Appendix 1
Context Setting For Canadian Health, Agriculture And Agri-food Systems

Health System
In 2007, Canada’s spending on its health system outpaced inflation and population growth for the 11th consecutive year to reach an estimated annual cost of $160 billion. However, the rate of increase of health care costs is now slowing and is estimated to only rise from 10.4% in 2006 to an estimated 10.6% in 2007.¹⁸¹ As seen in Figure A,¹⁸² more than half of health care resources go to hospitals, retail drug sales, and physician services.¹⁸³ Diet-related chronic diseases such as cancer, cardiovascular diseases, diabetes, and stroke take up two-thirds of direct costs of the health system.¹⁸⁴ The direct cost of diabetes alone to the health care system is estimated to be over $9 billion per year, affecting 1.9 million Canadians.¹⁸⁵

	Figure A. Distribution Health Spending Canada, 2007. From the report Health Care in Canada 2008, by the Institute for Health Information, 2008, Pg. 5. Copyright 1996-2007 by Canadian Institute for Health Information (CIHI). Reprinted with permission.

	Figure B. Proportion of different types of cancer that can be prevented. Source: Trish McAlister, Globe and Mail/World Cancer Research Fund

Shaping an Alternative Path for Chronic Diseases
It is now well-established that changes in four individual lifestyle behaviours, namely diet, physical activity, smoking, and alcohol consumption, can significantly reduce the prevalence of chronic diseases. Recently published U.S. data provides estimates of the prevalence of different types of cancers that could be prevented with appropriate nutrition and physical activity (Figure B).¹⁸⁶

For example, appropriate nutrition and physical activity could reduce the prevalence of cancer by 24%¹⁸⁷ with similarly dramatic reductions in cardiovascular disease.¹⁸⁸ Similar numbers have been published recently using Canadian data for cardiovascular diseases, which cost Canada over $22 billion a year in health care and lost productivity.¹⁸⁹ The WHO Global Strategy on Diet, Physical Activity, and Health provides a set of recommendations related to nutrition and diet at both the population and individual level and ultimately concludes that unhealthy diets and physical inactivity are two of the main risk factors for chronic illness. Targets and approaches for reducing these chronic diseases are set out in the Canadian Heart Health Strategy and Action Plan, the Canadian Strategy for Cancer Control, and the Canadian Diabetes Strategy. Each of these strategies outlines multi-level, multi-stakeholder partnerships that are required to achieve lifestyle behaviour changes. Each strategy describes the important role of the agriculture and agri-food sector in driving the necessary changes to the food supply and in participating in the creation of a healthy demand.

A recent modeling exercise conducted by the Milken Institute¹⁹⁰ indicates that, with optimistic scenarios of reductions in risk factors, the number of cases of chronic disease can be slowed from a potential increase of 43% to 17% in the U.S. by 2023 (Figure C).¹⁹¹ The study compares a “business-as-usual” baseline scenario, which assumes that current trends continue into the future, against an optimistic scenario that assumes reasonable improvements in health due to more comprehensive prevention and lifestyle changes.

For all chronic diseases modeled, the difference between the two scenarios in 2023 is remarkable. To estimate the potential gains associated with better prevention and treatment of chronic diseases, the study projects rates of disease and associated costs. The results show that in 2023, compared with the baseline scenario, under an optimistic scenario society could: avoid 40 million cases of chronic disease; reduce the economic impact of disease by 27%, or $1.1 trillion annually; increase the nation’s GDP by $905 billion linked to productivity gains; decrease treatment costs by $218 billion per year; produce productivity gains of $254 billion with lower obesity rates alone; and, avoid $60 billion in treatment expenditures per year.

To develop the optimistic scenario, the study assumes a range of reasonable improvements in prevention, behavioural patterns, and treatments that will require a focused, society-wide effort to be realized and achieved. The optimistic scenario assumes:

• That overweight issues and obesity will be the focus of a national health initiative resulting in a reduction in the number of obese individuals (in the same way as smoking cessation was a health priority in the 1970s, 1980s, and 1990s);
• That an increase in physical activity will occur, with the share of the population engaged in physical activity to be up to 83.3% by 2023;
• That there will be a modest improvement in early intervention and treatment, with a more uniform use of best practices in early detection and screening; and,
• That there will be moderate improvements in disease management practices.

The study offers two recommendations for change that are also of relevance to Canada:

• Health care system incentives should promote prevention and early intervention. Employers, insurers, governments, and communities need to work together to develop strong incentives for patients and health care providers to prevent and treat chronic disease effectively; and,
• Society needs to renew its commitment to achieving a “healthy body weight.” There needs to be a strong, long-term, national commitment to promote health, wellness, and healthy body weight.

Overweight, Obesity and Relation to Chronic Diseases
Rapidly rising rates of overweight individuals and obesity have reached epidemic proportions in Canada and other countries, with more than half the adult population being overweight or obese and weight issues becoming steadily more prevalent in children and youth. The International Obesity Task Force’s estimates suggest that, at the current rate of progress of the global childhood obesity “pandemic,” nearly 287 million children worldwide could be overweight or obese by 2010, which is 85% more than a decade ago.¹⁹² By 2015, this number could rise to 700 million, with the poorest segments of the population being the most affected, in both developed and developing countries.¹⁹³

Figure D assembles key statistics on the increase in prevalence of overweight and obese people across all segments of the population from the late 1970s to 2004. Three age groups have seen overweight/obesity double in less than three decades, namely the 12-17, 25-34 and 75+ categories. Statistics show that being overweight is associated with a 73% (odd ratio of 1.73) increased likelihood of having diabetes; this proportion rises close to 400% (odd ratio of 3.97) for obese individuals. Similar numbers are shown for high blood pressure, which also has steadily increased over time.¹⁹⁴

	Figure E. Agriculture and agri-food: Contribution to GDP and expenditures. Sources: Statistics Canada and AAFC.

