September 11, 2012

 

Canada's beef industry on continual decline

 

 

Canada could soon become a net importer of beef for the first time in at least a generation due to a state of chronic decline of the country's US$6 billion beef industry.

 

Canada is increasingly shipping live cattle and low-value meat cuts to its main foreign customer - the US - while importing higher value beef, according to the report by the Canadian Agri-Food Policy Institute (CAPI), an independent think tank set up by Ottawa in 2004.

 

The result is a rapidly dwindling trade surplus with the US - the destination for 85% of Canadian exports. Canada's beef trade balance with the US has fallen to US$42-million in 2011, down from US$1.4-billion in 2002.

 

"The sector is forgoing economic opportunities and its competitive position is falling behind," concludes the report.

 

In some cases, Canadians are buying beef at the grocery store that comes from cattle raised in Canada but is shipped south and processed in the US.

 

That is opening a growing balance in the value of trade. The average price of the meat products Canada ships to the US is now US$3.74 per kilogramme, compared to US$6.55 per kilogramme for US imports, and the gap has been steadily growing.

 

"Canada is diverting significant economic activity to the US for American processors," the report said.

 

"This has important implications for Canada's domestic value-added processing sector. Canada needs to decide whether this is an important policy issue."

 

Canada has successfully recovered most of the sales it lost in the wake of the mad-cow disease problems of the early 2000s. But in the interim, other major beef exporting countries including the US and Australia, have been doing a much better job of penetrating fast-growing offshore markets. Since 2005, the US has boosted its exports to countries other than Canada by 280%; Canada's offshore exports are up 45% over the same period.

 

The size of the Canadian beef herd is also in decline, dropping by a million head, or 20%, since 2005.

 

The report identifies several causes for the industry's reversal of fortunes, including more aggressive competition from foreign suppliers; the high value of the Canadian dollar; a surge in corn-feed prices due to drought and ethanol production; stricter regulations; higher costs; US country-of-origin labelling rules; and declining beef consumption.

 

What Canada needs is "a robust, long-term strategy and a sustained commitment to execute the strategy," CAPI said.

 

The strategy should include more collaboration between ranchers, producers and governments, clear leadership, better use of market information and promotion of industry "champions" in the supply chain.

 

"Continued indecision will rob us of very real opportunities," the report said.