indicatorAgribusiness

Agriculture's role in Alberta’s economy during COVID-19

By ATB Financial 30 November 2020 5 min read

Since March, Alberta has been dealing with the repercussions of COVID-19, including widespread shutdowns. While many urban businesses were forced to shut down, rural Alberta was able to avoid lockdown. This kept one of the economic engines of Alberta and Canada running so that we could have food on our tables.

“Our agriculture sector has always been resilient, beginning with farmers and ranchers” says Jonathan Neutens, Vice President of Agriculture at ATB.
Although the industry has run into its own barriers throughout the pandemic, most notably the disturbances in the supply chain, it is well positioned to continue building towards economic growth and diversity for Alberta.

This success is largely due to the drive and ingenuity of owners and operators throughout the sector. The industry’s fortitude is perhaps best exemplified by the emerging presence and investment in value-added agriculture and agri-food innovation. Looking to the future, Alberta has the opportunity to strengthen its role in providing reliable and high quality food products for domestic and international markets.

The impacts of COVID-19 on Alberta’s agriculture productivity

Despite the coronavirus, the province’s farm receipts ticked up by a single percentage point in the first half of 2020, including four per cent for grain crops.
The pandemic’s impact was most felt by the livestock industry as supply chain interruptions caused livestock receipts to fall by nine per cent. Still, as a second wave brings deeper disruption to many other sectors, packing plants forge on, working through a backlog of nearly 100,000 head. The hope is that by spring, the industry may be back to normal in terms of feedyards buying and selling along with monthly processing.

While there was turbulence, producers continue to remain optimistic about 2020 thanks to the strong export potential of products as well as continually improving crop varieties that will bring about greater on-farm profitability.

To learn more, check out ATB’s October 2020 Economic Outlook.

Value-add opportunities for Alberta agriculture

The agrifood sector played an important role in overcoming supply chain disturbances. Various agrifood service providers have stepped up during the pandemic and helped Alberta producers and processors maintain or reposition their operations. The sector’s response to new safety protocols and food logistics challenges was also important as the industry addressed sovereignty and efficiency issues. We’ve also seen efforts to diversify the supply chain through the expansion of controlled environment farming.

These actions highlight the opportunities in this sector and support the government's stimulus as a strong economic driver for agriculture and its ability to contribute to economic recovery. A prime example is the recent announcement by Agriculture and Forestry Minister Devin Dreeshen of more than $400 million for irrigation funding. This funding will be coupled with a leveraged loan from the Infrastructure Bank of Canada, more than doubling it to $815 million. Eight irrigation districts are expected to significantly benefit through new reservoirs and upgraded infrastructure.

This announcement means a few things, but most importantly, it means job creation.

“In order to bring on more irrigated acres to deliver water more effectively and efficiently than we do today, there’s going to be jobs,” says Neutens.

Pea yields continue to increase alongside growing demand for alternative sources of protein, farmers could see years of sustained profitable prices for pulse crops. With sizable investments from the federal government through its Protein Supercluster, this subset of agricultural commodities seemed poised for a significant boost at all levels.

“COVID has exacerbated the need for us to look for further opportunities in value added processing,” says Neutens. “Pulse crops is a natural area given consumer trends as well as the agronomic viability and sustainability of peas, lentils, chickpeas and dry beans.”

Other value-added opportunities include hemp for its many uses including fibre, industrial and oil. Similarly, canola value-added has increased lately with companies seeking to not only extract its oil but also its proteins, which have applications in skin-care, feed and food, and other niches. All of which are examples of how value-added can go beyond finished food products and into the processing and manufacturing of food ingredients for agri-based products.

Agrifood as an emerging growth driver

Production farming contributes 50 per cent of Alberta’s agricultural GDP, while agri-food processing is the other half. In recent years Alberta's agri-food industry has seen an average growth rate of nearly five percent. 

Agrifood processing will continue to be an area to watch in the coming years as a significant contributor to Alberta’s GDP as “both primary production and agrifood provides us a great opportunity to help diversify the Alberta economy,” says Neutens. “The Steady Eddie is going to be primary production, but the added value is where significant [economic] growth can come from. When we export a value-added product, more of the profit margin will stay in our pockets here in Canada and Alberta.”

In Alberta, the food and beverage manufacturing industry remains the second largest in the province, accounting for more than $15.8 billion in revenue in 2019. This will play a vital role in 2020-21 as the province looks to rebound from the crisis and guarantee local food supply.

Economic recovery for Alberta

As the pandemic reverberates through the remainder of 2020, Alberta is still uniquely situated to help meet the federal government’s aspirational target of $75 billion in agri-food exports by 2025. Through its diversified farm, livestock and value-added products, Alberta will play a crucial role in both the province and country’s economic recovery both in 2021 and well into the future.

There is also still plenty of room to grow for homegrown value-added innovation and additional downstream agri-food processing capacity. For example, Alberta largely exports raw commodities, whether plant- or animal-based. The province stands to gain more profit through innovation across the entire value chain and increasing the amount of processing before exporting. This would create more jobs for everyday Albertans and help to propel economic diversification, once again highlighting the sector as a significant backbone of the province with immense growth potential.


Connect with one of ATB’s agriculture experts to learn how we can help Alberta farms and agribusinesses evolve and thrive.

 

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