Economic Contribution of the Ontario Chicken Industry

Economic Contribution of the Ontario Chicken Industry

Economic Contribution of the Ontario Chicken Industry

Economic Contribution of the Ontario Chicken Industry Study prepared October 2013

Economic Contribution of the Ontario Chicken Industry

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Economic Contribution of the Ontario Chicken Industry

Executive Summary . 1 1.0 Introduction . 2 2.0 Chicken Farming in the Province of Ontario . 4 3.0 Chicken – An Integral Part of the Farm Economy . 8 4.0 Economic Contribution of Chicken Farming in Ontario . 10 5.0 Contribution of Primary Processing of Ontario Chicken .

18 6.0 Summary of Findings . 24 Annex I – Background on the Study Authors . 28 Annex II – An Overview of the Model . 28 Table of Contents

Economic Contribution of the Ontario Chicken Industry
Economic Contribution of the Ontario Chicken Industry

1 Ontario’s chicken industry is an important contributor to the economic health and growth of the province. Ontario boasts the largest chicken producer, processor and consumer base in Canada, with more than 200 million chickens grown every year by more than 1,000 independent, successful chicken farms and processed by some 18 primary processors. While most of Ontario’s chicken production is concentrated in a band just west of the Greater Toronto Area that stretches from Lake Erie to the Bruce Peninsula, the benefits of chicken farming and processing stretch across the province. Chicken farmers have a marketplace value of $760 million, with a Gross Domestic Product of $819 million that supports 11,409 full-time equivalent jobs.

Including the primary processing of chicken, the industry contributes $2.72 billion to the Ontario economy, with a GDP of $1.38 billion and supporting 19,183 full-time equivalent jobs. Tax revenues generated by the chicken industry for the federal, provincial and local governments total $391 million. Ontario chicken farmers spent $342 million on feed in 2012, accounting for nearly a quarter of the sales volume of the province’s feed manufacturers. Supplying this feed accounted for 19% of all soybeans crushed in Ontario, and required 14,000 truckloads of corn to be delivered to the feed manufacturers – that’s 54 trucks on each workday of the year.

Chicken farmers and processors also support chick hatcheries, energy suppliers, general equipment suppliers and labour.

But the economic impact of chicken farming goes beyond agriculture and processing plants. Every dollar of chicken sales by Ontario chicken farmers generates $2.29 of economic activity. When combined with the economic activity of chicken processors, every dollar spent results in $2.34 in broader economic activity. Increases or decreases in chicken output will have a corresponding impact on the economy. For example, if Ontario can increase chicken production by 10%, it will result in $272 million of additional economic activity, and 1,913 new jobs created with an overall increase in wage payments by $84 million.

The increase to Ontario’s GDP will be $138 million, and governments will collect an additional $39 million in tax revenue. Executive Summary

2 The Ontario chicken industry generated $760 million in farm cash receipts in 2012, representing 6.6% of all farm level cash receipts received from the market by Ontario farmers. The chicken industry is a large and valuable contributor to the Ontario farm economy, as well as to the overall provincial economy. When the value of processed chicken is included, this overall market value of Ontario’s chicken industry grows to $1.16 billion; this is valued as primary processed chicken and does not include highly processed chicken such as breaded chicken fingers or stuffed chicken products. This report shows that the overall economic consequence of the Ontario chicken supply chain is rather significant, with it contributing to more than 19,000 full-time jobs throughout the Ontario economy.

The overall economic impact of the Ontario chicken industry and its supply chain cannot be ignored. Partners in the chicken industry of Ontario engaged outside economic expertise1 to provide factual information to stakeholders and policy decision-makers on the economic contribution of the supply managed chicken industry within the province of Ontario and its importance to the overall farm economy across Ontario2 . 1.1  Project Focus and Organization of this Report This report provides a perspective on the overall importance of the chicken industry in Ontario from a few different viewpoints.

Section 2.0 illustrates the importance of chicken farming across Ontario, which accounts for 6.6% of market cash receipts across the province. In counties where chicken farming is more predominant, such as Wellington County, the chicken industry can be as much as double that value, demonstrating the significant impact of chicken production on the farming economy in rural Ontario.

In Section 3.0, we examine the linkages between chicken farming and the agri-food sector, including the chick hatching sector and the corn and soybean sectors that supply the feed for Ontario chickens. The overall contribution of chicken farming to the province of Ontario, such as the amount of GDP (value added) contributed by chicken production throughout the province, is explored in Section 4.0. Across the economy, chicken farming generates more than $800 million in GDP. The approach used to measure the economic contribution of chicken farming is a special application of a generic regional impact model (RIM: Canada) developed by Econometric Research Limited (ERL).

