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Frank Hart Protein Industries Canada
Frank Hart
Chair of the Board - Protein Industries Canada (PIC)
Part of the Spotlight on Regina’s Agri-Food Innovation Ecosystem

Driving Innovation to Increase Agri-Food Products’ Value

Takeaways

  1. Technological developments in artificial intelligence and robotics will be the driving force behind agricultural innovation.
  2. Due to climate change, Canada is poised to become one of the biggest providers of healthier food ingredients globally.
  3. Research and innovation is key to helping Canadian farmers produce better products that benefit consumers.

Action

With the ongoing innovations in technology that are making it easier for farmers to produce and harvest better products, Canada will need to seize the opportunity to move beyond simple commodity production. By processing commodities here in Canada and exporting high-quality ingredients, Canada will be able to successfully capitalize on its unique position in agricultural.


What makes Canada, and specifically Regina and Saskatchewan, attractive for foreign direct investment in agri-food?

One of the biggest advantages Canada and the Regina Plains area has is the massive amount of acreage that exists for crop production. Saskatchewan has about 40% of the farmland in Canada and Regina is located in the southern belt of that, which is a major producing area where most of the grain is grown. It has access to supply, which is important for providing commodities—which it does today at a large degree around the world—as well as moving food ingredients.

Our plant proteins, for example, is the one area that we are heavily focused on at Protein Industries Canada (PIC). The Canadian Prairies produce 60 million tonnes of grain a year, and about 14 million of that are plant proteins, but they are locked in the seed. We do not extract that—we ship it out as raw commodity. As food processors look for jurisdictions where they can get access to large volumes of very high-quality supply, getting close to the acreage production in places like Regina or Western Canada is very important to them. That is one of the big advantages that we are seeing from foreign companies that need access to that supply.

“The Canadian Prairies produce 60 million tonnes of grain a year, and about 14 million of that are plant proteins.”

It is a mixed bag of fortunate and unfortunate benefits from climate change. As we see the effects of climate change, the general view is that we will see more pressure on the Northern Hemisphere to produce more of the food. There are three big growing areas in the Northern Hemisphere, one of which is Western Canada. If you are looking for a jurisdiction to invest in, where you have potential access to large quantities of supply, coming from farms that are very sophisticated and are using the latest technologies, then it is a very attractive place to invest. The Canadian regulatory environment, the financial environment, and access to skilled workers are also another range of things in addition to the acreage that make Regina and Saskatchewan a compelling case. We have seen some international companies like Roquette already investing in Portage la Prairie as well as AGT Food and Ingredients, which is a Canadian headquartered company, but has operations all over the world and is doing more expansion of its work in Canada and the Regina area.


What were the initial objectives of the Protein Industries Supercluster, and why was plant-based protein chosen as the priority focus?

Over the years, we have seen environmental pressures and some changes in consumer choices. Consumers have started to recognize that if we are to continue to get a lot of protein from animal sources, such as dairy, meat, poultry, and aquaculture—which are still the dominant sources and will continue to be for human diets—with a changing climate and pressure on water and acreage to grow food, as well as two billion more people on the planet, we are going to have to get more of our protein from plants directly as opposed to routing it through an animal. It takes eight pounds of protein to produce one pound of beef protein. The efficiency would be to put that one pound of protein into human food directly rather than routing it through livestock.


What are the best opportunities for Canada to add value through innovation?

On the innovation side, we have taken the view at PIC to take a full supply chain orientation to it. It starts with seed or germplasm, which has certain characteristics to it. Some of our innovation projects are focusing on how to develop a seed that has the traits and characteristics that are ultimately going to be looked for by the consumer or the processor down the supply chain. That is one key piece of our focus and that is where the University of Saskatchewan is one of the leading research institutes in the world on plant science, particularly as it relates to crops grown in Western Canada.

“The University of Saskatchewan is one of the leading research institutes in the world on plant science.”

We can start with the seed germplasm itself. As an example of that: we are investing, with Corteva and local Canadian companies, in a new variety of canola that will increase the amount of protein in the canola through plant breeding, making that protein easier to extract from the seed for processing. That creates a product in terms of the seed itself that is bred and engineered to be used better by consumers in terms of delivering more protein and making that protein easier for processors to extract.

The next leg in the supply chain is the farm. What we have as an advantage in Canada and Western Canada in particular is a farming community that is very quick to adopt and adapt new technologies. There are really exciting advances going on in agriculture, particularly artificial intelligence (AI), robotics, and applications related to planting and crop maintenance.

As an example, on August 20th, 2020 we announced a $26 million investment into a consortium led by Precision.ai, which is a drone robotics, AI-enabled system for applying crop pesticide and crop nutrients. Today, a farmer will go down to the field with an implement that has a large spray boom that will put pesticide everywhere. It will kill the weeds, but sometimes the crop is immune to that pesticide and there is residue on it. With the drones, their AI-enabled intelligence is smart enough to recognize whether it is a seed or a plant we are trying to harvest, or if it is a weed that we want to get rid of. It will put a microdot of poison on the weed and leave no residue on the plant that we desire to harvest. You avoid all of the big costs of the big equipment that are required and you reduce the amount of crop nutrients and crop protection product that you need to put on the field. This reduces the total load of that by putting it precisely where it is needed to get the plant to grow or on the weeds that the plant is in competition with to go away.


