Grain and Flour Market in Canada

04 February 201414 min reading
Canada has succeeded to be one of the world’s leading grain producers and suppliers despite its limited arable land and unfavorable climatic conditions. Being one of the important countries in the world for grain production (particularly for wheat and oat); Canada realized over 50 million tons of grain production in 2012/13 season. The country exports a great part of wheat and oat production and the rest is milled in 55 wheat and oat mills across the country. Being one of the important countries in the world for grain production (particularly for wheat and oat) despite its limited arable land, Canada also is famous for being a grain and grain product supplier with high quality. Exporting 10-20 million tons of wheat every year, Canada is stated to have nearly 55 wheat and oat mills. However, Canada as an important supplier of grain products has not shown the same performance on milling products. Being away from the less developed countries and milling product importers is an important reason of that situation as the developed countries in terms of milling products have an important competitive advantage in those markets compared to Canada. However; despite all these difficulties, Canadian grain milling industry exports to more than 30 countries annually. ECONOMIC STRUCTURE AND PERFORMANCE IN CANADA Being 11th largest economy of the world according to 2012 data of IMF; Canada is a bridge between the North American market and rapidly developing Asian economies. With this strategic position, the country is world’s ninth largest consumption market. The country is considered as one of the world’s leading most dynamic economies with the secure business and investment environment besides providing the opportunity to reach a consumer group exceeding 443 million with the help of North American Free Trade Agreement (NAFTA) made between Canada, U.S. and Mexico. In Canada that is a member of Organization for Economic Co-operation and Development (OECD) and G8; natural sources have a key role on country’s economy. 70% of the total economic activities and 75% of the employment is provided by the service industry. Having a great importance for British Colombia and Alberta states, natural sources are an important element of the trade balance. The most prominent element of Canada’s economic performance is that it did not have any economic constriction in the period from 1991 when there was 2,1%-economic constriction for the last time until 2009. It is seen that Canadian economy was growing constantly with the low unemployment rate and budget surpluses in that period. The country succeeded to overcome 2001 crisis only with a three-month constriction. The economy grew with the rates of around 3% annually between 2004 and 2007. On the other hand; having a current account deficit together with the economic constriction for the first time after years with 2009 crisis, Canada showed a growth of averagely 1,1% between 2007 and 2011. The growth rate in 2012 was realized as 1,7%. It is estimated to be 1,7% in 2013. The growth rate expectation for 2014 is 2,2%. CANADIAN AGRICULTURAL SECTOR Arable lands in Canada range along the southern border of the country. Despite the restricted arable land, the country is one of the leading particularly wheat and other agricultural producers. In the last 50 years; Canadian agricultural industry has had a structural change, the share of agricultural industry and the employed population in agriculture has decreased gradually just like in other industrialized countries, farms have extended but their numbers have decreased. There has not been much change in the arable land in total and the arable lands per farm have increased in total; within this concept Saskatchewan state has been the one with the largest arable land amount. Although the country is an important producer of agricultural and food products; regular import is realized for meeting the demand especially for the products grown in warmer climates. Despite that fact that agricultural foreign trade is mainly realized with other NAFTA (North American Free Trade Agreement) members U.S. and Mexico due to the geographical position; European and Far Eastern markets have also an important role on Canada’s foreign trade. On the contrary to other industrialized countries, Canadian farmers do not get large subsidies from the government. Canadian farmers only get support in case of natural disasters and drought. GRAIN PRODUCTION AND CONSUMPTION Canada has succeeded to be one of the world’s leading grain producers and suppliers despite its limited arable land and unfavorable climatic conditions. Being one of the important countries in the world for grain production (particularly for wheat and oat); Canada realized over 50 million tons of grain production in 2012/13 season. According to the data of USDA (U.S. Foreign Agricultural Service); Canada, which ranked sixth in world wheat production with an amount of 27,2 million tons in 2012/13 season, has increased its wheat production 50% in the last 10 years. Canadian wheat production, which was 15,9 million tons in 2002/03 season, reached 28,6 million tons in 2008/09 season but decreased a little in the following seasons. Declining to 23,3 million tons in 2010/11 season, the production increased to 25,2 million tons in 2011/12 season and 27,2 million tons in 2012/13 season. Country is expected to realize a 10 million-ton record increase in wheat production in 2013/14 season and thus the production will increase to 37,5 million tons. The country uses approximately 1/3 of the wheat