How to Innovate Agri-Food in Canada

This is an excerpt from Canada 2020’s upcoming report ‘Being Innovative.’ The report will be released in early November, 2016

By Mike Moffatt

Assistant Professor, Western University

The Canadian agriculture and agri-food sector plays an important role in the Canadian economy and cannot be ignored as Canada 2020 investigates innovation opportunities.

The combination of continued population growth, climate change and changing demands from the marketplace make this economic sector rich with possibilities.

Canada’s agriculture and agri-food sector generated $103.5 billion in 2012, which accounted for 6.7 per cent of GDP. Overall, an estimated half of all primary production in the Canadian agriculture and agri-food sector is sold for export, making Canada the world’s fifth-largest exporter.

Canada is a world leader when it comes to agriculture, as it has nearly 70 million hectares of farmland and seven per cent of the world’s renewable freshwater resources.

Even as the consolidation of farms continues, Canada’s average farm size is now larger than the U.S.’s and Brazil’s. Farming has become steadily more capital intensive.

The food and beverage processing portion of the agri-food sector is the country’s largest manufacturing sector by employment, with more than 245,000 people employed in it in 2013.

The June 2014 Senate report on agriculture noted the importance of innovation in the agriculture and agri-food sector in Canada: “Despite Canada’s wealth of arable land and water, Canadian farmers today can produce more food with fewer resources. This productivity is made possible by the discovery and adoption of research-driven new technologies and processes.”

At the same time, chronic unprofitability within the agriculture sector in Canada, combined with increased international competition and a lack of innovation, has many calling for rethinking how the Canadian agriculture and agri-food sector is approached.

The Canada 2020 team headed to Innovation Guelph in southwestern Ontario, where we met some of Canada’s leading experts in the agriculture and agri-food industry.

Here is what they told us:

Efficacy requirements:

The need, in some cases, to prove not just the safety of a product but its efficacy was seen by some at the roundtable as a barrier to innovation.

One roundtable participant described the barriers created by efficacy requirements:

“In some cases, Ontario agri-technology startups are launching their products in the United States instead of Canada since it is faster and the markets are bigger,” one roundtable attendee told us.

“These companies are enjoying millions in sales and Canadian farmers do not have access to the technology, even though Canadian taxpayers helped fund the innovations through various grants and loans over several years.

We could solve this problem by harmonizing regulations with the U.S.A. and realizing we are too small to demand sovereignty in everything. There is no evidence to suggest the U.S. regulatory system is vastly inferior to ours. As was mentioned by others today, our onerous efficacy requirement is parental in nature and means that commercializing these innovations can take about three years longer in Canada. We have already harmonized important areas like human and environmental safety. Getting rid of the efficacy requirement does not seem to be too much to ask.”

Regulatory coherence:

Roundtable participants discussed the incredible complexity of the agriculture and agri-food regulatory environment and said how difficult it can be for small- and medium-sized companies to navigate. They felt that agri-food manufacturers have a particularly difficult time navigating the system, because they have feet in both the agricultural and industrial worlds. One roundtable participant gave an anecdote of an agri-food manufacturer looking for government assistance to commercialize a potentially breakthrough innovation. “We don’t deal with manufacturing, you need to talk to industry,” they were told by agriculture regulators. Industry regulators offered a similar response, saying, “We don’t deal with agriculture.”

Regulatory mindset:

A few members of our roundtable felt that to be the biggest regulatory barrier was the goal of regulators. As one participant put it, “The government needs to shift out of its parental mindset. The mindset is protectionist, slow and safe. It is problem-oriented, rather than potential-oriented. If we want to be the most trusted system in the world, then the way we create policy needs to change.”

Provincial barriers to innovation:

One roundtable participant described the challenges as follows: “In one program, we are required to use a provincial body to be our agent to access funds from the federal government, so innovation becomes parochial. We must always try to force-fit innovation into an Ontario scenario.

“True innovation knows no borders. The vast majority of possible innovations in agriculture will serve the interests of all provinces and ideally multiple countries. If they can’t, then it is unlikely any will be of a size that matters.And yet, one of the filters we use to assess if we can take on an innovation is whether it will mainly benefit Ontario agriculture,” one roundtable attendee told us.

This occurs while at the same time the federal government is encouraging us to expand nationally outside of Ontario. In other words, we are funded by federal money administered by a province and the province wants innovation to be provincially-focused while the feds wants us to expand nationally.”

Funding gaps:

Funding issues, beyond provincialism, were also identified. One participant suggested that Canada should take lessons from Israel, where government programs ensure funding for companies at every single lifecycle stage and there are active supports to help innovators navigate commercialization.

Another suggested that the way that funds are allocated for multi-year projects needs to be more flexible; the money is allocated equally each year in some programs, but companies typically have much greater needs in a project’s middle years than in the early and later years.

On average, roundtable members supported funding models that put decision-making at the local level.

Infrastructure gaps:

The lack of rural access to broadband internet was seen as a hindrance to innovation for farmers and small agri-food companies: It impedes the adoption of the “internet of things” technologies, the acquisition of new techniques and methods, and access to foreign markets. One roundtable member suggested that Canada does not do enough to learn from best practices around the world.

Final thoughts:

Overall, the roundtable’s consensus was that agri-food needs to be recognized as a strategic sector for the country. The global challenges of a rising world population and climate change create a world of opportunities for Canadian agriculture and agri-food companies.

But Canada will only fully capitalize on its potential if we have innovative, entrepreneurial companies, embrace the changes brought on by a big data revolution and get the regulatory regime right.

Mike Moffatt is an Assistant Professor at Western University’s Ivey School of Business.

This is an excerpt from Canada 2020’s upcoming report ‘Being Innovative.’ The report will be released in early November, 2016.

Canada 2020 is Canada’s leading, independent, progressive think-tank working to redefine the role of the federal government for a modern Canada. Founded in 2006, Canada 2020 has spent a decade publishing original research, hosting events, and starting conversations about Canada’s future. Our goal is to build a community of progressive people and ideas that will move and shape governments.

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