How does a local food system create economic value both for its consumers and its producers? How does a shifting global trade environment affect our local food systems? Join this presentation and discussion with OMAFRA’s senior economist.

1. Economic Resilience for
Local Food
Eastern Ontario Local Food Conference
Steve Duff
OMAFRA Chief Economist

2. Overview
• How does a shifting global trade environment affect
our local food systems?
• How does a local food system create economic value
both for its consumers and its producers?
2

3. Overview
• Ontario’s Agri-food sector
• Agricultural Trade Policy
• Local Food Consumption Example
• Economic Resilience of Local Food
3

4. Ontario’s Agri-food Sector

5. DISTRIBUTION
RETAIL
$39.5 billiona , 179,684a jobs
INT’L AGRI-FOOD
EXPORTS
$12.5 billiona
FARM
$12.5 billion sales
81,800a jobs
INTERNATIONAL
AGRI-FOOD IMPORTS
$23.4a billion
FOOD MANUFACTURING
INDUSTRY
Over $36.9 billionb, and over 95,457a jobs
Almost 3,000 establishments
Total jobs – 781,639a, 11% of provincial employment
Source: OMAFRA statistics 2013; a OMAFRA statistics 2014; b Food manufacturing revenue as at 2012
FOOD SERVICE
$21.0 billion, 373,298a jobs
ONTARIO AGRICULTURE AND FOOD AT A GLANCE
5

6. Source: Statistics Canada, OMAFRA website, OMAFRA calculations
Ontario Food Consumption
6

7. Source: Statistics Canada, OMAFRA website, OMAFRA calculations
Food at Home & Away from Home
7

8. • In 2015, Ontario production at 71% of vegetable demand down
from 72% in 2000
0
500
1,000
1,500
2,000
2,500
3,000
3,500
0
500
1,000
1,500
2,000
2,500
3,000
3,500
Millionkg
Millionkg
Disappearance fresh Disappearance processed Production fresh and processed
Ontario Vegetable Production vs Demand
8

9. • In 2015, Ontario production at 12% of fruit demand down from
25% in 2000
0
500
1,000
1,500
2,000
2,500
0
500
1,000
1,500
2,000
2,500
Millionskg
Millionskg
Disappearance fresh Disappearance processed Production fresh and processed
Ontario Fruit Production vs Demand
9

10. 10
Integrated North American Food Market
• Since World War II - steady increase in % of imported foods due to
rising incomes, population, changing demographics
• Now about 40 percent
• Top imported foods to incl fruits and nuts, beverages and spirits,
vegetables, and pasta and other grain preparations.
• Fully integrated North America and world food market
• Global trade has led to specialization which has helped to keep food
prices low, but has also increased complexity in the food sector.
• Growing complexity has led to a rise in efforts by companies, and
governments to design and implement food traceability initiatives.

11. 11
Integrated North American Food Market
• Ontario’s vast scale and geographic and climatic diversity, and its
immense reserves of fresh water, provide a wealth of natural
resources to support food production.
• Combination of our cold climate and a relatively small population
means that the potential for domestic growth is somewhat limited
• Companies seeking to expand significantly are putting a large focus
on growing their businesses through exports.
• We can create the conditions that support growth while contributing
to safe and healthy food, sustaining our environment, and providing
greater access to food in Ontario, Canada and around the globe.

12. 12
Integrated North American Food Market
• Exports are not the only way to create opportunity.
• Another strategy is to tailor products to specific markets or in some
cases market niches.
• Strong opportunity to displace imports in many specific markets but
to do so in large volumes requires cost competitiveness
• It is not always about the lowest cost and largest scale. .
• Sometimes it is about innovating to explore specific market niches.
• Tailoring to niche strategies are often easier for smaller firms to
pursue.

13. 13
Integrated North American Food Market
• Food sector in Ontario is in a unique position today.
• Some aspects of food are highly integrated, involving complex
relationships and supply chains around the world.
• Other aspects of the sector are intensely rooted in local
communities.
• We have the opportunity today to create the conditions that will
support growth in both these aspects of Ontario’s food sector
• The two together can provide a strong provincial and local economic
engine, contribute to safe and healthy food choices and sustain our
environment.