It is a unique model that captures the economic impact of different activities at the provincial and national levels. The model is based on a novel technology that integrates input output analysis and location theory. [See Annex II for more background on the model and on Input/Output analysis.] The model utilizes a large set of economic and technical databases for Canada that are regularly published by 1 The JRG Consulting Group in collaboration with Econometric Research Limited (ERL), a firm that specializes in economic impact modelling and analysis. (Annex 1 provides a short background on the study authors.) 2  In the near future, CFO may collaborate with the other supply-managed commodities in Ontario to offer a broader view of the contribution of the supply-managed sector to the Ontario economy.

When the value of processed chicken is included, this overall market value of Ontario’s chicken industry grows to $1.16 billion; this is valued as primary processed chicken and does not include highly processed chicken. 1.0 Introduction

3 Statistics Canada3 . A short list of Statistics Canada data used in the model includes the inter-provincial input output tables, employment by sector, taxes by type of tax and the level of government collecting it, prices of products, energy used in physical and energy units, etc. Some of the key impact indicators generated by the model include value added, gross output (value of transactions in the economy), employment, wages and salaries, and taxes received by governments. The Ontario chicken economy includes more than chicken farming; processing Ontario-grown chicken is a significant piece that is covered in Section 5.0.

This analysis includes all upstream economic activities4 based on shipments of primary processed chicken. Primary processed chicken includes cut up fresh chicken as shipped by processors to retail establishments. The analysis was conducted in this manner for two reasons. First, data is available on the wholesale value of primary processed chicken, and this is not the case for further processed chicken such as chicken kiev. Second, this measure is a good indication of the overall economic activity that may be at risk if the regulatory features of the supply management are no longer in force5 .

3 Statistics Canada: Inter-provincial Input Output Tables, Catalogue No. 15F0042XDB. 4  These are backward linkages through input suppliers, such as chicken farmers and feed manufacturers. 5  Major pillars of supply management include (1) control of imports to pre-specified access levels, (2) production controls within Canada, and (3) the ability to establish a made in Canada price for the live chicken supplied by Ontario chicken farmers to processors.

4 Ontario is the largest chicken-producing province in the country, accounting for 32.2% of Canadian chicken production6 in 2012.

This share of national production is less than Ontario’s share of the Canadian population, which stands at 38.7% with a population of 13.5 million Ontarians. Quebec is the second largest chicken-producing province and accounts for 27.4% of Canada’s chicken output. In 2012, Ontario chicken famers shipped 447 million kilograms of chicken to primary processors, which generated $760 million in farm cash receipts, as reported by Statistics Canada. This value is: •  14.4% of farm cash receipts generated by Ontario’s livestock and poultry sector; and •  6.6% of all market based cash receipts received by Ontario farmers in 2012.

Within Ontario, the importance of chicken production varies across the province, but it is largely concentrated in a band west of the Greater Toronto Area that stretches from the Bruce Peninsula to the shores of Lake Erie (see Figure 2.1– counties with darker shading have a larger share of the overall Ontario chicken production). Wellington County is the provincial leader in chicken production, with $108.9 million in sales value for 2012 accounts and 14.3% of Ontario’s chicken production, which is followed by Huron County at 12.3% and Niagara Region at 11.7%.

The map (Figure 2.1) also indicates the location of the 18 primary chicken processing plants in Ontario that receive live chicken supplied by Ontario farmers.

These primary processors are located in the chicken production regions and near the major chicken consuming region (the GTA). The three largest counties, in terms of chicken production, account for 38% of provincial production, with the top five accounting for 55.4% of Ontario’s chicken production. The top 10 chicken producing counties are highlighted in light grey in Table 2.1, and account for 79% of Ontario’s chicken production. 6 It can be noted that in 1990, Ontario accounted for 34.8% of overall Canadian chicken production. 2.0  Chicken Farming in the Province of Ontario