The Canadian Agriculture and Agri-Food System
The agriculture and agri-food system contributed $87.9 billion dollars (1997$) to the Canadian economy in 2006, representing 8% of the GDP.¹⁹⁵ It employs 2.1 million individuals, the equivalent of 12.8% of Canadian active manpower.¹⁹⁶ The agriculture and agri-food system combines primary agriculture, processing, retailing/wholesale, and food services with Ontario, Quebec, and Alberta being the most significant contributors to the sector’s contribution to the GDP (Figure E1).¹⁹⁷ While continuing to play a critical role in the economy, the relative contribution of these sectors to the overall economy, particularly for primary agriculture, has been declining. Primary agriculture is on par with food services in its contribution to the GDP (1.3% and 1.5% respectively), but employs a smaller proportion (1.8% versus 5.0%) of total manpower (Figure E2).¹⁹⁸ At the provincial level, primary agriculture has maintained a stronger prominence in comparison with other segments of the agriculture and agri-food sector in P.E.I, Manitoba and Saskatchewan (Figure E3).¹⁹⁹

As seen in the Table A,²⁰⁰ the nature of production for small farms versus large farms differs significantly. The nature of the business varies significantly by size of farm. Small farms are often hobby or leisure enterprises, whose owners are employed in other occupations or retired. Canadian large farms are business-focused farms and are more likely to be incorporated operations. Therefore, the challenges and opportunities vary significantly for primary producers depending on size, business focus, and the type of food produced.

	Figure F. Agriculture and agri-food: Contribution to GDP and expenditures. Source: AAFC.

Productivity and profitability of agriculture and agri-food system
As the relative contribution of Canadian agriculture to the overall economy has declined, government expenditures to support the agriculture and agri-food sector have increased, presenting a significant burden at both provincial and federal levels (Figure F).²⁰¹ In fact, program payments now surpass market income, with a yearly cost estimate of $5 billion.

Indeed, productivity growth in primary agriculture has consistently decreased over the last 15 years and is consistently lower when compared with Canada’s lead competitor, the U.S. (Figure G1).²⁰² Conversely, productivity growth of the remainder of the agriculture and agri-food sector over the same period of time has consistently improved and been superior to its competitor, the U.S. (Figure G2).²⁰³

In past years, the productivity growth in the food processing sector has been low relative to total manufacturing; however, it increased in recent years (Figure G3).²⁰⁴ It is noteworthy that an increase in productivity of primary agriculture and of the agri-food sector has the same power to contribute to Canada’s economy. For every $1 of GDP created in either primary agriculture or the food processing industry, approximately $2.80 is created for the country’s GDP (Figure G4).²⁰⁵ Thus, investing to improve the productivity of both sectors has significant potential to contribute to the country’s overall economic performance and competitiveness on the world markets.

Figure H highlights the key features of Canada’s performance in trade and global development. Canada is the world’s fourth largest agriculture and agri-food exporter, after the E.U., the U.S. and Brazil (2006 data).²⁰⁶ It accounts for 5.6% of the world’s total agriculture and agri-food export (Figure H1).²⁰⁷ Canada is also the sixth largest agriculture and agri-food importer, after the E.U., the U.S., Japan, China and Russia (Figure H2).²⁰⁸ It accounts for 2.8% of the world’s total agriculture and agri-food imports. Figures H3²⁰⁹ and H4²¹⁰ indicate that over the last two decades, the composition of export and import has changed significantly, with the share of bulk commodities remaining stable and that of value-added, consumer-oriented products rising to 30.4% for export and accounting for 74% of the total imports in 2007.²¹¹

Figure I. Accumulated outward investment in food Manufacturing by Destination Country, 1999-2007. Sources: Statistics Canada and AAFC.

These value-added, consumer-oriented products represent the largest growing share of imports. Over the last 8 years, the majority of outward investments (in the agri-food industry) have targeted the U.S., but in terms of global markets an increase in outward investments has occurred in the rest of the world (Figure I).²¹²

Investments in research and development
Figure J features selective para-meters concerning public and private investments in R&D in the agriculture and agri-food sector. Canadian public investment in R&D has been lower in the 2000s compared to the 1980s and 1990s (Figure J1).²¹³ For private sector investment, the numbers indicate that private investment has been larger in food processing than in primary agriculture, possibly contributing to the sustained productivity growth in the former (Figure J2).²¹⁴ However, it is noteworthy that R&D expenditure as a share of GDP by private industries of the primary agriculture or food processing sector is significantly smaller than that of the total manufacturing sector (Figure J3).²¹⁵ Furthermore, as Figure J4²¹⁶ shows, since the early 1990s, Canada’s businesses have consistently lagged behind their competitors (the U.S. and Japan) in regard to the share invested in R∧D within the food processing sector.

The analysis above suggests there is a pressing need and opportunity for productivity growth in both primary agriculture and food processing sectors. From an extensive analysis of the evolution of farm and agri-food income in Canada (http://capi-icpa.ca/pdfs/CAPISynthesisReportFeb.pdf), CAPI concluded that a strategic shift is needed to provide the Canadian agriculture and agri-food system with new opportunities, not only to satisfy the changing food habits of Canadians, but also to take advantage of climate change, our Nordic climate, and water availability. By translating and applying life sciences research from other fields (including nutriogenomics, proteomics, biotechnology) to developing new innovative plants, animals, and food products, Canada can develop new niches in the global market, while making a contribution to improve food security and worldwide nutritional quality. Taken together, these form the key strategic components of the future of our agricultural economy. An Integrated Health and Agri-Food Strategy for Canada is, more urgently than ever, a critical step in this strategic shift.

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