Canada’s food manufacturers grow sales: FCC report

Mar 31, 2022

Farm Credit Canada's latest Annual Food Report says thanks to pent-up demand and higher prices, Canada’s food manufacturing industry performed well in 2021.

Food manufacturing sales increased 14.8 per cent to more than $125 billion in 2021 and are projected to increase 7.4 per cent in 2022. Last year was the strongest year-over-year sales growth recorded since 1992.

“Consumers appeared to unleash strong disposable incomes and accumulated savings during the pandemic in 2021,” said J.P. Gervais, FCC’s chief economist. “This resulted in increased foodservice volumes that more than offset volume declines at grocery stores.”

In addition, a robust export market contributed to an estimated 36.8 per cent of sales. Overall, Canadian food manufacturing exports grew by 16.9 per cent in 2021, driven by higher prices and strong demand for healthy and high-quality foods. Export growth came from the United States, Mexico, Philippines and South Korea. Conversely, exports to China declined over 16 per cent on lower pork demand.

Food imports increased in 2021, albeit growth was at a more modest pace of 3.6 per cent. Most imports came from U.S. suppliers, but also from a diversity of other countries, led by China, Brazil and Italy.

The share of domestic consumption of Canadian manufactured food also climbed by almost two per cent in 2021, after declining the two previous years. This increase was largely due to a combination of a “buy local” approach by many, as well as increased investments in marketing and operational efficiency by manufacturers.

“The strong growth we’ve seen in Canada’s food sector is largely a reflection of innovation, resiliency and the ability to quickly adapt to the changing economic environment,” noted Gervais. “This has enabled most food manufacturers to overcome significant challenges posed by the pandemic, such as higher input costs, amplified labour shortages and shifting consumer consumption trends.

The report notes that although gross margins improved slightly in 2021, food manufacturers continue to struggle to fully pass on higher labour and material costs. Inflation is also expected to be above the Bank of Canada’s target rate for most of 2022, which will drive interest rate increases.

“Inflation is beginning to diminish the purchasing power of many households and the growth in 2022 will depend on several other factors, such as the evolution of the pandemic and how businesses adapt to interest rate increases and elevated input costs,” added Gervais. “But if the past is any indication of the future, Canada’s food processors will continue to take advantage of the many opportunities that exist amid the many challenges.”

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Video: The 15-Year Bet Behind Every New Variety!

Canada is trying to decide how much agricultural research capacity it can afford to lose. Brian Rossnagel believes the better question is whether the country can afford to rebuild it.

The longtime barley and oat breeder makes the case with a simple fact about his profession: the consequences of today’s decisions may not become visible for 10 or 15 years.

“Pick the right parents. That’s the biggest thing,” Rossnagel says. “If you pick the wrong parents, you’re not going to get anywhere—and you don’t know that until 10 years, 15 years later.”

That warning carries particular weight as Agriculture and Agri-Food Canada moves to reduce spending and streamline parts of its science operations. The department’s 2026–27 plan anticipates the loss of approximately 665 positions by 2028–29 and says some research will be reduced where capacity exists in academia or industry. AAFC says the changes will make its science operations more cost-effective over the long term.

For Canada’s seed industry, Rossnagel’s career illustrates what is at stake.

This fall, the retired University of Saskatchewan breeder will be inducted into the Canadian Agricultural Hall of Fame. During his 35-year career at the Crop Development Centre, he helped develop more than 100 barley and oat varieties, including CDC Austenson—one of Western Canada’s most widely grown feed barleys. His induction recognizes not only those varieties, but the collaboration and research system that made them possible.

Rossnagel is quick to emphasize that none of it was the work of one person.

“The first thing I thought about was all the other people who contributed to whatever success I and my program had over the years,” he says. “We know that it’s not an individual who does this. It’s a group—a team.”

That team extends well beyond the breeder whose name appears beside a variety. It includes technicians, pathologists, quality specialists, statisticians, regional testing sites, seed growers and industry partners. It also includes the breeders who came before and those who will carry the germplasm forward.

CDC Fraser barley, for example, moved through three breeding careers. Its parents came from Brian Harvey’s program. Rossnagel advanced the material after Harvey retired, and Aaron Beattie later guided it through registration and release.

That kind of handoff is normal in plant breeding. The person who makes the original cross may never see the resulting variety reach farmers.

It also explains why lost research capacity cannot simply be switched back on when budgets improve.

“If you shut it off, it’s very, very difficult—and particularly costly—to start it up again,” Rossnagel says. “If you have to start from scratch, it’s going to be at least 10 years before anybody notices whether you’re getting anything done or not.”

The concern is not simply how many experimental lines Canada can process. Modern equipment, statistical tools and genetic technologies allow today’s breeding programs to evaluate tens of thousands of lines—far more than Rossnagel could handle when he entered the field in the early 1970s.

But efficiency and automation do not generate every idea.

“If you pare back down, and instead of having six or seven individual scientists concentrating on wheat breeding, you go down and say three people could handle all this, well, that’s half the ideas gone,” he says. “Particularly if you happen to lose the three people who had the really neat and innovative ideas, boy, that’s a problem.”

It is a timely distinction for Canadian agriculture. Consolidating programs may preserve the volume of material moving through a system, at least initially. It may not preserve the diversity of thinking, regional knowledge or willingness to pursue unconventional crosses.

That regional knowledge matters because Canadian agriculture is not one uniform production environment. A variety suited to southern Alberta may face different disease, moisture and maturity pressures than one grown in Manitoba, Ontario or Atlantic Canada.

“Agriculture is applied biology,” Rossnagel says. “Biology, all around the Earth, moves from the poles to the equator. It does not move from Newfoundland to B.C. like politics do.”