The phrase “game changer” is bandied around to describe everything from public policy to hockey players. And while the Canada-EU free trade agreement actually is a “game changer,” it will not be the saviour of the beef industry.
It may, in fact, lead to a complete restructuring of our beef industry, eliminate smaller producers and force Canadian consumers to pay high EU prices for their meat.
Beef sells in the EU for up to triple the price in Canada, mainly due to higher production costs both for transportation and to adhere to EU regulations. To attain those higher EU prices, Canadian exporters will also end up with those higher production costs.
Following the foot-and-mouth and BSE (bovine spongiform encephalopathy) crises, the EU refocused its quality control system from the end product to one that provides full transparency from farm to fork, including environmental standards of production and animal welfare. Growth hormones are banned and a strong emphasis is put on process controls throughout the food chain.
The opposite is true in Canada, where growth hormones are standard and quality control is sector based with a focus on the end product. Producers use the Canadian Cattle Identification Program (CCIA) to tag their animals and verify age and birth place. CCIA is an industry-initiated and established system designed solely to contain and eradicate animal disease and is not mandated by law.
At the feedlot and processing plant, Animal Identification and Premises Identification (PID), is used to enable animal traceability and determine, in the case of a disease outbreak, which animals came into contact with each other. Again, animal welfare, feed considerations and life cycle quality control are not mandated.
Fundamental changes will be required if Canadian suppliers expect to compete with the EU’s largest beef supplier, Brazil, and other international suppliers for the EU market, including raising livestock without hormones. In fact, Brazil has a competitive advantage because of its high quality, low-production costs, and its early buy-in to infrastructure changes required by the EU.
For Canada, doing so will translate into both a slower growth cycle and more feed and direct costs of up to $50 per head. There will also be much higher indirect costs because of the need to join and adhere to the mandated CFIA (Canadian Food Inspection Agency)-administered program and “to provide evidence to the certifying veterinarian that Canadian beef products are derived from animals that have never been treated with any growth-enhancing products during their raising period.”
Producers must enrol their calves in the CFIA program within six months of birth and the cattle must be raised under special requirements that include specific feed and space requirements which must be certified by an approved CFIA veterinarian.
The cattle will also need be segregated from other non-EU-destined cattle, checked at intervals for the presence of implanted hormones and slaughtered separately at the beginning of a shift. Meat identity and traceability is maintained at all times.
What sounds good in Ottawa and in Brussels doesn’t always make sense on the back 40. Canadian producers could achieve EU standards but it will mean a complete and costly transformation of an industry, from producers, feed suppliers, feedlots, meat-processing facilities and exporters. In addition, Canadian consumers will have to be willing to pay higher prices for their beef or accept a two-tiered system where high-grade beef goes to Europe and a lower quality and rejected beef stays in Canada.
The fact is, despite enjoying most favoured nation (MFN) status for EU beef exports, Canada has never filled its current quota and has only four facilities that are approved to process the high-quality, grain-fed prime cuts the EU demands. Combined, Australia, U.S., New Zealand and Uruguay — which also enjoy MFN status — only fill about two-thirds of their quota.
The market is simply not big enough to absorb more supply unless new sales come at the expense of other suppliers, one of whom, Brazil, enjoys a distinct advantage.
We need to ask ourselves: are we prepared to do all of this for a market that we do not, and never will, have a competitive advantage in?