5 Source: Calculations based on distribution of quota units in late 2012 Sudbury District Parry Sound District Lake Nipissing Nipissing District Muskoka District Municipality Haliburton County Victoria County Simcoe County Grey County Oshawa Nepean Ottawa Gloucester Toronto Richmond Hill Brampton Oakville Hamilton St. Catharines Chicken Primary Processing Plants Chicken Production Share by County 15% 8% 0% London Kitchener Huron County Brant County Elgin County Kent County Essex County Bruce County Middlesex County Lambton County Perth County Oxford County Wellington County Dufferin County Manitoulin District Lake Huron Georgian Bay Lake Erie Lake Ontario Renfrew County Lanark County Stormont Frontenac County Hastings County Peterborough County County 2012 Market Value ($million) County Share of Ontario Value (%) Wellington $108.9 14.3% Huron $93.6 12.3% Niagara $88.7 11.7% Oxford $64.7 8.5% Perth $64.7 8.5% Haldimand-Norfolk $59.4 7 .8% Waterloo $34.9 4.6% Middlesex $33.3 4.4% Bruce $29.6 3.9% Hamilton-Wentworth $21.3 2.8% Durham $19.0 2.5% Lambton $16.2 2.1% Elgin $15.0 2.0% Prescott & Russell $14.9 2.0% Simcoe $14.8 2.0% Brant $11.7 1.5% Peterborough $8.7 1.1% County 2012 Market Value ($million) County Share of Ontario Value Gengarry & Stormont $8.0 1.1% Prince Edward $7 .9 1.0% Grey $6.9 0.9% Northumberland $5.9 0.8% Dufferin $5.2 0.7% Peel $5.0 0.7% York $4.9 0.6% Ottawa-Carleton $3.7 0.5% Halton $3.6 0.5% Victoria (Kawartha Lakes) $3.0 0.4% Kent $2.8 0.4% Lennox & Addington $1.2 0.2% Essex $1.1 0.1% Renfrew $0.9 0.1% Sudbury $0.1 0.0% All Ontario $759.60 100% Figure 2.1 Location of Chicken Production and Chicken Processing Plants Table 2.1 Value of Ontario Chicken Production, by County, 2012

6 The table on the previous page highlights Ontario’s top counties and regions in terms of overall chicken production. The importance of chicken production to the overall farm economy within a county is illustrated in Figure 2.2, which shows the importance of chicken production within a county based on the chicken contribution to farm cash receipts in a county7 . Again Wellington County is the top county, with 13.3% of county farm output being chicken production; this is followed by Niagara at 10.3% and then Peterborough at 9.6% of its output (See Table 2.2).

The data indicates that the chicken industry is an important part of the local agricultural economies in the counties that are in the southeast to northwest band on the west side of the GTA.

Counties where the farm value of chicken production in a county exceeds the provincial average of 6.6% of all farm production (based on cash receipts) are highlighted in grey in Table 2.2. There is a high correlation between the counties where chicken has the highest share of farm cash receipts and the largest chicken producing counties8 , as indicated by the last two columns in Table 2.2. In counties with chicken production above the provincial average, we can expect that the amount of valued added (or GDP) in the region due to chicken will be meaningful. GDP captures all of the value added by chicken producers as well as the value added by all of their suppliers (feed mills, hatcheries, labour, etc.).

Source: Calculations based on distribution of quota units in late 2012 for first two columns and 2011 Census of Agriculture data and 2010 chicken production for the third column. County 2012 Market Value ($million) County Share of Ontario Value (%) Chicken Share of County Cash Receipts Wellington $108.9 14.3% 13.3% Niagara $88.7 11.7% 10.3% Peterborough $8.7 1.1% 9.6% Huron $93.6 12.3% 8.9% Hamilton-Wentworth $21.3 2.8% 8.2% Oxford $64.7 8.5% 7 .9% Haldimand-Norfolk $59.4 7 .8% 7 .4% Perth $64.7 8.5% 6.9% Prince Edward $7 .9 1.0% 6.3% Durham $19.0 2.5% 6.2% Waterloo $34.9 4.6% 5.9% Bruce $29.6 3.9% 5.8% Brant $11.7 1.5% 5.4% Peel $5.0 0.7% 4.7% Middlesex $33.3 4.4% 4.3% Prescott & Russell $14.9 2.0% 4.1% Elgin $15.0 2.0% 3.4% Northumberland $5.9 0.8% 3.1% Simcoe $14.8 2.0% 3.1% Dufferin $5.2 0.7% 3.1% Lambton $16.2 2.1% 2.9% Grey $6.9 0.9% 2.7% Halton $3.6 0.5% 2.3% Victoria (Kawartha Lakes) $3.0 0.4% 2.2% Gengarry & Stormont $8.0 1.1% 1.7% York $4.9 0.6% 1.6% Lennox & Addington $1.2 0.2% 1.5% Ottawa-Carleton $3.7 0.5% 1.1% Renfrew $0.9 0.1% 0.8% Sudbury $0.1 0.0% 0.7% Kent $2.8 0.4% 0.5% Essex $1.1 0.1% 0.2% All Ontario $759.60 100% 6.6% Counties Ranked by Share of Chicken Value to Overall Farm Cash Receipts Table 2.2 7 This calculation used 2011 Census data, which reports on 2010 cash receipts for a county, and compared that overall county value to the 2010 value of chicken production in that county (which is based on internal CFO data).

