Governments need to think now about how they will manage.
Ottawa–While we have a long way to go before COVID-19 is just a bitter memory, Canadians need to fully appreciate what it will take to revive the heavily-indebted economy that will emerge from the recovery.
Fortunately, there’s a lot of high-level thinking about this issue under way and in many plans, the agrifood sector plays an important role.
The C.D. Howe Institute picks it among five sectors that will need government support going forward to avoid being seriously scarred and harming the entire national economy.
“With increasing risk of a shift towards protectionist policies internationally, Canada must remain a champion of open borders and integrated trade,” says a report from the Institute’s Working Group on Business Continuity and Trade. “However, Canada may need an elbows up defence to ensure key Canadian industries survive amid restructuring of global value chains.
“Canada could lose agrifood manufacturing capacity without stable farm production,” it warned. The agrifood industry must be seen “as a channel of export-driven growth.” The threat “if its operations and value chain is decimated” needs to be clearly understood.
To help it, “the federal government could simplify its agricultural supports, targeting temporary subsidies based on lost revenue and volumes.”
Food manufacturers depend on a stable annual supply of produce. “If financial distress for farmers results in depressed crop and livestock production for several years, agrifood manufacturers will look abroad for new investments and reorient supply chains away from Canada. Facing large losses on this year’s crops, farms lack cash flow to fund cultivation in the upcoming growing season.
“Canada’s agricultural risk management programs have been arguably designed for the economics of the grain sector, and recently announced farm credit support appears cumbersome for growers of produce and livestock. With produce growers already selling at low margins, the virtual elimination of revenues as domestic and export demand collapses will impose steep losses,” the report said.
“Up to 15 percent of Canada’s farms may be at risk of insolvency and closure. The loss of this agricultural capacity could cause the departure of agrifood processing and manufacturing capacity to jurisdictions with stable production. Investments are made for the long-term and, if agrifood producers shift production elsewhere, it will be difficult to win back to Canada.”
The report said the federal government “has been slow compared to other countries in establishing programs to buy up and distribute perishable products. The disposal of produce–for example, unused potato stocks–could also have a significant ecological impact and compromise future planting. In contrast to Canada, the United States has rapidly extended and established programs for purchase and redistribution of food stocks to avoid the financial and ecological costs of disposing of current inventories.”
Agrifood companies that closed because of the pandemic “will require significant lead-time – particularly to restock, re-hire and re-train new employees,” the report said. Governments need to help bridge this process.