AGRICULTURE and AGRI-FOOD SECTOR Report May 2014 Agriculture and Agri-Food Sector Report 2014 Acknowledgements This sector report it the first in a series of reports available on Worktrends.ca . Worktrends.ca is a project of the Elgin Middlesex Oxford Workforce Planning and Development Board. Report written by Emilian Siman © May 2014 Guidance and expertise kindly provided by Debra Mountenay - Executive Director of the Elgin, Middlesex and Oxford Workforce Planning and Development Board (EMO WPDB), Kiran Maniar - Project Coordinator of Worktrends.ca, Martin Withenshaw - Projects and Communication Manager at EMO WPDB, and Justin Dias - Community Coordinator at EMO WPDB. “The material contained in this report has been prepared by the Elgin Middlesex Oxford Workforce Planning and Development Board and is drawn from a variety of sources considered to be reliable. We make no representation or warranty, express or implied, as to its accuracy or completeness. In providing this material, the Elgin Middlesex Oxford Workforce Planning and Development Board does not assume any responsibility or liability.” This Employment Ontario project is funded by the Ontario government. The views expressed in this document do not necessarily reflect those of the Government of Ontario. Worktrends.ca at Elgin Middlesex and Oxford Workforce Planning and Development Board| 647 Wilton Grove Rd., 2 Unit 3. London, ON N6N 1N7. Tel: 519-672-3499.Fax: 519-672-9089 Agriculture and Agri-Food Sector Report 2014 Table of contents EXECUTIVE SUMMARY ............................................. 4 INTRODUCTION ............................................. 7 International trade ............................................. 8 NATIONAL AND PROVINCIAL SECTOR ............................................. 8 Economic performance ............................................. 8 Sector structure- industrial concentration ............................................. 10 Export-import activity ............................................. 17 Labour force, employment, composition, age, entrepreneurship ............................................. 20 National and provincial sector forecast ............................................. 22 Growth: demographics and productivity ............................................. 23 National and provincial competitive advantages ............................................. 27 ELGIN, MIDDLESEX and OXFORD COUNTIES AGRICULTURE AND AGRI-FOOD SECTOR ............................................. 28 Counties at a glance ............................................. 28 Sector's structure - concentration ............................................. 32 Major employers in the region ............................................. 35 Economic performance ............................................. 35 EMO counties competitive advantages ............................................. 36 Demographics, labour force, employment, age, entrepreneurship ............................................. 36 CONCLUSIONS ............................................. 41 METHODOLOGY & LIMITATIONS ............................................. 42 Including agri-food system in the analysis ............................................. 42 Clarifying definitions ............................................. 42 REFERENCES ............................................. 43 Worktrends.ca at Elgin Middlesex and Oxford Workforce Planning and Development Board| 647 Wilton Grove Rd., 3 Unit 3. London, ON N6N 1N7. Tel: 519-672-3499.Fax: 519-672-9089 Agriculture and Agri-Food Sector Report 2014 EXECUTIVE SUMMARY The report presents the recent dynamics in the agriculture and agri-food sector for various geographies: national, provincial as well as in Elgin, Middlesex and Oxford counties. This geographic allows to funnel the information from the larger perspective captured at national towards a narrower and focused view at the Elgin, Middlesex and Oxford counties. Switching to an economic filter, the document looks first to the output (economic performance) and then goes back to the potential causes( the industrial structure of the sector - employers and employment and productivity) and ends with a brief forecasting. Forces driving the sector changes in consumer demand (variety, convenience, value and safety) wider concerns about environment and animal welfare growing awareness about the importance of bio-fuels increasing dependency on export activities increasing international competition from emerging markets like India, China, Brazil, and Mexico increasing business risk and volatility due to fluctuation in the value of national currency and more frequent financial instabilities on the world markets growing dependency of agricultural input suppliers on upstream industries Agriculture and agri-food sector in Canada and Ontario The agriculture and agri-food sector is an important component of the Canadian economy contributing about 8-11 percent to the national GDP and employing about 12 percent of the Canadian population. In Ontario the sector contribution to the GDP is limited to around 6 percent while employing about the same proportion of the population as nationally, 12 percent. It was estimated that at provincial level $1 spent in farming operations produces $2.25 aggregate GDP and one job in farming creates another (1.09) indirect, or induced, job (Groenewegen, 2013). Nationally and provincially, the sector went through several rounds of consolidations resulting in fewer farms with larger operating areas, larger average number of animals per farm, larger capital values, larger average number of operating equipment per farm. This trend suggest continuous efforts to improve productivity, gain economic efficiency and remain competitive internationally. The industrial structure of the sector is heavily skewed towards self-employment and micro-establishments (1-4 employees). Due to the nature of its products (food) the agriculture and agri-food markets were responding more rigidly to fluctuations in prices (lower income elasticity of demand), which played as an advantage during the most recent years when recession affected the economy because the slowing down has been much smaller than for the business sector. Nevertheless, the improvements in the sector productivity are attributed mainly to the increased level of mechanization in the sector, the intensity of intermediate input use and application of research and technology. All these factors lead over time to a major contraction in the number of hours worked in agriculture sector. Worktrends.ca at Elgin Middlesex and Oxford Workforce Planning and Development Board| 647 Wilton Grove Rd., 4 Unit 3. London, ON N6N 1N7. Tel: 519-672-3499.Fax: 519-672-9089 Agriculture and Agri-Food Sector Report 2014 This structural transformation of the sector resulted in a stellar of the associated Canadian export activity, Canada claiming in 2012 the fifth place in the world among the suppliers of agriculture and agri- food products. In conjunction to this, the government marked significant achievement in negotiating major international trade agreements with the European Union (CETA), Korea (CKFTA), India and Japan opening new markets for the sector. The employment in pure agriculture (NAICS 111 and 112, 1151 and 1152) decreased over time in Canada while in Ontario it's been maintaining at a steady level. The employment in this sector in largely concentrated in Ontario (28% of total Canadian employment in the sector, in 2010). Nationally and provincially the employed in this sector are majority males. The "25 to 54 years old" group tended to decrease their presence among the working people in this sector. In contrast the "55 years old and over" group increased its presence among the working people in this sector. The youngest group, "15 to 24 years old" maintained a level presence among working people in agriculture and agri-food sector. The sector employment is seasonal and very sensitive to weather conditions. For the next decade the sector growth will be driven by population growth, technological advancement, new market opportunities and the increase in prices of agriculture and agri-food products and services. Ontario is set to double its annual growth rate of the sector by 2020. Extensive provincial and national government support is offered for funding projects promoting adaptation to the new market conditions, advancing technological innovation, accessing new markets, and proposing local, regional, or provincial economic development. Competitive advantages: Geographic proximity to the US, Canada's largest trading partner. Favorable international trading agreements with the EU, China, Korea and Japan Canada's low arable land population density and a high rate of technological adoption Educated labour force Global reputation for producing safe and high quality foods A slight depreciation in the Canadian dollar over the last year Stable financial system and tighter government and industry regulations Agriculture and agri-food sector in Elgin, Middlesex and Oxford counties At the county level numerous efforts were conducted towards developing optimal distribution channels, particularly through stronger customer-supplier relationships between local food producers and government institutions (schools, hospitals, nursing homes, and other). These efforts seek efficiencies in the value supply channel and creation of competitive advantages for the local agriculture and agri-food sector producers. Overall Elgin Middlesex and Oxford