We do not have a complete accounting of the infrastructure of the middle, as outlined by Stahlbrand, especially the "soft" infrastructure. Many local and regional reports attempt to identify some of the social and physical infrastructure (cf. Barbolet et al., 2005; PEI Food Security Network, 2017; Miller, 2017), but various approaches to their identification are taken and there is no consistency in them, making comparisons across the different regions difficult. And many regions are poorly characterized.
Some hard infrastructure is better identified. With some digging, the regional state of processing, storage, distribution, retail and food service firms can be described regarding value of production, goods produced, numbers of operations, and broad employment figures. But food flows within and across regions are not well understood, in part because much of that information is considered Confidential Business Information (CBI) (see Goal 2, Demand-supply planning and coordination). Identified needs are often, then, partly data-driven and partly anecdotal. But broadly speaking, there are considerable deficiencies.
The aggregate numbers suggest hard infrastructure is stable or slightly expanding, though with shifts towards the more populous provinces (CAPI, 2020), but there's an argument that we don't have the right mix of plant sizes in many sectors. Large plants are more cost effective in traditional economic terms but also more fragile in the face of disruptions. Smaller plants are less cost effective but contribute to greater system resilience (Rude, 2020). So a balanced system mix is appropriate but in the absence of DSC, we don't have the instruments to assure the right system level construction because we rely too much on market forces that are incapable of getting the mix right. There's also a conceptual problem within the field of economics, that resilience tends to be defined more in firm terms than system ones because the profession does not really have a coherent system analysis (see Get Started, Problems, General, Lack of resilience).
Much of the dominant system is built around convenient and coercive economic relations that favour large actors. Though not well studied, supply chain decisions are not necessarily rational, influenced by the emotional dynamics of the relationship between source and buyer (cf. Polyviou et al., 2021). Local Food Plus, an NGO for many years attempting to create or re-establish infrastructure of the middle (see Stahlbrand, 2019), regularly experienced the effects of these dominant relationships. When asked why they don't purchase more from mid-scale local and regional producers and processors, typical responses from major buyers of horticultural products were, "I've been buying from X out of California for 30 years, why would I change?", "If I buy locally during our season, the California and Florida sellers will cut me off when I can't get local supply", and "It's too much work to find local suppliers and I have to deal with too many of them to make up what I can get from one US supplier". A key indicator of the problem was the inability (or unwillingness) of most buyers to identify what percentage of their supply chain was regional. One part of this situation makes sense, that commercial relations are based on trust, but the coercive aspect and distance of exchange is problematic.
Although the situation has improved somewhat as large actors have attempted to respond to consumer interest in local food, centralized purchasing, warehousing and inventory control systems of large retailers and food service operators, designed primarily around large volume imports, have also effectively cut out many small and mid-scale actors in many segments. They are unable to meet vendor specifications, including low price points, volumes, schedules, packaging and cosmetic characteristics (cf. McCallum et al., 2013 on local fruits and vegetables).
But hard infrastructure investment is also a particular challenge, those processing, transport, distribution and selling elements that in the current environment require capital investment largely by private firms. The state does support infrastructure but not well this infrastructure of the middle, so part of the challenge is to revamp state infrastructure programs (see Solutions this section). Adding to the challenge and reflecting the complexity of food systems, infrastructure of the middle is itself diverse, not only processing plants and transport but also less visible elements. For example, carbon dioxide - used for stun guns, fruit and vegetable post-harvest handling, and beverage carbonation - is an important but largely invisible input. Its manufacture is tied to natural gas and fertilizer and there are few processors making it in Canada. When there are supply limitations, such as occurred during COVID, the smaller operators are often shorted to keep the large players active, part of a wide spread phenomenon when systems are under stress (see Harris, 2022). Another example is shipping containers, now at the heart of much global trade. When owners of containers decide it is more profitable to send Port of Vancouver containers back to Asia empty to take advantage of high rents for consumer goods shipping from there to North American markets, it is often food system of the middle actors who are unable to access shipping. The food system is full of such critical inputs relying on efficient and equitable market relations and signals, but they are frequently distorted by private decision making at odds with public welfare (see Get Started, Problems, General, Lack of Resilience).
Provincially inspected red meat slaughter is only about 5% of federally inspected slaughter (Rude, 2020). This statistic doesn't entirely tell the story of abattoirs focused on regional markets since some regional plants have defaulted to federal inspection even though not much of their product is traded across borders. But access to abattoirs in the pork and beef sectors is a chronic problem in some regions of the country. Consolidation has resulted in reduced local and regional capacity, longer travel times and extended waits for processing, 4-12 months in some cases in Ontario. According to OMAFRA, Ontario had only 115 abattoirs (2020) compared with 229 in 1999, with attendant loss in certain regions and for animals targeted to local supply chains (McLeod, 2021). Loss of timely access usually results in extra feeding costs for farmers and penalties for overweight cattle at slaughter plants. Loss of mid-scale feed mills and processing plants in Nova Scotia is reported to be a significant factor in the substantial decline of pork production in the province (Finnigan, 2021). BC also has many regional capacity problems, partly addressed by changes to plant licensing systems, and grants for new capacity (Ayers, 2022).
