Farm Credit Canada has identified $12 billion in food and beverage exports that could be shifted away from the U.S. market as cross-border trade comes under continued strain.
U.S. tariffs have introduced uncertainty to a relationship that has historically been of benefit to Canada’s agriculture and food sector, the Crown corporation said in a report published Monday.
“The concentration of Canadian exports to the U.S. underscores the sector’s vulnerability to the evolving trade policies of our southern neighbour and a strong need for diversification,” said FCC, which provides financing and other services to the agriculture sector.
The proposed strategy aims to reduce Canada’s U.S. market dependence for food and beverage exports to half of 2023 levels by strengthening interprovincial trade, leveraging existing trade agreements and establishing new international trading partnerships.
It said more than three quarters of Canada’s food and beverage exports were destined for the U.S. in 2023, up from two-thirds five years earlier. Primary agriculture exports had a much more diverse customer base, with 31 per cent heading to the U.S.
“The United States is always, always going to be a major destination for Canadian food products. I don’t think you can decouple from the United States. I don’t think that’s the point of the report,” said FCC chief economist J.P. Gervais.
“The point of the report is what is the opportunity here to diversify away from the United States, leverage the trade agreements that we have?”
The agency estimates $2.6 billion in current food and beverage exports to the U.S. could be redirected to meet Canadian demand, and $9.4 billion to European and Asian markets.
One of the biggest opportunities for diversification FCC sees is in the prepared foods category, which had exports worth $8.6 billion in 2023, 90 per cent of which went to the United States.
“This commodity category presents a strong opportunity for furthering Canada’s export market diversification, as prepared foods can travel longer distances without the same risk of spoilage compared with other food items,” the report said.
It highlighted China, France, Germany, the Netherlands and the United Kingdom as the best markets with which to boost trade in the prepared foods category.
The report recommends promoting the buy Canadian movement to boost domestic demand, enhancing Canada’s global brand and expanding domestic processing to increase the value of its food products.
“Right now there’s no doubt there is enthusiasm, there is a willingness of consumers to support Canadian businesses,” said Gervais.