The COVID-19 pandemic has heightened trade tensions in many different sectors of the world’s economy, and Canada’s huge agricultural industry is no exception. Out of necessity, the sector has had to adapt to an array of new challenges.
“The pandemic has tested international relations and brought a proliferation of new export restrictions as well as demands to ‘reshore’ supply chains. Forecasts are that global trade could shrink as much as 32 per cent this year,” says Claire Citeau, executive director of the Canadian Agri-Food Trade Alliance (CAFTA).
The crisis has slowed growth in Canada’s agri-food sector, which boasted $60-billion in exports in 2019.
“Before the pandemic, [the sector] was growing faster than any other part of the Canadian economy,” Ms. Citeau says.
Companies that import and export food say that COVID-19 has driven up costs and increased the time it takes to ship goods internationally, she explains.
While the food sector has moved quickly, it has been an ongoing challenge for agricultural exporters to respond effectively, says Rav Kapoor, chief executive officer of ETG Commodities Inc., the Canadian wing of an international agricultural supply chain company that operates in 40 countries. ETG ships 680,000 tonnes of food worth more than $450-million each year.
Exporters began 2020 with a lull in many of the trade-related skirmishes that had led to delays, regulatory roadblocks and tariffs over the past several years, Mr. Kapoor says.
Relations seemed to be improving, in the agricultural sector at least, after a rough two years of trade-related disagreements between Canada and China, India and the United States.
“We had been dealing with new barriers and policy decisions in various parts of the world, but all in all the dust from this had settled by the end of last year,” Mr. Kapoor says. “Then COVID happened.”
“The countries we export to got into a defensive mode, and food safety became one of the primary concerns,” explains Mr. Kapoor. ETG has nine locations in Canada, with its headquarters in Mississauga and facilities in Saskatchewan.
Mr. Kapoor says exporters had to find ways to keep products shipping while balancing the safety of employees and those along the entire supply chain.
“It took us about 15 to 20 days to iron out how we could move forward and follow all the federal and provincial rules for worker safety,” he says. For example, prior to COVID producers didn’t focus on personal protective equipment (PPE) but they are now, says Mr. Kapoor. Food handlers must wear PPE and production facilities are getting cleaned more often.
In response to the pandemic, some countries banned their own exports to protect supplies; for example, Kazakhstan blocked exports of wheat flour, Vietnam stopped exporting rice and Russia banned the export of grains.
Still, some COVID-related trade moves actually benefited Canadian food exporters, Mr. Kapoor says. While countries sought to protect their domestic supplies, many still needed to import from major agricultural countries such as Canada.
For example, before the pandemic, India had slapped a 30 per cent tariff on lentils, one of the biggest commodities among the 26 different food products ETG ships from Canada. The tariff was supposed to address an abundance of supply and low prices among India’s own producers. Canada shipped 400,000 tonnes of lentils to India in the 2019-2020 crop season up to June 1 compared with 737,000 tonnes in 2018-2019.
After COVID hit, India lowered its lentil tariff to 11 per cent in June, albeit only until Aug. 31, in order to boost supply with imports.
Canada is still in a strong position as a food exporter, Mr. Kapoor says. “Our production is big and we don’t have a large population to feed. In that sense, Canada and Australia became the big players in the food production game – supply and demand worked in our favour.”
The cross-border challenges were different for Canada’s largest food company, Kraft Heinz, says Av Maharaj, chief administrative officer, vice-president of legal, corporate affairs and human resources for the Canadian operation.
“We have a huge facility just outside Montreal, where most of our food for Canadians comes from. We don’t export much from here. But we do import material to produce products for Canadians,” explains Mr. Maharaj.
Food producers faced a crunch as Canadians sought particular comfort foods during quarantine, such as peanut butter – and yes, Kraft Dinner, whose sales are up 14 per cent over the last 30 weeks compared with pre-pandemic levels. But Kraft-Heinz has managed to maintain its supply chains, says Mr. Maharaj.
“In some cases, we have to simplify our supply lines and produce more of what is in demand and less variety. We’re producing more of the most popular flavours and items – peanut butter is another one in big demand – and fewer of the more esoteric ones that cater to specialty tastes,” he says.
The Canada-U.S. border, which is open for product shipments but not casual visitors, “has been fairly good,” says Mr. Maharaj. “The biggest issue is getting enough trucks because there is a huge demand,” he adds.
Coping with COVID has not been cheap, explains Mr. Kapoor. Overall, it has added between 2 and 3.5 per cent to the cost of exporting this year, he says, mostly due to higher costs for cleaning, PPE and border crossing delays.
But the effort is working, notes Robert Asselin, senior vice-president of policy at the Business Council of Canada.
“Canada can absolutely bet on the food sector. People need to eat and there’s a lot of potential for export. Our industry adjusted very fast and in an agile way,” Mr. Asselin says.
However, food producers in Canada and around the world will need to make additional adjustments in the months to come, says David Johnston, director of the Master of Supply Chain Management Program at York University’s Schulich School of Business in Toronto.
“I think we’ll see a consolidation of products – there are too many different brands chasing too few customers,” he says, adding that he expects both importers and exporters will re-examine their supply chains to determine if producers will seek out more local ingredients.
Canada is in a good position, notes Ms. Citeau as much of the world depends on Canadian agricultural exports to feed their large populations.
“The key to food security for Canada and the world is to ensure unfettered trade and to manage supply chain risks, not avoid it,” Ms. Citeau says.
“For farmers, ranchers, food manufacturers and agri-food exporters, the future of the global trading system isn’t some abstract debate. It’s literally meat and potatoes.”