Canada’s food processing and manufacturing industry should continue to grow in 2019, according to Farm Credit Canada’s agricultural outlook, though there will be challenges that lay ahead. Image: FCC

Canada’s food processing growth trend anticipated to continue in 2019

Manufacture and processing of food extremely strong economic driver for the country

Food manufacturing and processing in Canada has grown tremendously the last few years and it’s a trend expected to continue through 2019.

That is the synopsis provided by Farm Credit Canada (FCC) and its chief agricultural economist J.P.Gervais in the corporation’s annual agricultural industry outlook.

“We also know that there are other export countries that are challenging us in our own markets as well,” he said.

Gervais noted the Canadian food manufacturing and processing sector has been one of the strongest economic engines and most important business categories in the country for the last five years.

READ MORE: Loonie, trade will have affect on Canadian agribusiness

“Especially in the last two or three years, the industry’s growth has far exceeded any type of other growth throughout the economy,” he stated.

“The benefit to having that strong of a sector is that more of Canada’s raw commodities are being processed at home and the value of that is being added to our economy. That’s significant.”

Another benefit, especially for exporting processed products, is the continued weakness of the Canadian dollar.

Currently, the loonie is worth around 75 cents USD — good news for exporting products because of the exchange rate — and has remained around that mark for the past couple of months following a steady decline last year.

However, Gervais added there is one big question that faces the industry as a whole and that is if the sector wants to maintain profitability.

“With Europe for example, we have a trade deal, but they have been growing their exports to Canada faster than we have grown our export market there,” he said.

“That means more competition for Canada and, if you put that with some of the added costs our processors face — higher labour and energy to name a couple — that tends to put some significant headwinds in front of our sector.”

READ MORE: Low strength of loonie to help poultry producers

On top of that, new rules on packaging for export is another cost processors must tack on.

“Although in reality, from a demand standpoint, the sector remains very strong,” Gervais noted.

Other factors that could affect the industry include inflation on food expected to exceed 1.8 per cent in 2019, the impact of expanded online ordering options on food preferences and purchases, and how the commodity markets react to any outcome of the ongoing U.S.-China trade tensions.

Market specific

On the fruit and vegetable processing front, profit margins improved last year with revenue outpacing the cost for the raw product and those margins are expected to stay on the positive side due to greater demand from consumers.

Gervais noted climbing operational costs, a tight labour market, plus higher interest rates will put pressure on both businesses and consumers.

“This may deflate some consumption of high quality or expensive foods,” he stated.

Meanwhile, a keen eye will be needed for potato processors as profits are likely to weaken in spite of strong product demand.

The average raw potato has climbed as a result of a rising energy costs and a reduced 2018 production — from a combination of a hot and dry summer followed by a wet harvest, which left an estimate 15,000 acres still in the field.

READ MORE: Canada’s dairy sector expected to remain profitable as import market starts to expand

As for meat processors, 2018 saw inconsistent profits across the sector. It’s expected beef and pork processors will see the value of exports get better this year with the lessening of European and Asian tariffs.

“However, expect some warning shots too, as demand for plant proteins is growing,” Gervais added.

“While they may not directly substitute meat, they also can’t be easily dismissed.”

Lastly, challenges in garnering high-quality wheat will keep profits in the bread and baked goods sector at levels similar to last year’s. Cashing in on canola crush is expected to be similar to 2018 with lower domestic crop acres and strong demand to export the product.

This is the fourth of seven articles in a series looking at the agricultural sector for Canadian producers.



jordie.dwyer@ponokanews.com

Like us on Facebook and follow us on Twitter

 

According to Farm Credit Canada’s agricultural outlook, the potato processing sector will be among those food manufacturing firms that will buck the trend of exponential growth in the industry because of a poor 2018 harvest and higher raw product prices. Image: FCC

Just Posted

Alberta was crowned champions in Wheelchair Basketball at Canada Winter Games

Ontario won silver while Quebec took home the bronze medal

Remember When: Recognizing the people of Bashaw’s St. Peters Church

It took the dedication of the Bashaw St. Peters Anglican Church congregation to make it all work

Idea spawned to help ripples into project to assist Bashaw residents

Bashaw School students love the new idea spawned out of a need for some help

Bashaw peewee club’s season comes to an abrupt end

Players decide not to go into playoffs without one of their teammates

Fashion Fridays: Must have wardrobe basics

Kim XO, helps to keep you looking good on Fashion Fridays on the Black Press Media Network

National Energy Board approves Trans Mountain pipeline again

Next step includes cabinet voting on the controversial expansion

Child advocacy centre raising funds through Dream Home Lottery

The child advocacy centre in Red Deer uses its resources to help kids all over Central Alberta

Trudeau tells Canadians to listen to clerk in SNC-Lavalin matter

Privy Council clerk Michael Wernick delivered a blunt assessment at the House of Commons justice

Mueller report looming, new attorney general in hot seat

Robert Mueller is required to produce a confidential report to pursue or decline prosecutions

B.C. woman shares story of abuse with church officials ahead of Vatican summit

Leona Huggins was the only Canadian in the gathering ahead of a historic summit at the Vatican

Sylvan Lake’s Megan Cressey misses Freestyle Skiing Big Air podium

Alberta’s Jake Sandstorm captured silver in the men Freestyle Skiing Big Air contest

Why do zebras have stripes? Perhaps to dazzle away flies

Researchers from University of Bristol look into why zebras have stripes

Poll: More voters believe Canada doing worse under Trudeau government

22 per cent believed the country is doing better and 27 per cent said things are the same

Most Read