production for its own domestic consumption. When the consumption data is reviewed; it is seen that there is not many changes between the years and the consumption is realized between 7 and 10 million tons. Wheat consumption, which was 7,7 million tons in 2002/03 season, increased to 8,9 million tons in 2006/07 season and decreased to 6,8 million tons in 2007/08 season. Increasing a little in the following seasons, consumption reached to 9,5 million tons in 2012/13 season. Wheat consumption is expected to reach 10,2 million tons level in 2013/14 season. With 24,4 million-ton amount in 2012/13 season in total coarse grain production, Canada ranks ninth in world production. As one of these grains, corn production has increased nearly 4 million tons in the last 10 years. According to the USDA data; Canada’s corn production, which was 8,9 million tons in 2002/03 season, reached to 11,6 million tons in 2007/08 season but decreased to 10,06 million tons in 2008/09 season and to 9,7 million tons in 2009/10 season. Increasing again in 2010/11 season, country’s corn production reached 13 million tons in 2012/13 season. The country is estimated to rank ninth in world corn production with 14,2 million-ton corn production in 2013/14 season. On the contrary to wheat, Canada uses almost entire corn production and sometimes more than the entire production for its own domestic consumption. When corn consumption data is reviewed; it is seen that the country has averagely 11 million-ton consumption. In 2013/14 season, Canadian corn consumption is expected to reach 12,5 million tons which was the 10 year-earlier level. Another product for which Canada is an important producer is barley. The country ranks third in world barley production with the 8 million-ton production in 2012/13 season. Canada’s barley production, which was 7,4 million tons in 2002/03 season, reached to 12,5 million tons as the highest amount in the last 10 years in 2004/05 season. Having increases and decreases in the following seasons, the production declined to 7,6 million tons in 2010/11 season and increased again in 2012/13 season to 8 million tons. Canadian barley production is estimated to continue to increase in 2013/14 season and will reach to 10,2 million tons level. 7-8 million tons of barley production in the country is used for domestic consumption. Ranking third in world oat production, Canada realizes 2 to 4 million tons of oat production every year. According to the USDA data; realizing 2,9 million tons of oat production in 2002/03 season, Canada reached its highest production level in 2007/08 season with 4,6 million-ton amount. Decreasing in the following seasons, Canadian oat production remained at 2,8 million tons level in 2012/13 season. It is estimated that the oat production in the country will increase again in 2013/14 season and reach to 3,8 million tons. Canada uses nearly 50% of the oat production for its own domestic consumption and the rest is exported. FOREIGN TRADE IN CANADA According to the records of International Trade Center; Canada ranks 12th in world export and 13th in world import. In 2012, Canada’s export increased 0,7% and import increased 2,6% compared to the previous year. Total foreign trade volume increased to 915,8 billion dollars in 2012. When the export structure of the country is reviewed; it is seen that the export share of services and industry increases gradually but the export of the raw materials like agricultural products, timber, and ores decreases. However, this situation is not reflected on the foreign trade values due to the increase in commodity prices recently. While wheat ranks first among the most important products exported by the country in 2012; soybean and dried legumes are another important import items. For the import; agricultural and food industry products constituted 8,5% of the total import realized in 2012. When the foreign trade of Canada is reviewed by countries; it is seen that the commercial relations between Canada and U.S. constitute the world’s largest bilateral trade flow. U.S. is the largest commercial partner of Canada both for export and import. While China, England, Japan and Mexico are in the first places among other important markets to which Canada make export; particularly Netherlands, Germany and France, European countries, South Korea, Hong Kong, Brazil and India follow them. In Canada’s 2012 export, Turkey ranked 25th with a share of 0,2%. Canada’s export rate to Turkey decreased with a rate of 33,7% compared to the previous year. Just like in export, U.S. is the most important country in Canada’s import. Half of Canada’s import in 2012 was realized from U.S. and the share of European countries in Canada’s import is approximately 12%. China, Mexico, Japan and South Korea are other important countries in Canada’s import after U.S. and European countries. It is seen that the import from 20 out of 35 countries to which Canada makes import increased in 2012 but the import from other 15 countries decreased. The highest import increase of Canada was made from Iraq with a rate of 61% in 2012 compared to the previous year; the second largest import increase was from Holland with a rate of 37%. Turkey ranked third in the largest increase ranking in Canada’s import with a rate of 30,5%. THE PLACE OF GRAINS IN FOREIGN TRADE Having an important role in the world market on foreign trade of grain-based agricultural product just like in the production; Canada exports 10 to 20 million tons of wheat every year. When the data on wheat that has an important place in the foreign trade of Canada is reviewed, it is seen