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Beef industry at a crossroads

A decade after rebounding strongly from the 2003 BSE crisis, Canada’s beef sector is stuck in a competitive rut with no clear idea of how to get out it, says a report prepared by the Canadian Agriculture Policy Institute (CAPI).

The world market for beef has changed in the last 10 years, says the report, based on interviews with farmers and other players in the cattle industry. The “sector faces many new challenges, of which our balance of trade with the U.S. is a paramount concern.”

The beef industry “needs a robust, long-term strategy — and a sustained commitment to execute the strategy — if it wishes to secure its place as a competitive force in domestic and global markets,” the report adds.

About 85 per cent of Canada’s beef and cattle exports go to the U.S., it notes. While that generates $1.8 billion in total sales for Canadian beef, Canada needs to increase the proportion of exports to recently opened overseas markets, it suggests.

Among other key points in the report are:

  • Canada is at risk of becoming a net importer of beef;
  • Canada focuses on supplying the American market even though the returns are lower than for beef exports to other countries and the U.S. benefits more from the arrangement than Canada does;
  • In 2011, Canada had a net trade balance in beef of $42 million with the U.S. compared to a trade balance of nearly $1.4 billion in 2002, which suggests the industry is losing its competitive edge;
  • The value of Canada’s exports to the U.S. is only about 60 per cent of the value of American imports to Canada because of the amount of Canadian beef and cattle processed in the U.S., which exports higher-value product back to Canada;
  • While Canada backfills the U.S. market, that country is realizing a greater advantage by significantly expanding exports beyond Canada. Since 2005, U.S. beef exports are up 280 per cent on a value basis, and 159 per cent on a tonnage basis. Canada’s exports beyond the U.S. have increased by 45 per cent, in terms of value, and 13 per cent in tonnage of beef;
  • Canada’s cow herd has declined by one million head or 20 per cent since 2005 raising questions about whether Canada has a critical mass of cattle to meet future market opportunities.

CAPI says its research indicates the Canadian beef sector “is forgoing economic opportunities and its competitive position is falling behind.”

Many in the industry think change is over due, it adds. “Stakeholders are keen to have a new dialogue on strategy. But this discussion can only occur if leaders in the sector are willing to act.”

It needs a strategy to take advantage of the opening of new foreign markets.

The industry also needs to pay more attention to the domestic market, the report recommends. Beef consumption has fallen by 10.7 per cent since 2001 while pork consumption has declined by 28 per cent and poultry has increased 3.4 per cent.

“Price is a key determinant. Beef costs more to produce than other proteins. Moreover, despite improvements, more grain is required per kilo of beef production than for other meat proteins.”

This statistic is part of the charges “that beef’s environmental footprint is unsustainable and, for some, a reason not to consume beef,” the report says. “There are also concerns about the perceived healthfulness of beef and the ethical treatment of animals.”

CAPI suggests that a long-term strategy is needed “to build the beef brand and to generate consumer trust in the product and production processes.”

Canada has a more advanced traceability system that can provide consumers with information about what they’re buying.

“While a strategy must be industry led, government can support the development of a robust industry strategy,” the report urges. “Government then must align its own policies, initiatives, funding and regulation to enable this strategy. Importantly, government must also approach market access negotiations for the beef industry with a strategic plan which aligns with the industry strategy and positioning.”

As well, the reports call for the industry to create a national organization “to articulate and support an overall domestic and international strategy.”

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