As populations grow, demand for food will climb.
China may not yet be the world's largest country by gross domestic product standards, but what happens in the region has a dramatic impact on every other nation around the world.
That may be no truer than in the food and beverage industry, where population growth and an expanding middle class is dramatically increasing demand for food. Ernst & Young expects that by 2030, 1 billion Chinese will be part of the middle class, up from 150 million today.
Rising median incomes will impact large agricultural industries most, says Marcus Cote, a senior account manager in the food and beverage vertical with GE Capital. People tend to move towards more protein rich diets when their disposable income rises, he explains. Some agricultural commodities in Canada, such as wheat, soybeans, beef and pork, are already seeing an uptick in demand.
According to Export Development Canada, agri-food exports reached $50.3 billion in 2013, up from $30 billion in 2005. Strong demand from emerging markets should help exports grow by an additional 19 percent in 2014.
There's a good reason why Canada is seeing an increase in demand, says Cote. "Canada has built a reputation, internationally, as a producer of premium products with high food safety standards," he says. "This perception positions Canadian food manufactures to continue to grow exports and service this growing global middle class."
To keep up with demand, companies have to increase productivity and capacity. They're doing this by investing more on technology that increases automation. While that
helps businesses operate around the clock, it can also help by increasing food safety (less human hands touching the food) and reducing redundant, low-value labor. That helps lower prices and increase competitiveness.
John Rogers, senior vice-president with Moody's Investors Service, adds that companies will also need to increase their use of fertilizers, utilize efficient seed technology and tap into advancements in "precision agriculture," a technique for maximizing plant growth via micronutrients.
While it may take some investment dollars to get ready for the increasing demand, Canadian companies are in a good position to take advantage of this growth. Our strength, says Rogers, is in knowledge-based, value-added farming. "As productivity improves in North America," he says, "exports will increase."
Budding Biotech Industry
One fast growing part of Canada's agriculture market is biotech food, also known as genetically modified organisms. With 10.8 million hectares under cultivation, Canada is the world's fifth largest biotech crop producer in the world.
There are four main crops in Canada getting the GMO treatment – canola, maize, soybean and sugar beet. These foods are being engineered to meet specific needs, says Gord Surgeoner, president of Ontario Agri-Food Technologies, a biotech-related industry association.
India, China, Korea and Japan could be lucrative markets for these genetically modified foods, he adds. "We won't just sell them a soybean," says Surgeoner. "We're going to sell you a soybean that is specifically designed to make tofu."
This content was produced by The Globe and Mail's advertising department, in consultation with GE Capital. The Globe's editorial department was not involved in its creation.