Study reveals ominous trend for cattle industry

An agricultural think tank called the Canadian Agricultural Policy Institute (CAPI) recently released a study on the direction

An agricultural think tank called the Canadian Agricultural Policy Institute (CAPI) recently released a study on the direction of the Canadian cattle industry and its future ramifications.

It doesn’t look promising for any sectors, because it brings to light some of the inherent weakness of every sector of the industry.

The study, which was partially financed by the Alberta Meat and Livestock Agency, in more ways than one is telling us essentially what we already suspected. It’s not the first study about the realities of the cattle and beef industry in Canada, but it is more upfront and direct than most efforts in the past.

The problem with it — as with most studies — is will it be taken seriously and acted upon, or will it be filed away in that place were so many other well-meaning studies end up?

The CAPI reports on the declining share and value of Canadian beef, not only in exports but also in our domestic market. It clearly points out that our biggest beef trading partner, the U.S., is eating our lunch. Our exports to that market bring us less value, and our imports from the U.S. are taking a good chunk of our premium markets.

The obvious solution would be to find more offshore markets that will pay us a premium over the U.S. market for our beef. Our beef export agency, both past and present, has been diligently working at that approach for years, but it seems much more needs to be done.

The report talks about the declining competitiveness of Canadian beef production. That’s no secret, but some aspect of that reality is quite difficult to resolve, considering the industry is a victim of the high value of the loonie.

Let’s face it, Canadian beef cattle and beef exports to the U.S. are quite competitive when the dollar is 60 cents. It’s not in the game when it’s $1.05. That’s when discounting becomes the only hope to maintain a share of the market for beef.

What the high loonie also exposes is the high cost of our extra regulatory burden and our higher labour costs. Add all that together and you get what the CAPI report so vividly portrays.

The report suggests that the industry needs to seriously consider a better and more co-ordinated supply chain to meet consumer needs and trends in food production and marketing. It laments that there is very little sign of any leadership in the cattle and beef industry to achieve such an approach. It highlights that cross-industry co-operation seemed to exist just after the outbreak of BSE.

True enough — but the implication is that only the onset of an almost total collapse of the industry will force such co-operation between the various sectors.

One hesitates to come up with excuses as to why the industry continues to lurch toward dysfunction, but it’s the realities of the cattle and beef business in Canada. The fact is primary production, feeding and processing of cattle and retail marketing of beef have been mutually antagonistic in the marketplace since the beginnings of the business in this country. To make money, each sector tries to take a chunk out of the other — almost never does the entire chain make money at the same time. That market psychology is hard to change. Most leadership within every sector tends to have the same mindset. Hence, we see the primary sector and feeding sector at a constant war with each other over checkoffs — meanwhile, the wheels are falling off the stability of the industry — it boggles the mind.

The report notes that the Canadian cattle herd is down by about 1 million head, which is a whopping 20 per cent. That reality not only exacerbates the present situation, but makes any future recovery or marketing realignment a lot more difficult. That is a very precarious road to be on, if the fate of the hog industry is any example.

One hopes the report will be taken to heart by the movers and shakers in the Canadian cattle and beef industry, and that they consider working together will be a lot more productive to a stable cattle and beef industry. But don’t hold your breath — it just might take another industry disaster like BSE to shake up the players to some sense of reality.

Will Verboven is the editor of Alberta Farmer.

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