First defensive strategy for farmers, processors: aggressive review of costs

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This article was published 22/03/2025 (230 days ago), so information in it may no longer be current.

There is little doubt the imposition of punishing tariffs on sales to U.S. customers casts a chill over the entire Canadian agriculture and food sector.

However, when researchers with the Guelph, Ont.-based Agri-Food Economic Systems consultancy dug deeper into the impacts, the emerging story is more nuanced.

In another of a series of research papers outlining the work the Canadian sector must now undertake to assess and mitigate its exposure, economists Al Mussell, Douglas Hedley and Ted Bilyea underscore the reality there is no easy escape from the sector’s heavy reliance on the American market.

Exporters must now assess their vulnerabilities in the face of crippling tariffs and choose whether to absorb them, find ways to pass them on or put the work into developing new markets.

It may be a combination of all.

“Especially when it is done at a detailed level, it is arduous work and it is work that Canadian firms and industries must do as they recognize that the U.S. is not the trading partner it once was and we should not assume that the situation will return to resemble the 1990-2024 period characterizing Canada-U.S. trade any time soon, if ever.”

Accepting the current scenario shows no signs of being temporary will be the biggest factor determining how well the industry recuperates from this generation-defining setback. As the saying goes, the first step on the road to recovery is admitting there is a problem.

Canada’s addiction to the U.S. market was driven by adjacency and nurtured by trade deals, but it has nonetheless proven to be as toxic as the naysayers predicted when the Canada-U.S. Free Trade Agreement was first negotiated in 1987.

Even if today’s tariff threats are pulled from the table, the sector can have no confidence current or future deals will secure access to the U.S. market.

It’s widely expected U.S. President Donald Trump’s tariffs will be passed back through the supply chain, which will have the effect of reducing sales, prices or both. But that isn’t a given.

“There will likely be a range of product outcomes resulting from the tariffs, with some products perhaps experiencing little impact, others devastated by complete loss of U.S. market and many products somewhere in between,” the economists write.

Unlike with past trade wars triggered by overproduction, there is no shortage of demand for the commodities and food Canada produces. Open for debate is whether those sales can continue at a price that keeps Canadian suppliers in business.

There may be instances when sales continue relatively unfettered, such as when a product can’t be easily displaced by domestic suppliers, serves a premium niche or has strong brand recognition that customers want badly enough.

“A detailed analysis requires a realistic product-by-product assessment of price elasticities and their determinants — competitors, brands, substitutes, niches, etc. It is also a situation that can be influenced through marketing, promotion, product investments, and a variety of other means,” the economists write.

“The best defence we have is a commitment to renewed competitiveness and agri-food innovation.”

For farmers and processors alike, the first defensive strategy will be an aggressive review of costs.

On the offensive line, developing new markets and innovating processes or products will take time and investment. These are areas where governments can step in to help.

Secondly, can Canadian exporters do more to differentiate their products through quality, ethical production practices or selling Canada as a brand?

For example, Maple Leaf Foods executive chairman Michael McCain told the recent Sustainability of Canadian Agriculture conference how his company has grown its U.S. sales by being “distinctive and different,” marketing its commitment to sustainable production.

“We have what I could describe as the ‘attacker’s advantage,’” he said. With only three to four per cent of the North American marketplace, “we’re kind of small. So that makes us large enough to scale these ideas into scalable solutions, and that’s important, but small enough to be rebellious in what we do.”

At the time, McCain said the company will pass tariff costs to its U.S. customers.

Will they pay them? Time will tell.

Laura Rance is executive editor, production content lead for Glacier FarmMedia. She can be reached at lrance@farmmedia.com