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FCC report says $30B opportunity in restoring productivity growth in Canadian ag sector

Farm Credit Canada’s (FCC) economics team says rekindling productivity growth in Canadian agriculture is a $30 billion opportunity over 10 years, according to a new report.

“If the agriculture industry can return productivity growth to where it was two decades ago, FCC estimates it would add as much as $30 billion in net cash income over 10 years,” says J.P. Gervais, FCC’s chief economist. “Developing innovative solutions, adopting new technology and leveraging data and insights can boost productivity growth and pay off in a big way for Canadian farms.”

Canada’s agricultural productivity growth has slowed since 2011 which is consistent with global agricultural productivity trends.

Agricultural productivity evaluates how inputs such as labour, capital, land, fertilizer and feed are efficiently transformed into outputs such as crops, livestock and aquaculture products. Productivity growth happens when producers increase their output using the same or smaller quantities of inputs.

Total factor productivity measures the combined effects of new technologies, efficiency improvements and economies of scale It is a key metric for assessing trends in agricultural productivity.

“Between 1971 and 2000 there was steady productivity growth on Canadian farms before hitting a plateau,” explains Gervais. “We are now seeing declining growth with a further decline projected for the next ten years. While that is the current projection, the entire agrifood supply chain can rally around the innovation spirit of farm input manufacturers and suppliers, farm operators, researchers and food processors to restore growth in agricultural productivity towards its peak.”

Average annual total factor productivity growth in Canadian agriculture by decade:

Sources: USDA database on agricultural productivity and FCC calculations.

As a global leader in growing, processing and exporting safe and reliable food, Canadian producers have a long history of adopting new technology and production practices that feed the world and protect the environment.

“The world’s population is expected to reach nearly 10 billion people by 2050. The Canadian agriculture industry is well positioned to be a leader in the technology and innovation that will meet that demand for food,” says Justine Hendricks, FCC president and CEO. “At FCC we offer a full complement of financing services and resources to support the industry in sustainably increasing its productivity and maximizing the resulting economic gains.”

The $30 billion opportunity that exists for the industry by restoring productivity growth to its historical peak is calculated using a framework that takes into account the relationship between total factor productivity, farm product prices and farm input prices.

“I have confidence in the agriculture industry’s ability to enhance productivity growth,” says Hendricks. “FCC is dedicated to supporting our customers as they meet these new demands and pursue productivity improvements through a variety of operational shifts designed to reduce input costs and maximize efficiencies.”