that there has been an increase of nearly 100% in the last 10-year period. According to the USDA data; Canada’s wheat export, which was 9,4 million tons in 2002/03 season, reached to 19,4 million tons in 2006/07 season. Declining to 16,1 million tons in 2007/08 season; wheat export reached 18,8 million tons level in 2008/09 season and 18,9 million tons in 2009/10 season. Having a fluctuating course in parallel with the production, Canada’s wheat export was realized as 18,5 million tons in 2012/13 season. The country is estimated to reach the highest level in the last season with 22,5 million-ton wheat export. Canada will continue to rank third in the world wheat export with this export amount. Two other important products in Canada’s grain products trade are barley and oat. Ranking sixth in world barley export, Canada exports 1 to 2 million tons of barley. Country’s barley export, which was 427 thousand tons in 2002/03 season, increased 2,2 million tons in 2005/06 season. Reaching to the highest barley export of the last 10 years in 2007/08 season with 3 million tons; had some decreases in barley export in the following seasons and realized 1,3 million tons of barley export averagely. Exporting 1,3 million tons of barley in 2012/13 season, Canada is estimated to reach 1,9 million-ton export amount in 2013/14 season. Canada continues to be on the top in world oat export. By itself, Canada realized 73% of world oat export which was 1,8 million tons in 2012/13 season. When the oat export data is reviewed by years; it is seen that the highest export amount is 2,3 million tons and this amount was realized in 2007/08 season just like other grain products. Realizing 1,3 million tons of oat export in 2012/13 season, Canada is projected to increase this amount to 1,7 million tons in 2013/14 season. MILLING AND GRAIN PROCESSING INDUSTRY Canada has been making production for over 200 hundreds years in commercial-purpose grain milling industry. According to the data of Canadian National Millers Association; some of Canada’s largest modern grain mills are operating at or near locations where mills have operated for more than 100 years. It is stated that Canada has approximately 55 commercial wheat and oat mills situated from Pacific to Atlantic coasts and 20% of these mills are less than 15 years old. Using state-of-the-art milling methods and technology, the grain milling facilities in the country has approximately 1.5 billion $ capital investment. According to the information presented by Canadian National Millers Association Chairman Gordon Harrison; Cargill owning Horizon Milling, and P & H Milling Group are the top two millers in Canadian milling industry. ADM and Kraft follow them. The fifth is Rogers (Foods Ltd.), the Japanese-owned interest. Besides them, there’re probably another 20 or so independent mills with various specializations across the country. Some of them are Brant Flour Mills Ltd., Grain Millers Inc., Nutrasun Foods Inc., Prairie Flour Mills Ltd. and Richardson Milling Limited. The association reports that commercial scale wheat and oat mills operate in 8 of Canada’s 13 provinces and territories. Canadian wheat mills process approximately 3.1 million tons of Canadian wheat annually. The majority of eastern Canadian wheat processed is grown in Ontario, but milling wheat is also produced in Quebec and Atlantic provinces. Canadian oat mills process approximately 600,000 tons of milling quality oats annually. This Canadian sub-sector relies heavily on the United States market and holds a disproportionate share of total North American oat milling capacity, having expanded considerably in the past 15 years. Total milling capacity in the country is shared about equally between eastern and western Canada. While the majority of wheat milling capacity is in the east in close proximity to larger urban centers, the majority of oat milling capacity is situated in the Prairie Provinces. Grinding over 3.5 million tons of wheat, oats and barley each year; Canadian mills export wheat flour, semolina and other milled grain products to over 30 countries. Canadian milling companies have free trade access to all of Canada, the United States and Mexico under the terms of the North American Free Trade Agreement. Although the United States is Canada’s largest export market for milled grain products, over 30 countries import wheat flour and other milled grain products from Canada each year. According to “Canadian grain milling industry profile” that is prepared using the data of Statistics Canada, the Strategis as the website of Canadian Industry and many other sources; there are 98 establishments in Canada that fall within this industrial classification. Of these, 48 are wheat milling establishments. An additional 7 are industrial scale oat milling establishments. The remainders are primarily specialized milling (commodities other than the primary cereal grains, wheat, oats, barley and corn that include dried fruits and vegetables, pulses and other specialty crops) and further processing establishments that are in the bakery mix and dough preparation business. A number of bakery mix establishments are co-located with wheat milling facilities. According to this industry profile; the milling industry has undergone extensive modernization and significant capacity expansion between the mid1990s and 2010. The capacity expansion has been market-driven, closely tracking population growth. Current replacement cost of all wheat and oat milling establishments is estimated to be between $1.5 billion and $2.0 billion.
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