Supply managed sectors have somewhat fewer difficulties because of the regulated orderly marketing designed around provincial boundaries (see Goal 2 Demand - supply Coordination). There is some evidence that smaller scale processors are less concerned with constraints imposed by supply management than large processors. Large processors appear to be more wedded to "free" market dynamics, and focus more on lower cost strategies for profitability. Smaller processors focus more on product differentiation (Hansen Sterne and Van Duren, 2019). One conventional US economic analysis concluded that large packers have 12% lower costs than medium firms and 25-40% lower costs than small firms (Macdonald et al., 2000 cited in Rude, 2020). These cost analyses are primarily related to high fixed and technology costs which benefit from being spread across volume, and do not include the externalized costs associated with plant operations, inputs and the distribution of their products. Pertinent to Daly's observations above, a core unanswered question is at what scale and technology are sustainability, health and equity optimized? Optimization also requires consideration of resilience in the face of threats. Related to this question is some evidence that the lauded scale efficiencies of large plants only result when operating at full capacity and that smaller plants operating at full capacity may actually have lower per unit costs than large ones at lower capacity (Ward, 2000). In other words, part of the imperative of large plants is that they must operate at full capacity, and often have to restrict the ability of smaller plants to compete with them, so that they can achieve such optimization. This partly explains the need for corporate concentration and control of supply chains. It is effectively an operational self-fulfilling prophecy. Retail oligopsony also contributes to the problem with pricing and vendor requirements that penalize smaller operations (Rude 2000).
The meat sector is relatively better studied than many other areas of the food system, so whether these problems are at play across all commodity areas is less clear. The bakery sector (distinct from grain milling) is second in value to meat among processing sectors and is less concentrated. The majority of firms in Canada have less than 100 employers and they are more evenly dispersed across the country than meat processing. Only one firm in bakery has more than 500 employees (Statistics Canada, 2016). Fruit and vegetable processing is a relatively small sector, but has suffered for consolidation and closures. Large firms closing operations in Canada and moving processing to the US included Heinz, Campbell's and Bick's Pickles (CAPI, 2020). Tomato processing has suffered significant declines since the 1970s, resulting in increasing imports of both dehydrated tomato paste and processed goods, with resulting declines in tomato acreage for producers serving the domestic processing sector.
Fish processing is another sector largely focused on export and there are many stories of local buyers unable to procure local fish and seafood because the market infrastructure does not really exist in their region and/or supplies are fully allocated to international buyers (see also Goal 5, Sustainable fishery management).
Regardless of sector, Canada is short on aggregators. Aggregators take many forms and serve the function of providing glue to smaller operators who want to participate in mid-scale markets but don't want to scale up themselves, providing different combinations of transport, training, processing and market access, and branding. Although increasing in some regions, they generally struggle with viability given a large unfavourable environment. A full national accounting of food hubs does not exist, but there are some regional networks, eg. BC Food Hub Network, and FLEdGE in Ontario. FLEdGE's 2017 survey of organizations linked to hubs (125 respondents) revealed access to capital and labour and regulatory requirements as the key challenges.
One on-going challenge relates to the flexibility, scalability and seasonality of fruit and vegetable processing. The loss of plants became more acute during the 1970s (cf. Winson, 1992) and has continued. Canada remains a significant importer of frozen fruit and vegetables, despite farm capacity. Part of the challenge is the seasonality of operations and the associated challenges of assuring staffing on a seasonal basis. One response, still limited in Canada but growing, is Individual Quick Freeze (IQF) plants that can be used to freeze many different plant foods (and even poultry), but seem most popular with fruits and vegetables because of the ability to shift processing based on local season supply. Existing operations sell to both retail and food service. Canada also appears to have a growing sector of companies manufacturing and distributing IQF equipment of different scale. This represents another area where a DSC approach could identify regional opportunities for import substitution.
The alcoholic beverage sector, especially beer, wine, cider and gin, also display many challenges regarding SME infrastructure. Beginning from periods of very localized production, then high degrees of government control post Prohibition, followed by post WWII economic and policy forces, significant corporate concentration resulted with associated reliance on imported ingredients, including hops, malt barley and grapes. Starting in the 1980s, some provincial governments changed their regulatory strategies to create space for small domestic entrepreneurs, ultimately resulting in more vibrant wine and craft beer sectors, linked to agri-tourism (for an analysis of contested policy successes in the wine sector, see Migone, 2022). Many beverage sectors are now quite bifurcated; high levels of corporate concentration in mainstream markets (e.g., 3 global beer conglomerates control about 90% of beer sales in Canada), with a robust (at least pre-pandemic) SME and craft sector. However, the pandemic appears to be triggering a new round of consolidation among SME firms (cf. on craft beer, Kirby and Lundy, 2022), highlighting again the lack of resilience in the system (see Get Started, Problems, General, Lack of Resilience).