“When a customer asks you to buy red wagons and you say ‘I am sorry, we’re only selling green ones’ – you lose the sale.”
– CHARLIE GRACEY
Canada’s beef sector must move out of America’s shadow and take charge of its own future, two prominent beef industry consultants told a Manitoba Cattle Enhancement Council (MCEC) strategy session here Nov. 30.
“You just have to wake up to the reality that if you are going to access export markets, you are going to have to come up with a made-in-Canada policy,” said Charlie Gracey, an industry consultant and former manager of the Canadian Cattlemen’s Association.
He said the Canadian industry has become so closely tied to the U.S. market, it can’t see the bigger global picture. “We should be focusing on how we are doing beyond the NAFTA region.”
Gracey said producers have been lulled into a false sense of security, believing they are formidable forces in the global meat market, with statistics that say they are the third-largest beef exporters in the world.
In reality, when exports to the U.S. under preferential trade agreements are discounted, Canadians are minuscule players globally – filling less than one per cent of export trade in beef.
This country’s ability to expand that market share is inhibited by its refusal to move out of the commodity beef model it shares with the U.S. in order to supply international customers with the type of beef products they want, such as increased food safety assurances, traceability or attributes such as hormone free.
“When a customer asks you to buy red wagons and you say ‘I am sorry, we’re only selling green ones’ – you lose the sale,” Gracey said, noting the only way Canadian beef will find a home in the European markets will be if producers stop using growth hormones.
Canadians shipped so much of their “productive capacity,” which includes feeders cull cattle and product, to the U.S. in 2008, “the Americans were eating more Canadian beef than Canadians were,” Gracey said. Domestic consumption was 43.1 per cent of production whereas total product shipped to the U.S. was 43.7 per cent.
But since the implementation of Country of Origin Labelling (COOL) and the declining value of the U.S. dollar relative to Canadian currency, much of that beef is moving at unprofitable levels. Gracey said all of the additional costs associated with COOL are passed back through the system to the cow-calf producer.
The notion that agreements and rules guide international trade exists in theory only; in reality, international trade is a “blood sport” in which just about anything goes between competing exporting countries.
He noted that although the Europeans have increased the tariff-free access for non-hormone-treated beef this year, only U.S. producers are able to access that market. In the final stages of reaching the agreement, a caveat was added that requires eligible meat to be federally graded. The U.S. has federal grading. The Canadian grading system has been privatized.
Gracey said Canadian beef sector’s problems are rooted in an “irrational” expansion that took place in the late 1980s, fuelled by the low Canadian dollar which artificially raised the prices for cattle shipped south.
The influx of Canadian cattle into U.S. markets created a backlash, and eventually an anti-dumping action initiated by R-CALF in 1996. The courts ruled the cattle were being dumped in the U.S. but that the impact was not hurting the markets.
“Did we not read the shot across our bow? As soon as we “won” the case, we continued our expansion. R-CALF had effectively lost the battle and just laid back in the weeds until BSE struck and it had another cause. When science ran out on BSE, they invented COOL,” he said.
“The point I am trying to make is don’t try to grow it before you have a secure market,” he said.
His comments were echoed by Ted Bilyea, formerly the executive vice-president of Maple Leaf Foods, who now does extensive consulting for industry and government.
Bilyea said Canada already has enviable systems in place for food safety, age verification, removal of specified risk material and its move towards national identification for animals and premises that could be used to offer differentiated products to global markets. Plus, it has a relatively low population, a solid and relatively well-managed resource base and high productivity.
“We have a lot of things that we do in our industry that are really desired by markets. I, for the life of me can’t figure out why our industry wants to hide that,” he said.
Bilyea said he can understand why Canadians would be attracted to the size of the U.S. market. But that has lessened their appreciation for their local market and has also caused them to overlook other markets that are growing faster.
“Because the U.S. market is not growing, it is shrinking and they already have enough product. So, why anybody would target that market is highly questionable.”
“Your first market that is most important to you is your domestic market. You want to own your own market and if you don’t do that, you really don’t have a base to export from,” Bilyea said.
Bilyea said there are opportunities for the Canadian beef sector to diversify its exports. “But what it takes is good leadership, vision and imagination, all the things I don’t see in the industry today. Sitting there listening around the table these people are struggling but they are willing to take a risk – if there was a bit of leadership and that’s what is missing. I just think our industry, frankly, doesn’t have a strategy.”