectively accounted for 17.1%.
- Exports to the U.S. increased by 13.1% in 2014 to $26.5 billion, while exports to non-U.S. markets grew by 10.1% to $25.0 billion. Exports to China, which grew by 84.0% in 2012 and by 3.5% in 2013, dropped by 8.0% in 2014.
- With import sales of $39.4 billion in 2014 —an increase of 14.9% over the previous year —Canada remained the world's sixth-largest importer, accounting for 2.9% of the total value of world agriculture and agri-food imports. The U.S. accounted for 61.4% of the value of all Canadian agriculture and agri-food imports.
- Relatively high grain and oilseed prices, as well as record cattle and hog prices, have supported farm market receipts in recent years, causing them to reach $55.7 billion in 2014.
- Cattle receipts have increased for five consecutive years due to strong cattle prices and were up 44.4% in 2014. Strong hog prices contributed to a 25.2% increase in hog receipts in 2014.
- Overall, market receipts increased by 76.8% between 2004 and 2014. Market receipts from grains and oilseeds increased by more than 160% during that time period. This accounted for the largest share (35.5%) of the total value of all farm market receipts in 2014. The share of farm market receipts from red meats, which was 30.0% in 2004, decreased slightly to 27.1% in 2014.
- Farm-level performance, as measured by net cash income, reached a record high in 2014, while net value added declined from the record high registered in 2013. Net cash income among Canadian farms in 2014 was $14.2 billion —32.5% above the 2009-2013 average. The net value added in agriculture was $14.9 billion in 2014 —in line with the 2009-2013 average, but 32.9% lower than 2013 level.
- Agriculture producers saw their operating costs increase substantially over the 2004-2014 period, as increased global demand for agricultural commodities led to higher input prices, with costs increasing by over 47%. The categories of operating expenses that most contributed to the increase in overall expenses over this period were commercial seed (107%), fertilizer and lime (103%), livestock and poultry purchases (91%), and machinery fuel (71%).
Farm level innovation
- Farmers demonstrated innovation in areas such as new crop varieties and livestock breeds or processes and practices such as soil management methods, fertilizer application methods, precision farming and marketing methods on their operation, with about half of Canadian farms (48%) adopting at least one type of new or significantly improved product, process or practice between 2011 and 2013.
- Financing was a critical factor influencing 59% of farm operators' decision to implement an innovation. However, a greater share of million dollar farm operators (72%) stated financing was a critical factor compared to only 44% of operators of smaller farms in the revenue class of $ 25,000 to $99,999.
- Canadian farmers relied on their own experience (91%) and the advice from peers (68%) when deciding whether to adopt or innovate.
Food and beverage processing
- In 2014, the food and beverage processing industry was the largest of all manufacturing industries in Canada, accounting for 16.0% or $27.7 billion of the manufacturing sector's total GDP in 2014. It accounted for the largest share (16.6%) of jobs in the manufacturing sector.
- The food and beverage processing industry produces goods using both primary and processed products as inputs, with about 50% of the raw agricultural products produced in Canada being used as material inputs by the food processing industry.
- The food and beverage processing industry continues to grow, and the value of its shipments has almost doubled between 1995 and 2014 to $103.4 billion. More than half of the total value of food processing shipments is accounted for by the meat, dairy and beverage industries.
- Canadians spent $195.7 billion on food, beverages and tobacco products in 2014. This represented the second-largest household expenditure category, after shelter.
- Real spending on food and non-alcoholic beverages increased by 2.2% in 2014, due in part to a slight increase in retail food price inflation in Canada.
- The share of household expenditures spent on food has decreased since 1997 in Canada. In 2013, food accounted for 10.1% of all household expenditures in Canada.
Government expenditures in support of the sector
- Expressed in dollar terms, government expenditures (federal and provincial) in support of the AAFS were estimated to be $5.3 billion in 2015-2016. As a share of the agriculture GDP, government expenditures are estimated to be 26.0% in 2015-2016. That figure was 25.9% in fiscal year 2014-2015.
- Program payments as well as safety and control measures make up the largest portion of federal government expenditures in support of the agriculture and agri-food sector. Program payments, which also make up the largest portion of provincial government expenditures, continue to be an important component of support to the agriculture and agri-food sector. However, program payments have generally declined over the 2003-2004 through 2014-2015 fiscal years, but are estimated to increase slightly in fiscal year 2015-2016.
- Public investments in research and development (R&D) in the agriculture and agri-food sector represent a critical source of innovation and productivity growth. These expenditures, of which the majority are incurred by the federal government, are estimated to rise by 7.1% to $649.5 million in 2015-2016.
- Canada's public R&D spending in the agriculture and agri-food sector, as a share of gross farm receipts (GFR), has decreased since 2007. However it continues to exceed that of the U.S., though it has been surpassed by Australia.
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