The red meat sector is the largest sector of the Canadian food manufacturing industry. From 2010 to 2020, per capita consumption of beef is expected to slightly decrease from 12.96kg per person to 11.84kg per person. In contrast, per capita consumption of pork is expected to slightly increase from a per capita consumption of 12.09kg per person. With a static domestic market and to aid recovery from trade disputes and food scares, Canada’s meat sector needs to seek out new international markets.
Since 2007, Canadian meat exports have increased by 20%, but the industry faces several challenges in the future to compete with other leading meat producing markets. The US, Japan and Russia account for just under 73% of meat exports. In 2012, Canada exported pork and beef to over 150 countries.
A study released in September by CAPI, the Canadian Agri-Food Policy Institute, highlights the fact that Canada’s beef industry is at something of a tipping point. Corrective action is needed if it is going to deliver maximum benefits to producers and stakeholders and realise its full potential on a global scale. The research reveals the beef industry lacks a comprehensive strategy to address challenges and take advantage of the significant opportunities that the future offers. Canada is also at risk of being a net importer of beef.
Another major concern is Canada’s reliance on the USA, which accounts for 85% of the country’s cattle and beef trade. Although this is good in terms of revenue and the economy, Canada is “backfilling” the US market, which imports cheaper products from Canada so that it can export domestic beef to get a better return. Canada therefore needs a clear strategy to compete on the world stage and reap maximum benefit.
Other major beef exporting countries, including the US and Australia, have been doing a much better job of penetrating international markets. Since 2005, the US has boosted its exports to countries other than Canada by 280%, whereas Canada’s exports are up just 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 sector’s demise, 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, as well as declining beef consumption.
Canada exported €0.8bn (CAN$1.2bn) of beef and veal to 67 countries in 2012. Exports to the USA were constrained, with a drop of 22% to 182,600 tonnes, due to tightened beef and lower cattle inventories. There were also significant declines in exports to Russia (-66%), Egypt (-54%), Mexico (-33%) and China (-17%). However, a significant gain was seen in South Korea with an increase of 2,500%. Further decreases have been seen during the first third of this year, with beef exports down 3.8% and imports up 3.4%. However, exports to Japan have increased significantly, with a rise of 92% in April. Imports have notably increased from New Zealand.
Beef also remains the main stumbling block for the conclusion of the Canada-European Union Comprehensive Economic and Trade Agreement (CETA). Completion of the CETA negotiations is important as it would permit access to 500 million consumers in all 28 EU member states. The critical issues are volumes and quotas that suit both parties. Some EU member states are resisting Canada’s entry in fear of competition in the mainstream beef sector, threatening prices, but Canada plans to go after premium customers.
However, Canada will need to move fast in order to keep up with competition from other beef exporting markets. All eyes are now on the European trade talks to re-open a high-value market for Canadian beef.
Canada exported CAN$3.19bn of pork to over 100 countries in 2012. Pork exports grew 3% from 2011-12 to reach over 1,189,000 tonnes. Exports to the USA account for over a quarter of exports, and other top markets include Japan, Russia and China. Russia was the star performer with an increase of 60%, but the US, Japan and China saw a drop of 19%, 13% and 34% respectively.
So far in 2013 the picture does not look bright. During the first third of the year, pork exports were down 14.8% and imports were up 1.9%. The biggest drop has been in shipments to Russia, China, South Korea and Japan. South Korea imported a lot of Canadian pork products in 2011, following the outbreak of foot-and-mouth disease, but is now importing more pork products from the US and Europe. The fact that Europe and the US have negotiated a free trade agreement with South Korea, and Canada has not, means Canadian pork will be more expensive for that market.
Free Trade Agreements
As well as the much anticipated CETA, conclusion of the long-stalled Canada-South Korea Trade Agreement negotiations is vitally important, because Canadians will be progressively disadvantaged in the terms of access to this very significant market as a result of the implementation of the South Korea-United States Free Trade Agreement.
Also in the pipeline is the Canada-Japan Economic Partnership. Negotiations are in progress and, upon conclusion, will greatly benefit Canada’s meat sector. The maintenance of competitive access to Japan is vitally important given the sheer volume and value of beef and pork imports for that country.
Canada may be playing catch-up to other key meat-producing nations, but with the right long-term strategy encompassing the entire supply chain and the opening up of new markets due to Free Trade Agreements, Canada’s meat sector has every chance of recuperating its ailing exports.
• Jayne Hunt is a Consultant with Promar International, the value chain consulting arm of Genus plc and can be contacted at: Wnlar.email@example.com