What policies or investment supports are the federal and provincial governments implementing to encourage companies to invest in Saskatchewan?

The challenge for Canada is that we leave a lot of value on the table. A crop like canola, for example, sells as raw seed for roughly $530 to $540—the market goes up and down, obviously—but that is the whole seed price. If I sell that to a buyer in China, the U.S., or Europe, that would get me just over $500 for a tonne. On the other hand, if I take the conventional approach today, which is to crush that canola and separate the oil and the meal, I can get about $900 a tonne for the oil and $300 a tonne or thereabouts for the meal. I have taken that from $500 now to $1,200. Now, if I start to extract the protein out of that plant, which is about 20% of the seed, that is worth $1,800 a tonne. As you fractionate the seed into more component parts and you integrate that into the food supply system, the value is captured much more in Canada. Our mission is to make sure that we are maximising the value from the crops that we grow today.

We have been successful at attracting interest from companies because they see a strong focus on innovation as a result of the supercluster. As the world changes particularly around all these trends I talked about, increasingly Canada is seen as a leader in innovation. They know we have good scientists, we can execute projects here well, and the government is supporting us through co-funding the innovation. There is a lot of discipline around intellectual property (IP) protection so that we do not see the benefits of our innovation leak out of the country but they are captured here for increasing more employment and jobs.

“We have been successful at attracting interest from companies because they see a strong focus on innovation as a result of the supercluster.”

That is one of the roles of the supercluster, but the provinces individually have their own initiatives that they can also offer. For example, in Saskatchewan’s case, if you build a new processing facility, it is usually eligible for a 15% tax credit on your capital costs. If you are investing $100 million on a plant, $15 million of it is coming back in tax savings right away as a result of that, which you can carry forward. Then, there are other programs to assist in training and infrastructure around utilities that are obviously important to building processing facilities.

Part of our mandate is not only to fund innovation but also develop an ecosystem of collaboration amongst all the various partners in one of those buckets that I mentioned: germplasm, production, farming, processing, or marketing. There is a whole community around that including finance infrastructure, legal infrastructure for IP management, and educational institutions for training skilled workers. That whole ecosystem has to come together and that is very much part our mission as well, to help create that ecosystem.


Are there specific pockets of the agri-food industry in Regina and Saskatchewan that foreign investors should know about?

There are two broad pockets of investment opportunities that are quite unique. One is the area that I talked about earlier, which is the robotics and AI initiative. In Regina, for example, two quick examples include the Precision.ai that is using the drone technology to apply crop nutrients and crop protection. Another one is called DOT Technology, which was recently acquired by Raven Industries from the U.S., and it is a completely robotic farm implement system. That unit is a power unit, which hooks to various implements and it requires no operator onboard. Basically, it goes out to the field from the farmer’s yard and it does its work and it returns when it is done, completely autonomously. Those are examples in the space of what I would call software, AI, and robotics that would be of interest to venture firms because you have companies here doing that and you have a farming community that is ready, willing, and eager to adopt that. If you want to scale up production for selling that machine or that software around the world, it is a great environment to do it in. The technology bucket benefits asset managers or investors who are looking to write smaller-sized cheques and are focused on innovation and technology that can be leveraged all around the world.

The second bucket would be processing, which involves much bigger capital and bigger firms partnering with SMEs that have developed these new technologies. A good example would be a company called Botaneco. They have developed a very unique process for separating oil in complete bodies rather than crushing it and blending it. Their products, in terms of protein extraction from oilseeds or oil bodies from extraction of oilseeds, provides huge advantages that are not widely used in the food industry but are game changers in terms of improving margins for food processors and providing healthier products. Today, if you buy a Beyond Meat burger or an Impossible Burger, you are probably going to get palm oil or something like that as a fat replacement and it is highly saturated. Whereas if you take a canola product that has more Omega-3 in it, you get a healthier oil dropped into that plant protein-enabled meat product. These innovations will improve the new plant-based products that are out there and provide a healthier choice.

“Canada has a very unique set of offers to make to global enterprises that are interested in the new world of food production.”

The challenge for Canada is to move beyond commodity production. We have mastered that game and it has its limits now. We have hit the margins that we can hit and we are only going to become more profitable by increasing scale. That is why you see fewer farmers with bigger farms, as an example. There is a huge amount of value to be captured by processing more of that product here and selling it as a high-quality ingredient. Governments are going to have to get their heads around how they can provide incentives for these global companies to get here and there is going to be competition between the communities for locating those facilities. There is no question that Canada has a very unique set of offers to make to global enterprises that are interested in the new world of food production and feed production to supply 2 billion more people and existing customers with better food.

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Frank Hart Protein Industries Canada
Frank Hart
Chair of the Board - Protein Industries Canada (PIC)

Bio: Frank Hart is the current Chair of the Board of Protein Industries Canada (PIC). He has extensive experience in business strategy, operations management, and finance, having served more than nine years in Greystone Managed Investments Inc. His role at PIC includes uniting diverse stakeholders to advance PIC’s vision and program launching initiatives. He is also currently serving as the Chair of the Board for Economic Development Regina.

 

Organization Profile: Protein Industries Canada (PIC) is one of Canada’s five innovation Superclusters. It is a not-for-profit organisation working with private industry partners to invest in projects that lead innovation in the agriculture and food sector. They also help companies gain pathways to customers, markets, partnerships, as well as academic and research institutions to drive