14. Agri-food Trade Policy

15. Trade in agriculture and food
• What is it?
– commodities trading
– foods goods, beverages, alcohol
– Equipment, technology
• How does it fit into the current trends?
– growing & more diverse Canadian population
– local foods / 100 mile diet
– healthy living
– food sovereignty
• The prevailing issues: market integration, mature economies
and comparative advantage
15

16. Agricultural trade: Canada / Ontario
• Canada is the sixth largest agri-food exporter after the European
Union, the US, Brazil, China and Australia
• Also world’s sixth largest agri- food importer
• Ontario's agri-food export interests tend to be distinct from
western commodity focus:
– 84% of Ontario agri-food exports are intermediate or consumer-ready
products – pasta, bakeries/tortilla manufacturing, grain and oilseed
milling and meat product manufacturing, and beverages
• About 74% of Ontario exports are destined for the US market –
Mexico, EU are other key markets
• About 53% of Canadian agri-food exports to US
• The vitality of trade activity in the region in perspective: two-way
trade crossing the Ambassador Bridge between Michigan and
Ontario equals all US exports to Japan
• one truck crosses the Canada/US border every 2.5 seconds
16

17. Agricultural Trade Policy
• Trade in agri-food was large and generally unimpeded prior to
World War I
• Since World War II agriculture has been a main “sticking point”
in trade negotiations
• Bulk of issues arose from process of North America feeding
Europe for many years
• Uruguay Round Agreement on Agriculture of 1994 sought to
bring agriculture into General Agreement on Tariffs and Trade
(GATT) which was formed in 1947 to cover trade in all other
products because:
– As world economies and populations grew they needed more trade
– Ag policies inflict costs on domestic economies and trade partners
– A given level of producer support is more costly to achieve with
tariff than with producer subsidy
17

18. 18
Canada’s FTA Coverage*
*Note: FTA coverage does not include WTO Agreements.
Countries with Completed
Free Trade Agreements
Countries with Free Trade
Agreements Being Negotiated
Countries with Free Trade
Agreements in Exploratory
Discussions
All other countries without
Free Trade Agreements with
Canada
• WTO set the stage for further liberalization
of trade but didn’t provide a good base for
free trade
• Many countries leaning toward bi-lateral or
multi-lateral free trade agreements
• Focus on free trade and worry about domestic
subsidies afterwards

19. Local Food Consumption
Example

20. 20
Hastings County at a Glance
Percent of
Item Hastings Province province
Population, 2015
Total .……………………………............................... 138,305 13,792,052 1.0%
0 to 19………………………………….……………… 28,600 3,038,549 0.9%
20 to 64…………………………..……………………… 80,985 8,542,351 0.9%
65 and over…………………..………………………… 28,720 2,211,152 1.3%
'Population grow th 2011-2015
Total .……………………………............................... 0.0% 4.0%
0 to 19………………………………….……………… -6.6% -2.1%
20 to 64…………………………..……………………… -2.1% 3.3%
65 and over…………………..………………………… 14.8% 17.2%
Fam ily Incom e, 2011 National Household Survey
Economic families (number)…………………………… 39,615 3,528,375 1.1%
Economic families average income($)……………… 76,690 100,152 76.6%
Couple-only (number)………………………………… 17,435 1,197,250 1.5%
Couple-only average income ($)……………… 70,994 89,678 79.2%
Couple w ith children (number)……………………… 15,475 1,689,175 0.9%
Couple w ith children average income($)…………… 94,434 121,285 77.9%
Lone-parent (number)………………………… 5,505 520,715 1.1%
Lone-parent average income ($)…………………… 46,341 58,622 79.1%
Source: Statistics Canada, OMAFRA website, OMAFRA calculations
Hastings County Profile

21. 21
Hastings County Food Expenditure
• Average Ontario rural household spends $8,962 per year on food
71% from stores and 29% from restaurants
• Hastings county has 39,615 households with an average income of
$76,690
• Households in Hastings County thus spend roughly 12% of their
income on food - provincial average is 8%.
• This higher % means that many Hastings county residents are
likely to look at their food purchases, sources and budgets different
than the average Ontarian

