I farm in southwestern Ontario, one of the most unique landscapes for Canadian agriculture. Being the most southerly part of Canada, we get to take advantage of more heat units than almost anywhere else in this nation. That means that we can produce some unique crops like processing tomatoes and a myriad of processing vegetables. I don’t grow tomatoes but I grow many crops beside them. I have to be very careful when spraying in the springtime not to have herbicide drift into these high-value crops.
I often think about the tomatoes in my area when considering overall food demand. We have our issues with commodity agriculture, constantly considering supply and demand factors, which influence price. However, crops like tomatoes have a whole different set of economics when it comes to their demand. For instance, I have often said that the 2 for 1 deals for pizza have had a huge influence on overall tomato demand through the years. It is pretty common to buy one pizza and get another one at half price or even free in some markets. The tomato paste used on both pizzas gets included in our consumption demand. However, not all the pizza gets eaten, so the simple marketing concept for pizza boosts tomato consumption overall.
This also happens in other food type commodities. Take for instance the coffee market. This is another market that I find simply fascinating. In any Canadian city, especially in the wintertime cars lineup in bitter cold weather so Canadians can get their coffee. If you park your car and go into any Tim Horton’s outlet in southwestern Ontario you will find it lined out to the door. People simply want their coffee, and will line up daily to get it. It’s almost part of being Canadian.
A funny thing happened to that market a few years ago. Where once Canadians and Americans for that matter lined up for their cup of coffee, single serve brewing machines using 2″ x 2″ plastic pods that yield one serving of coffee have changed the market demand. The single serve coffee makers have slowed demand growth for coffee, because the greatest consumer of coffee in the past has been the kitchen sink. Before, a consumer might make a pot of coffee, drink as much as they wanted and pour the rest down the sink. Today, that same consumer may use a single disc to produce a single cup of coffee and be satisfied. At the end of the day it’s led to a somewhat slowing of coffee consumption and an overall decline in coffee demand. It’s all because of some packaging phenomena, just like that 2-for-1 pizza.
So I suppose it can work both ways. In the tomato example we have 2-for-1 pizza, which increases the demand for tomatoes. On the other hand we have some new packaging for coffee that actually might have an effect of reducing overall demand even though coffee drinking remains very popular. It shows you how complex a market can be and how new technology with regard to food consumption and demand can have some unexpected effects. It makes me wonder if the same type of packaging could have an effect in our greater commodity market?
It may not even be a fair question because a commodity is a commodity at the end of the day. Isn’t corn the same in the United States versus the Ukraine versus Canada versus Mexico? The answer to the question is yes it’s the same but demand in those different regions is so different for corn. For instance, in Mexico corn demand on a per capita basis is so much higher than many other countries. Ditto for Egypt and Tunisia with wheat. Why do these two N. African countries lead the world in wheat per capita consumption? Yes, it might be cultural, but at the end of the day its simply so much more than in the United States and Canada.
Examples like this are one reason that grain demand remains robust even in a very bearish market environment. There are also examples where commodities turn into something else, like ethanol or soybean milk. Yes, value added to our commodities is always a very good way to boost demand. We need all of this and more in Canadian agriculture to make our industry thrive. Segmenting our value-added markets and further segmenting those markets through innovative packaging can go a long way to bringing even greater revenues back to commodity-based agriculture in this country.
So the next time you order a panzerotti or pizza for a late night binge after the hockey game consider the path those tomatoes have taken? Think of the ethanol that was burned in delivering that pizza and consider if it was 2-for-1? There might even be corn tortillas available across the street. Our Mexican populace near Dresden is opening up a shop to do just that later this spring.
What it represents is real robust food demand, which at the end of the day is the lifeblood of what we do. As we careen into late April were all poised to plant the best crop we can muster. Having record grain demand and surging food demand sure doesn’t hurt us and if that comes in some innovative ways, so be it.