July 19, 2021
Study finds Canadian beef production's contribution to economy more than previously calculated
A recent study funded by Calgary-based Beef Cattle Research Council showed Canada's beef production contributes more to its national economy than was shown by traditional measures like farm cash receipts.
Canfax Research Services did the project management of the study (called "Economic Impacts of Livestock Production in Canada – A Regional Multiplier Analysis"), working with University of Saskatchewan's Suren Kulshreshtha, who completed it in April. The study updated earlier ones to more accurately reflect the economic impact of the beef sector.
Researchers found it is difficult to measure the economic significance of the sector by looking only at direct impacts (farm cash receipts), which make up 25-50% of the overall economic impact.
According to the study, Canada's beef industry contributed on average $9.1 billion per year during the 2016-2020 period. It contributed an average of 14.2% of total Canadian farm cash income from 2011 to 2021.
While these numbers appear impressive at first glance, it underestimates the bigger picture, said Brenna Grant, manager of Canfax Research Services.
"When you then look at the red meat processing industry, which is the largest sector of the food manufacturing industry in Canada with revenues of $16.3 billion and total employment of 58,000 — lots of people just stop there at those two numbers," explained Grant.
"But when you actually add it all up and include all of the indirect and induced impacts, that's when the cattle sector contributes $51.6 billion in goods and sales, contributing $21.8 billion to gross domestic product at market prices, including $11.7 billion in labour income."
The sector is also directly or indirectly responsible for the creation of about 347,000 full-time equivalent jobs.
"That's where you start seeing the impact of the beef industry as just one part of the food sector and how big of an impact it really does have," added Grant.
Indirect impacts are created through the purchase of various inputs required for production.
Induced impacts are a result of spending income received by owners of these resources, which creates more demand for commodities and increases production.
Each region of Canada benefits from direct impacts, as well as through indirect and induced impacts.
However, in Eastern Canada, the processing sector produces 1.58 times the activity for every dollar's worth of farm level activity.
The study found this value is only 1.24 in Alberta, which is possibly affected by more beef exports to the United States.
The study considered structural changes that have occurred over the last 10 years. The sector in the 2018-20 period had $51.6 billion in goods and sales and contributed $21.8 billion to gross domestic product at market prices, including $11.7 billion in labour income. During this period, the sector also contributed $3.35 to the Canadian gross domestic product for every dollar of farm cash receipts.
Additionally, the study found that for every worker employed in the cattle sector, another 3.9 workers are employed elsewhere in the economy — with an employment multiplier of 4.86 person-years on a full-time equivalent basis.
Another $6.22 is created elsewhere in the economy for every $1 of income received by workers and farm owners, which resulted in an income multiplier of 7.22.
Andrea Brocklebank, executive director of the Beef Cattle Research Council, said she was not surprised there would be economic differences between western and eastern regions of the country.
In Canada's west, the cattle sector contributed $3.34 to the regional GDP for every dollar of farm cash receipts, while in the country's east, it contributed $3.41 to the GDP for every dollar.
"What was interesting to me is in Eastern Canada, we saw that number actually a bit higher. Not a major difference, but I do think Western Canada has more significant beef production," said Brocklebank. "The larger population in Eastern Canada supports more substantial processing industries, especially secondary processing industry, which contributes to that economic activity.
"We also see the flow from the dairy industry as well, which contributes to beef production particularly in Eastern Canada and that's sometimes the forgotten fact.
"So I think, sometimes regionally, we view one area as more significant than another and the beef industry recognises all provinces play a role, whether supplying cow-calf or playing a role in processing — those types of things. So having those regional results is also useful for us and a friendly reminder of the roles different areas play."
As the Canadian economy recovers from COVID-19, the study projects Canada's beef industry will provide stability and employment opportunities.
However, retiring workers by 2029, combined with any growth, could result in a shortage of 14,000 workers. There could also be labour shortages in other sectors that provide services to the beef industry such as veterinarians, trucking and feed, which could affect expansion plans for the beef sector.
But forecasts have labour productivity increasing from 0.9% to 1.2%, which will help reduce the need for labour as it becomes more productive.
Meanwhile , beef prices are projected to rise from 2025 to 2027 but then fall as the US rebuilds its herd. This expansion is expected to pressure Canadian domestic beef prices, resulting in a decline in wholesale prices of 9% by 2030, according to the study.
During this period, major disruptions to the animal protein sector from alternative proteins are not expected.
Brocklebank said the 2021 analysis will continue to build on past reports for communicating the sector's role to the public, government and cattle producers.
"(The study is) used across a lot of different fronts in terms of trying to understand how we contribute to the overall economy. A lot of focus currently is on environment, but we also know that things like trade and trade growth are really important moving forward, and I think we know the beef industry has an opportunity to play a further role in those areas," she said.
- The Western Producer