22. 22
Local Food Demand vs Production
• Like the province itself, no one county or community in Ontario is
truly self-sufficient in balancing food demand and production
• In most rural communities while food is a much larger portion of
incomes, food is also something with much greater visibility and
understanding.
• Inherently food production is intensely rooted in local rural
communities.
• The ability of a community, and its food producers to understand
the local balance of food demand and production and the income
situation of its residents is vital to maintaining an economically
resilient local food system

23. 23
Provincial
Yield
Hastings
County
Production
Produce Fresh (kg/cap) Total (kg/cap) Fresh (kg) Total (kg) Yield (kg/ha) Fresh (ha) Total (ha) Total (ha) Consumption (kg) Area (ha)
Apples 11.00 19.76 1,520,802 2,732,630 21,466 70.85 127 31 380,200 18
Beans green & wax 0.92 1.94 126,964 268,312 6,333 20.05 42 6 31,741 5
Corn 3.48 7.61 481,025 1,052,224 11,451 42.01 92 120 120,256 11
Strawberries 3.59 4.27 496,515 590,839 5,604 88.60 105 17 124,129 22
Tomatoes 8.55 30.84 1,182,784 4,264,773 72,687 16.27 59 13 295,696 4
TOTAL: 237.77 425.66 187.00 59.44
hectares hectares hectares hectares
Annual consumption per
capita
Consumption for
population
Fresh produce only for a 3
month summer:
How much area for the
population?
Source: Statistics Canada, OMAFRA website, OMAFRA calculations
Estimated Hastings County Food
Demand vs Production

24. Economic Resilience of Local
Food

25. 25
Local Food Value Proposition
• How a person/family/community defines what foods are or are not
local, depends on the nature and context of that
person/family/community.
• No agreed-upon definition of local.
• Local food does however resonate with three major ideas:
• Close relationship with those who grow food;
• More likely to be grown and distributed in a sustainable and
ecologically-sound way; and
• Helps support local businesses
• To foster economic resilience, a fourth point needs to be considered
which requires there to be a value proposition to the farmer –
presumably in the form of larger returns

26. 26
Local Food Value Proposition
• Every product needs a value proposition
• Value proposition is how a product is distinguished from all others
in its domain so that target customers consciously select it as a
superior option.
• Well-defined and effectively articulated value propositions can
transform ordinary products into extraordinary experiences.
• A strong value proposition is an attempt to achieve customer
loyalty by setting appropriate expectations about a product and
ensuring these are consistently confirmed at high levels.
• Setting appropriate expectations is extremely complex

27. 27
Local Food Value Proposition
Hastings County example: In summer, local stores offer California
strawberries, at the same time that Hastings county produces close to
the required number of hectares to supply the community
• Consumers: taste, freshness, convenience, assurance of safer
production methods or price?
• Farmer: increased production, reduced costs, reduced waste,
higher price
• Are these value propositions enough for the farmer to ensure a
reasonable profit and for the consumer to choose local over
California?
• An economically resilient local food system balances these
questions.

28. 28
Economically Resilient Local Food
• A local food system balances these questions by first recognizing
that the answers lie at the individual farm and consumer level.
• Farmers need to:
• Know their costs in order to appropriately price their products
• Develop a sound value proposition to articulate to consumers
• Consumers need to:
• Understand what value propositions matter most to them: price,
quality, other attributes
• Understand what attributes the product offers
• Recognize seemingly similar products may be different due to value
propositions that are not physical in nature – e.g local food
• Balancing these questions enables each party to maximize its own
value proposition and adjust their decisions if their value
propositions are not adequately met

29. 29
Summary
• Ontario is part of an integrated North American food system
• Growing incomes and population has increased the need for
imports
• In many respects all food produced in Ontario is local
• Like the province itself, no one county or community in Ontario is
truly self-sufficient in balancing food demand and production
• In most rural communities while food is a much larger portion of
incomes, food is also something with much greater visibility and
understanding.
• The ability of a community, and its food producers to understand
the local balance of food demand and production and the income
situation of its residents is vital to maintaining an economically
resilient local food system
• In doing so local farmers and consumers balance a series of value
propositions that are beneficial to both parties