By Peter G. Hall, Vice-President and Chief Economist
Agriculture is rarely found in the wow segments of the media. It typically operates in the economic background, a critical but unsung sector of industry. Until some crisis interrupts its supply chain, that is. Mere rumours of food shortage are enough to incite panic; grocery store shelves empty instantly when some event sparks a stock-up of basic foodstuffs. There’s a growing sense now that this economic second-fiddle could be set to take center stage. Why the sudden stardom?
It is not immediately evident in the data. Primary agriculture accounts for a mere 1.1 per cent of Canadian GDP. Add in processed food, and the total number adds up to 3 per cent of GDP. As a share of trade, primary and processed food adds up to 11 per cent of merchandise exports. Significant, but hardly stardom. So what is it that is vaulting this sector up the popularity rankings?
In short, the world is getting hungrier. It has been said many times, but it bears repeating: the rise of emerging markets over the past three decades is now vaulting millions into the ranks of the middle class every year. China alone is graduating 40 million a year. India is somewhere between 10 and 20 million, but its goal of 30 million annually is not far-fetched. These are staggering figures, and it is just a beginning: Indonesia, Brazil, Mexico, the Philippines, Vietnam and others are also aggressively adding to this income cohort. The significance of these graduates is their appetite. It grows with their incomes, and is putting what soon could be inexorable pressure on global food supply.
This trend is already affecting agricultural statistics. Is our bread-basket nation participating in this bonanza? Indeed we are. Back in 2002, emerging markets accounted for 14 per cent of Canadian agricultural exports, not a small share, but today it has grown to over 30 per cent. From 2000 to 2013, growth to OECD nations averaged 4 per cent, not a bad pace, but it was more than double that, at 8.8 per cent, to emerging markets. As world growth resumes, it is likely that the pace will increase.
Isolating the trend to particular countries is not easy. Here, China stands alone, accounting for over a third of our agricultural exports to emerging markets, and increasing at a hefty 16 per cent each year. Beyond that, it is hard to differentiate for size and growth. The next ten emerging markets are rising by an average of over 10 per cent per annum, led by growth to India, Russia and more recently, Indonesia. But below this level there are up-and-comers, like Vietnam, with staggering annual growth.
Cynics may say at this point that this trade is all in primary products, and that again, we are not adding much value to what we ship. True, 65 per cent of this aggressive trade is crop production. But of crops, animal products and processed foods, it is the slowest-growing category. At the same time, food manufacturing exports to emerging markets, 30 per cent of the total, are up on average by 12 per cent yearly. Animal production, just 5 per cent of the total, is seeing 18 per cent annual growth.
These numbers are nothing if not impressive, and their record has been largely unsullied by the global crisis. As the world gets back to growth, it is not hard to imagine this aggressive growth pace picking up even more. Growth alone will further boost middle-class entrants, but next-generation free-trade deals promise further liberalization of global agriculture. For nations like Canada that are net exporters of food, this is on balance great news, and promises even greater potential gains.
The bottom line? At the dawn of the next global growth cycle, Canada’s agriculture sector is poised to reap huge gains. They may make Victoria’s feted Jubilee parade look like a tea-party in comparison.
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