In March 2012, the Standing Committee on Agriculture and Agri-Food (hereinafter, “the Committee”) undertook a study on the food supply chain. The Committee held 26 public hearings from March 2012 to May 2013. As a part of this study, the Committee travelled on March 28, 2012 to the Guelph area, where it visited three agriculture-related businesses and a university centre for research on the identification of species through bar codes.

In the first several meetings, the Committee obtained an overview of the food supply chain. Thereafter, the Committee focused its research on issues relating to the supply chain of three specific sectors: red meat, grains and oilseeds and beverages. The structure of this report reflects this approach. The first part presents an overview of the food supply chain, its complexity, and describes the Value Chain Roundtables. The second part presents the trends, challenges, and opportunities and role of the government in the red meat industry. The third and fourth parts focus on the remaining two sectors. It is envisaged that the Committee will examine other sectors of the food industry as part of the current study.

A. Description of the food supply chain

1. How the food supply chain is organized

The food supply chain consists of a series of activities that connect participants throughout the various stages of manufacturing a product — from the production stage through to the final sale to the consumer. However, the food supply chain is far more complex than this simplified representation, as it is a dynamic system that involves numerous stakeholders, including government authorities and businesses of various sizes and types. Moreover, one witness stated that a definition of the food supply chain should be understood in a very broad sense.

These organizations represent businesses at every link in the supply chain, from input suppliers through primary production, transportation, processing, manufacturing, distribution, and importing to final marketers at export, retail, and food service.[1]

2. Complexity of the food supply chain

The food supply chain encompasses many actors who play specific roles throughout the chain. Many people believe that this chain is linear, but according to the evidence of Mr. David Sparling, Professor at the University of Western Ontario, it is actually a complex network in which information travels in more than one direction.

First, when we talk about Canada's food supply chain, we often envision it as a flow of product from input suppliers to producers to processors to the consumer. Information flows both ways up and down the chain. Those processes in Canada actually don't work as well as they should. In reality, a food supply chain isn't really a chain; it's a network.[2]

Witnesses noted that the complexity of this network sometimes hurts a particular sector. For example, due to the enlargement of the beef industry, there is an extended timeline in the supply chain, which reduces its effectiveness. This industry is divided into three key sectors: the cow-calf sector, the backgrounding or stocker sector, and the feedlot or finishing sectors. These three sectors are rarely managed by the same producer, which can cause problems in the flow of information about the desired characteristics of the product. In the organic sector, the network functions as a closed circuit with very tight links among its various members.

Historically, organic has had to maintain a closed-link system in order to ensure its rigorous standards and integrity, and to maintain transparency and traceability for consumers. Therefore many organic companies have chosen models that maintain very close relationships with their supply chains, their local growers, and their local processors and handlers, and all have grown together as a result. In many cases doing so has also been of tremendous value to the sector at large, and has contributed to the strong market position it enjoys today.[3]

In many ways the history of the organic sector's growth has been one of a well-connected value chain. We have always had the need to maintain an identity-preserved supply within a limited pool of downstream users. The downstream manufacturers or retailers of organic products have always oriented their businesses to the concerns and expectations of the final consumers, filtering information back to the growers and producers through our organic principles and standards.[4]

There are many different players in the agri-food sector, and the dynamics in the industry are constantly changing.[5] There are also differences in the food supply chain according to the types of products and the locations in which they are produced. Needs also differ according to where one is in the food supply chain.

Now, when we talk about the agrifood sector, one of the things we always like to point out is that it's not a monolithic thing. There are very different market conditions in different segments of the industry, such as, for example, capital intensity. Farming is a very capital-intensive business. It becomes much less capital intensive as you move down the value chain. Retailing and restaurants are much less capital intensive. So the market conditions are different in that respect. Their need for capital is different.[6]

Given the differences in the food supply chain, witnesses recognized that some industries are more successful than others. Witnesses indicated that the success of any given industry depends largely on co-operation among all of the players in the supply chain, as is the case in the canola industry.

Canola, of course, is one of Canada's major success stories, a major export success story. But it was born out of two Agriculture Canada scientists, if I'm not mistaken, who developed it and then worked with the University of Manitoba and the National Research Council and then with business and nutritionists to take it to where it is today.[7]

B. Value Chain Roundtables (VCRTs)

To enhance the competitiveness and profitability of the Canadian agriculture and agri-food sector, Value Chain Roundtables (VCRTs) were launched in 2003. These roundtables bring together key players from the entire value chain (input suppliers, producers, processors, food service industries, retailers, traders and associations), along with the federal and provincial governments. The VCRTs provide a means of discussing the issues affecting the sector and developing common strategies. There are currently 11 national Value Chain Roundtables: Beef, Food Processing, Grains, Horticulture, Organic, Pork, Pulse Industry, Seafood, Seeds, Sheep, and Special Crops. Many witnesses applauded the creation of the VCRTs and saw them as being excellent forums for bringing together various players in both the industry and government. Here are a few examples of initiatives by the various VCRTs:

The horticulture VCRT is developing a system where producers can post availability of fresh produce online to permit retailers to access more Canadian-produced fresh produce in their stores. The pork VCRT is leading on the implementation of traceability, good animal-care practices, on-farm food safety, and biosecurity measures to position Canadian pork as meeting both foreign and domestic consumer requirements. The seafood VCRT is looking at why exports from other countries of the same species are often able to obtain higher value for their product, and to develop an action plan to enhance the value of Canadian product through modification of harvest, preserving, processing, and marketing.[8]

Several witnesses indicated that collaboration among the various stakeholders is indispensable for VCRTs to succeed. Witnesses noted that these roundtables are highly effective forums, as they produce tangible results. People in the industry show a marked interest in these roundtables, the number of which has increased from 6 to 11 over the past four years.[9]

Recommendation

The Committee recommends that the government maintain its support for the Value Chain Roundtables (VCRTs) so that they continue to contribute to the success of the agri-food sector.