By any standard, Canada’s beef industry performance is impressive. Industry exports include live slaughter and feeder cattle and, including those live exports, Canada exported an astonishing 58% of its total production in 2016. This is illustrated in the chart inserted at the end of this article. The total tonnage produced, as reported by the Canadian Beef Research Council and my own separate analysis, was 1.33 million tonnes. But I was intrigued by the claim made by the Research Council that, to quote the council directly, “In 2015, 1.22 million tonnes (carcass weight) of Canadian Beef was produced for the world. That number rose to approximately 1.3 million tonnes in 2016, and is forecast to grow.”
The first part of the statement is technically correct. The industry did indeed produce 1.2, then 1.3 million tonnes in 2015 and 2016 respectively. But what is not made clear is that only 7% of that production reached markets outside the NAFTA zone. The second part of the statement, that production is forecast to grow is puzzling. With no indication of growth in the beef cow herd at January 1, 2017, it is a certainty that increased output before 2020 is virtually impossible unless carcass weights continue to increase.
This highlights two issues; the huge export dependency on the US market and the very minor presence of Canadian Beef in export markets outside the USA. Certainly, one should not decry the access that has been gained at considerable effort. But neither should one claim a major role in world markets as is implied in the quoted statement from the Research Council.
Global beef trade in 2016 was 9.4 million tonnes. Canada’s share of global beef trade was 3.8% and the amount that went to markets outside the NAFTA region was less than 1% of world trade. The industry cannot increase its role in world trade unless either the industry expands or exports are redirected away from the USA to other global markets. Redirecting trade will only occur if the price is higher in markets outside the USA. The most recent report on export performance from Canada Beef shows that average prices in several countries including Japan, Hong Kong, Korea and the Philippines are equivalent to or higher than export prices realized in the US market. Obviously, it is possible that there are problems in accessing a larger share in those markets. However, in several of those markets US exports are ten times as large as Canadian exports. In 2016 Canada exported about 75,000 tonnes to markets beyond the NAFTA zone while the US exported almost one million tonnes to those same markets.
It seems obvious that if Canadian cattle prices are low enough that live slaughter cattle are being exported to the USA, Canadian based packers should have a competitive advantage in markets outside the NAFTA zone. This begs one to question of the export policies of plants operating in Canada. Currently, it seems to me, our live cattle exports and beef are sort of “backfilling” the US supply making it possible for US plants to export more product to more lucrative, offshore markets, and back to Canada. In 2016 approximately 550,000 slaughter cattle and 120,000 feeder cattle were exported to the USA representing almost 300,000 tonnes of carcass beef. Add to that another nearly 370,000 tonnes of beef exports to the USA and one can see that without this inflow, US beef exports would have been reduced by more than half.
I anticipate defensive responses to these observations and would welcome them. We should all have a clearer understanding of whether we have unexploited export opportunities to the world at large. Alternatively, must we content ourselves with the secondary role of helping the US to maximize their own exports.