What many unfamiliar with Canadian agriculture production fail to recognize is the scope of annual purchases farmers undertake to grow major crops. These purchases significantly contribute to the regional, provincial and national economies of Canada.
I am often challenged with the question of, “What is the size of the agriculture retailing industry in Canada?” The short answer is, in Canada, the crop production input value chain from manufacturer to final farm delivery employs tens of thousands across the country with a value exceeding $10 billion.
To further demonstrate the magnitude of the contribution, I will focus on the three major crop input expenses of
fertilizer and lime, pesticides and commercial seed.
According to Statistics Canada1, Canadian agriculture production experienced many firsts in 2018, including:
- Farm gross operating expenses exceeded $50 billion.
- Farm expenses of the three major crop inputs combined exceeded $11 billion.
- Farm commercial seed expenses exceeded $2.8 billion.
As a percentage of total farm gross operating expenses, the three major crop input expenses represented 21.7% (2018) compared to the 5-year average of 22.9% (2014-2018).
Examining individual crop input expenses demonstrates year to year consistency:
|Crop Input Expenses||2018||Average 2014 - 2018|
|Fertilizer and Lime||$5.29 billion||$5.31 billion|
|Pesticides||$2.87 billion||$2.78 billion|
|Commercial Seed||$2.85 billion||$2.62 billion|
|Total||$11.01 billion||$10.71 billion|
As the above table illustrates, the 5-year average of major farm crop input expenses consistently breaks out to just under 50% dedicated to fertilizer and lime, with pesticides and commercial seed expenses relatively equal.
In any given year, production patterns, variety of available products, market signals and the adoption of technologies all will influence crop input purchases of Canadian farmers. 2019 however, one of the worst harvest experiences in a generation will significantly impact purchase decisions throughout the winter and well into spring.
As of Oct. 31, 2019, approximately 10% of Canadian crop production remained unharvested. Depending on the type, many remaining crops will be harvested next spring or written off due to lack of poor-quality marketing opportunities or inability to salvage.
In 2019, due in part to excess moisture across the American Midwest, spring seeding and planting occurred at roughly the same time across North America. A similar scenario is developing for the spring of 2020, due to soil conditions following this year’s harvest. In many regions of North America fall field conditions limited soil preparations and fertilizer applications.
The developing backlog of traditional fall activities will be completed this spring, we anticipate supply chain logistics will be one of the greatest challenges of 2020.
With that in mind, critical to delivering crop inputs with the least amount of disruption will be frank, early discussions with customers recognizing logistic capabilities, sourcing and delivery parameters in 2020. The bottleneck likely to occur will be the ability to supply product volume, type and timing as required.
With one of the most challenging crop years behind us and the holiday season before us, I would like to wish all CAAR members, and the tens of thousands of Canadians involved in the agriculture supply chain, a happy and prosperous 2020.
1 Table 32-10-0049-01 - Farm Operating Expenses and Depreciation Charges (x 1,000)
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