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New Markets Hold Potential for Canadian Ag: FCC

Canada still has room to expand and diversify beyond its largest traditional markets for its top four agriculture exports, according to Farm Credit Canada’s (FCC) most recent trade report released Tuesday.
 
But while there are opportunities to increase those exports, the report – Diversifying Canada's agriculture exports: Opportunities and challenges in wheat, canola, soy and pulses – identifies growing protectionism, distance and price sensitivity as hurdles Canadian exporters must overcome to diversify markets.
 
"Canada has done extremely well in establishing strong trade relations in a number of key markets thanks to a long-held focus on getting trade agreements in place,” said J.P. Gervais, FCC's chief agricultural economist.
 
“While we believe there is still room for growth in diversifying our agriculture export markets, it won’t be easy. The long-term success of Canadian agriculture relies on our ability to provide a greater diversity in commodities and food products for new and existing export markets.”
 
In 2018, Canada was the world’s fifth largest exporter of agriculture commodities, worth almost $34 billion, behind the United States, Brazil, the Netherlands and China. That same year, the U.S. accounted for just over 35.6% of Canada’s total agriculture exports, while China – the world’s most populous country – accounted for 22.9%.
 
The report indicates Canada’s diversification of its export markets can help reduce financial risks for Canadian producers by lessening dependency on dominant importers. When borders close for any number of reasons – due to trade tensions or shock caused by disease or weather – having a broader range of export markets allows Canadian exports to be re-allocated, rather than simply reduced, the report said.
 
According to the report:
  • Canadian canola exporters can expand diversification. Further growth in exports to Europe is possible: Canadian canola exports to Europe increased in 2018 after being shut out of China. Sustaining that export presence in the long term will be key to successful diversification.
  • The potential for further diversification of Canadian wheat exports is real, but many of the world’s largest and/or fastest-growing markets are supplied by large, established nearby exporters.
  • Soybeans represent perhaps the best opportunity for Canada to further diversify export markets. For one thing, in a huge global market dominated by Chinese demand, Canada is a relatively small player. Our limited market share in multiple importing countries can be expanded. However, soy trade flows in 2019 have provided a painful illustration of how China’s market concentration can foil Canadian market diversification efforts.
  • In a pulse market dominated by Indian importers, Canada is the world’s largest exporter. European (Germany, Spain and Belgium) and middle Eastern import markets (Pakistan and United Arab Emirates) hold the most potential for diversification.
The report notes some obstacles Canada faces in its push to further diversify its export markets: it’s often less costly for importers to source products from established suppliers; and China’s growing dominance as an agriculture importer serves to concentrate, not diversify, trade flows.
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