8 It can be noted that Middlesex is the 8th largest chicken producing County; however, its share of farm cash receipts is below the provincial average, given the importance of other agricultural production in the county.

7 Bruce County Huron County Lambton County Middlesex County Kent County Perth County Simcoe County Victoria County Peterborough County Hastings County Renfrew County Frontenac County Lanark County Stormont Haliburton County Parry Sound District Grey County Ottawa Mississauga Toronto Hamilton London St. Catharines Lake Huron Georgian Bay Lake Ontario Share By County 15% 8% 0% The data indicates that the chicken industry is an important part of the local agricultural economies in the counties that are in the southeast to northwest band on the west side of the GTA. Figure 2.2 Importance of Chicken Production to Farm Cash Receipts Within a County

8 While the production of chicken is a key economic driver – especially in parts of rural Ontario west of the GTA – the economic impact of the industry goes well beyond what is produced on the chicken farm. The economic importance of the Ontario chicken industry must also be considered from the perspective of its major linkages in the Ontario farm economy. Through the purchases of various goods and services, chicken production generates a positive economic impact throughout its supply chain. Viewed another way, chicken production is adding value to the corn and soybeans grown in the province of Ontario, as these grain and oilseed products are converted into meat protein on the chicken farm.

Figure 3.1 (on the next page) provides an illustration of the product and financial flows associated with chicken production. The 2012 chicken volume of production of 447 million kilograms by Ontario chicken farmers through its forward linkage to primary processing enabled the $1.16 billion in output of primary processed chicken products. This volume of chicken production required $342 million of prepared feed from Ontario feed manufacturers and $140 million of chicks from Ontario’s hatcheries. These two inputs account for 63% of the value of the chicken supplied by chicken farmers in 2012.

The 2012 volume of chicken production required an estimated 813,000 tonnes of prepared feed, with the feed destined for Ontario chicken production accounting for 23% of the value of shipments from all Ontario feed mills (based on value of sales as measured by Statistics Canada).

These feed mills in turn required approximately $141 million of corn (valued at the farm gate of corn farmers) and $112 million of soymeal from Ontario’s soybean crushers. This volume of soybean meal accounted for 19% of all soybeans crushed in the province, and the purchase of $141 million of Ontario soybeans to manufacture the soybean meal. The value of purchases by soybean crushers is higher than the meal value since the value of the soy oil is not shown in Figure 3.1.

The Ontario chicken industry also used an estimated 549,000 tonnes of corn in 2012, which required 14,000 truckloads of corn delivered to feed manufacturers – the equivalent of 54 loads every day of the workweek in 2012. This annual volume of corn is more than the amount of corn used by a typical 200-million-litre ethanol plant9 located in Ontario. In total, chicken feed manufacturers purchased 10% of the 2011/12 soybean crop and 8% of the 2011/12 corn crop10 . The production of chicken in 2012 generated $282 million in farm gate sales of corn and soybeans11 , which accounts for 9.5% of Ontario corn and soybean cash receipts for 2012.

These grain and oilseed farmers in turn purchased an estimated $66 million in seed, fertilizer and crop protection materials. These economic linkages from chicken production back through to input suppliers illustrate the interdependencies between chicken production, the grain production sector and processing (of feed and soymeal). These backward linkages for all purchases made by Ontario chicken farmers are used to calculate the economic activity generated in rural Ontario by the chicken production sector. If Ontario chicken production did not exist, a good portion of the level of economic activity occurring in the Ontario economy linked to chicken production would also not exist.

9 A 200 million litre ethanol plant will use between 480,000 to 500,000 tonnes of corn in a year. 10  The 2011/12 crop is used for comparison since corn and soybeans are harvested in the fall and are the major feedstock for the feed manufacturing sector in 2012. 3.0  Chicken – An Integral Part of the Farm Economy

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