In recent days, we’ve seen major meat processing plants shutting down because of COVID-19 outbreaks. Farmers are struggling because foreign workers can’t come into the country to plant or harvest crops. Are Canadians facing shortages and rising prices at the grocery store?
Pascal Thériault, an agricultural economist and Faculty Lecturer at the Faculty of Agricultural and Environmental Sciences, looks at the challenges facing Canada’s food supply chain.
What kind of pressure is COVID-19 putting on Canada’s food supply chain?
Our food supply chain is a highly efficient mature system, but it has been knocked off balance by the crisis. It is working on adapting but it could take a while to feel normal again. In a way, we went from being on cruise control to hitting traffic. We’ll get there, just not as smoothly.
We hear about labour shortages in the planting or harvesting of crops. What does that mean for farmers?
Canadian agricultural production, especially with fruits and vegetables, relies on temporary foreign workers (TFW). It is all part of our highly efficient, low-cost supply chain. Relying on these workers has allowed us to be able to produce agricultural products at competitive prices (in season), compared with imported fruits and vegetables.
Many farmers face great challenges as they will not be able to plant if they do not have the TFW. Relying on local workers (helped by government programs) comes with the risk that those workers will go back to their “real” jobs should the economy start again, leaving the farmers with no labour force to harvest their crops.
Some of North America’s largest meat producers have been forced to close their plants or reduce production amid the spread of COVID-19. What kind of impact will this have on consumers?
Some major meat processors have had to shut down or slow down. This will of course put some pressure on both the price and availability of certain products.
As production resumes, it will not be at the same pace and therefore, supply of certain meat cuts, for example, could be disrupted to focus on easier, higher-volume cuts.
As for prices, as the cost of processing food goes up, it will impact the consumer at some point. In general, the food industry is a high-volume, low-margin sector. So, with little margin to play with, prices will have to go up to compensate for the higher costs.
How have farmers been impacted by restaurants being shut down or reduced to take-out service only?
Dairy producers have had their milk processed and shipped to food banks, with millions of litres having been “rescued” so far, but the case of dairy is interesting.
The industry is under supply management (control of imports, fair price paid to producer, quantity of production regulated through quotas). Thirty-five per cent of the milk produced was going toward the Hotel, Restaurant and Institutional sector, often as cream, butter and higher fat content products. It is extremely complicated to shift the production of highly perishable products.
This is true with beef and veal as well. The majority of the veal (grain-fed, milk-fed) was going through restaurants and hotels, and the current situation has created an imbalance with farmers unable to sell these products. At the grocery store level, we have seen interesting rebates on higher valued cuts of beef such as rib steaks, prime roasts and other cuts that we traditionally consume outside of our homes.
The same is true with potatoes. A significant volume of potatoes goes toward the production of French fries, a food product mostly consumed in restaurants.
Farmers have been working with organizations to help process their surpluses. Recently we saw the president of the Eleveurs de Porcs du Quebec on TV offering to pay the overtime salaries of employees in processing facilities in order to keep the animals moving through the chain.
The ongoing challenge with food production is that you are taking a biological product (animal, plant, etc.) and turning it into food. You can’t just shut down a cow to stop the milk flow, or ask a pig to stop growing – just as you can’t change your crop once you’ve planted. You have to work with – and are sometimes at the mercy of – nature.
What does that mean economically for farmers?
Farmers have experienced smaller margins over the years, between their input costs and salary costs keep rising on one side and the consumer’s expectation of cheap food on the other. Profitability of farms right now is a serious issue. We can ask the supply chain to adapt by reducing production but ultimately, farmers, with their high fixed costs, will bear the weight of that reduced production.
How much do Canadians rely upon imported food? How self-sufficient is the Canadian food supply chain?
Canada is a net exporter of food products, meaning we export more food than we import. We do import certain fruits and vegetable because of our colder climate, but in some cases, those imports tend to be seasonal. In the summer, we actually export vegetables. Also, an important share of our net exports is pork production, beef production and, more importantly, grain and oilseed production.
While we are a net exporter of food, our food diversity as consumers has increased over the years, meaning we rely more and more on importing certain food products. But even with the support of the most aggressive government programs, it is unlikely we will try to produce bananas, avocado or oranges in Canada.
Does the pandemic emphasize the importance of supporting local farmers and the ensuring the health of the local food supply chain?
Since the onset of this crisis, we have talked a lot about how essential healthcare workers are. What we have found is that our food supply chain workers are also essential as they ensure that we have something to eat.
Supporting our local farmers has always been important but I believe that over time, most consumers have become too “comfortable” with our food. We have one of the cheapest baskets of food in the world, shelves are always full, and we have a high restaurant density. For the last two generations, we never have had to question where our food comes from and how it is produced.
Right now, we are starting to care again, and I hope that when we put this pandemic behind us, we will still care. Our food supply workers have not stopped working and let’s remember that they do it under some of the most restrictive environmental regulations in the world. We must be proud of what our farmers, processors and distributors do to feed us, pandemic or not.
How worried should Canadians be about food security at this moment?
When it comes to the average consumer, I am not worried about food security. Yes, prices may go up but only a small portion of our income goes toward food.
What worries me is food banks and other organizations that help the poorer population. With restaurants and hotels unable to give away their leftovers, and with everything running at a much slower speed, those organizations are finding it harder to get food products while a growing number of people are in need of help.