By: Will Verboven, Contributing Editor
It depends on the year, but about 45 percent of all Canadian beef production is exported, 75 percent of which goes to the U.S. That makes the Great White North highly dependent on exports, unlike the U.S. where beef exports hover around 10 percent of national production. Canada’s dependence on the American market has different perspectives, namely having one large customer has some pricing hazards that can depress marketing. On the other hand, beef producers like Australia and New Zealand would sell their souls to be so close to a large, premium and stable market like the U.S.
Such wishful statements need to be tempered by the reality that Canada/U.S. trade is not one way – Canada is the largest beef export market for the U.S., occupying around 15 percent of our total beef market. I suspect the Aussies and Kiwis wouldn’t tolerate the U.S. holding such a large share of their beef markets.
The cattle and beef business between Canada and the U.S. has a more-than 150-year history. Heck, if it weren’t for American cattle and cowboys moving north into western Canada starting in the 1880s, there wouldn’t be a cattle industry up here. From a practical perspective, that original American connection has evolved into a highly integrated cattle, beef and processing industry that operates on a North American scale.
Few U.S. consumers are aware that, on any given day, they might be eating Canadian steaks from Alberta in New York or San Francisco. The same goes for Canadian consumers in Toronto or Vancouver who unknowingly might be eating Kansas beef.
The big beef processors operate centralized marketing desks that move thousands of loads of beef from various plants around the continent to satisfy local marketing conditions and opportunities. Being so highly dependent on one market caused the Canadian industry to seek out more offshore markets, starting in earnest about 30 years ago with the creation of the Canadian Beef Export Federation (now Canada Beef Inc.), an export agency similar to the U.S. Meat Export Federation but on a more modest scale.
Back in the early days, Canadians were truly innocent pioneers in the offshore beef marketplace that was dominated by really big, mean marketing dogs like Australia, Argentina, New Zealand and the U.S. But after three decades of determined merchandising and promotion, Canadian beef now occupies 6 percent of the world market; not bad considering the American share is 12 percent.
That Canadian share is after the BSE crisis of 2003, which saw all offshore exports disappear overnight. That comeback is remarkable, but additional exports are becoming more difficult, thanks to perennial roadblocks that face both Canadian and American beef exports – trade barriers, irritants and just plain malicious mischief by offshore countries.
To be fair, the U.S. has no problems applying such restrictive trade activity to Canadian beef and cattle imports, but they are usually resolved over time, always at needless expense to the industry on both sides of the border. The problem with offshore beef markets is that they are rife with conflicting trade policies and treaties, all impacted by the politics and events of the day in importing countries.
The U.S. has the upper hand in these situations just because of its dominant role in the world. Canada, on the other hand, is a modest player in world markets. So we tend to go, cap in hand, to try to make trade deals with markets like Japan, South Korea, the European Union and anyone else who can be cajoled into buying our beef. Considering that 30 years ago Canadian beef exports to offshore countries were basically zero, the struggle has been successful, with many hundreds of millions of dollars in exports.
On the other hand, penetrating markets that don’t need Canadian beef, or even want it, is a torturous battle and something U.S. beef exporters also experience. For instance, after 10 years of negotiating with the European Union, a free-trade agreement was signed with Canada. Export cheerleaders proclaimed a new era of increased beef exports to the EU. That now seems unlikely as devious EU trade bureaucrats find new hurdles to make exports unviable.
Interestingly, U.S. beef exports to the EU exceed Canadian exports, even though the U.S. doesn’t have a free-trade agreement with the EU – go figure. Exports are critical to the Canadian beef industry, and it’s a never-ending quest to maintain the momentum. But that’s the big picture.