As Canada moves to diversity and expand its beef export markets, open lines of communications between all sectors is needed, says Charlie Gracey, former executive vice-president of the Canadian Cattleman’s Association and current director of the Alberta Livestock and Meat Agency.
Gracey, speaking recently to a packed house at Tiffin Conference series at Lethbridge College, says communication is vital if industry hopes to understand and be prepared for future challenges.
Gracey said forecasts of a world population increasing to about nine billion brings increased pressure on the food industry to produce enough to meet the demand. As population increases so likely will demand for world beef .
Gracey says while the U.S. has been and will continue to be Canada’s major export market for beef, there is a need to diversify and develop new export markets.
“The best way to feed the world is through intensive agriculture, and the best way to do that is through people (producers) working with a profit motive,” he said.
Recent figures showed 59.5 per cent of Canadian beef was consumed in Canada, and 38 per cent in the U.S. But those numbers exclude live cattle exports to the U.S. Those cattle represent potential beef production that could go elsewhere.
Markets first, production later
Canada’s current production capacity is 1.3 million tonnes of fed beef and 300,000 tonnes of non-fed beef. Gracey said since the late 1980s, half of Canada’s beef production has been exported, the other half consumed in Canada.
And he says as domestic beef consumption has been declining in recent years, there is opportunity for the industry to find ways to increase beef used at home. In 1980 the per capita consumption of beef was 38.8 kilograms per person, dropping to 20.2 kilograms in 2010.
But he warned as the industry looks to develop more export markets, it needs to avoid oversupply. He says it is better to wait for market pull — develop markets and then produce the beef — than to have market push — produce surplus beef and then try to find a buyer. The only time the Canadian beef industry experienced a demand-pull market was in late 1960s and early 70s. But as production increased faster than markets developed it changed to market push.
For much of the time over the past 25 years he says there were a number of government policies, world trade issues and changes in consumer preferences which led to overproduction, poor economics in the beef industry, and oversupply.
“But now we are moving from supply-push to demand-pull markets,” he said. “Canada is unique, our main product is fed beef. While there is opportunity to increase domestic consumption it has a finite limit. Almost all effort should be concentrated on fed-beef exports. A 7.5 million-head cow herd is likely Canada’s upper limit, but not in my lifetime.”
Gracey said it is important for all sectors of the beef industry, along with government, to work closely on production and marketing strategies.
Since Canada is not a major beef producer compared to other countries, he said it is important in a demand pull market to develop a few key markets where Canada can consistently meet market demand. For example, there is no point trying to line up 16 new major markets if the industry can’t provide a consistent supply of quality beef.
“We need a new export strategy that matches production capacities,” Gracey said. In his view the new Canadian beef-marketing strategy should focus on a relatively small producer base to supply select markets. He said continuity of supply is critical for optimum market development, and herd expansion must follow market signals.
Because the Canadian beef industry is so large and fragmented it needs a better information flow to producers know when to expand, he said.
Gracey says some are predicting Canada will have 7.5 million cattle by 2020, which represents production of about 2.8 million tonnes of beef. If domestic consumption remains at or about 900,000 tonnes, Canada would have about two million tonnes to export.
Gracey said most future growth prospects lie in export markets, especially with reduced Canadian population growth. That export potential will revolve around demand for animal protein increasing around the world, affluence, and population growth.
The bottom line, he says is that Canada must react to export opportunity, not export dependency. Market diversification will create competition. †