Can value-added industry in Alberta develop to its full potential without an open market system?

Keep Value-Added at Home

Can value-added industry in Alberta develop to its full potential without an open market system?

According to Neal Oberg, farmer and a director of AVAC Ltd., a member-based, not-for-profit company, Alberta has no choice but to capture more value from commodity grains if the agricultural industry is to remain viable and sustainable.

"The old model of sole reliance on export markets for our grains and oilseeds doesn’t work anymore," says Oberg. "Commodity prices have not kept pace with rising input costs. Countries that once were significant customers for Canadian grains and oilseeds now grow these crops themselves and compete with Canada in export markets."

Keeping the value of grains at home – processing, manufacturing, packaging, jobs – requires investment. "Unfortunately, investment in potentially profitable industries around board grains is being hampered by a lack of investment," says Gary Pike, CEO of the Pike Management Group in Lethbridge. "Without a competitive, open market to source wheat and barley supplies, some investors hesitate."

Wheat, barley and canola producer Tim Harvie at Cochrane sees the board as a "huge" restriction on value-added industry on the Prairies. "Not many investors would invest a lot of capital in a value-added industry, whether it’s a malt plant or a flour mill, when they can access raw product from only one supplier. It doesn’t happen in any other industry. Investors want the choice of accessing their product directly from producers or from a number of sources."

The challenge of generating value-added industries was met head on in 1996 when the Province of Alberta set a goal to generate $20 billion annually in value-added agriculture. A year later it gave value-added industry a $35 million shot in the arm by establishing AVAC Ltd. The idea was for AVAC to jump-start a successful and innovative value-added industry by helping clients access investment capital with significant benefits extending to producers and industry.

AVAC President and CEO Keith Jones, says, "More value-added industry offers producers the prospect of greater market choice for their primary products. Farmers will also benefit by becoming less reliant on export markets, and their exposure to currency value fluctuations will be reduced. Perhaps most importantly, they will gain access to more reliable and higher-value markets here in Alberta."

Oberg points to new value-added canola applications as an example of how expanding markets for Alberta’s agricultural commodities can benefit producers. "If canola, for example, is used to create biodegradable plastic tubing for human health products in Alberta, canola producers in the province will gain access to a value-added market with certain benefits," he says.

Jones points out: "In many cases, new markets and applications offer producers opportunities to capture better premiums for their commodity than in traditional export markets."

In Oberg’s view, diverting a commodity away from traditional export markets should strengthen prices in those markets and also offer producers opportunities to capture a greater premium for their product.

In Medicine Hat, the Palliser Economic Partnership is a not-for-profit company owned by 16 municipalities in southeastern Alberta. Palliser Chair Alan Hyland, who is also mayor of Bow Island, says the partnership, comprised of sixteen communities broken into three or four subgroups, is now a formal partnership.

"We study the whole area of economic development and network to identify opportunities to introduce secondary production," says Hyland. "With value-added opportunities we can grow, especially in our area. With the willingness of farmers to grow different crops and try different production methods, I am positive we have a future."

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