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Comment: Looking ahead to 2018

I was trying to think of a word to sum up 2017, and the best I could come up with was volatile.

We came into 2017 bloodied by a fall slump in prices but seem to be going out on a rising tide. Fat cattle and calf prices have been on the rise since September, and better prices brought a flush of calves to the market well into November. With Alberta calves fetching a premium over the U.S. we also had a few thousand U.S. calves get into the mix this fall. The futures also look promising despite the higher number of placements in the U.S.

What this all portends for 2018 is still to be written, but it seems safe to say the markets will remain volatile for some time to come.

One thing that did not show up in the numbers this fall was a sign of the optimism Canadian producers will need to start rebuilding their herds. As of early November the heifer kill was running 10 per cent ahead of last year, and the latest cattle-on-feed data says placements of heifers under 700 lbs. increased 56 per cent in Alberta and Saskatchewan feedlots in the previous two months.

It appears we are still not ready to climb out from under the shadow of BSE that has hung over this industry since 2003.

Part of that uncertainty lies in the trade front where negotiations over the reboot of the North American Free Trade Agreement appear to be stalled on the bumper of the auto industry. All three sides remained dug in over this central issue at the fifth set of meetings in Mexico City and while the negotiators are set to go at it again next month in Montreal, the signs are not hopeful.

The prospects look slightly brighter for the Comprehensive and Progressive Agreement for Trans-Pacific Partnership, formerly the TPP11. All 11 countries have agreed on the core concepts and were ready to sign the agreement last month in Vietnam until Prime Minister Trudeau stepped out of the room. He wants to keep negotiating for environmental and labour rights covered by dispute settlement mechanisms.

In an earlier statement the Canadian Cattlemen’s Association spelled out the costs to the beef industry if Canada should choose to opt out of the TPP.

With an agreement Canadian beef would immediately be subject to the same preferential tariff as Australian beef and our exports to Japan could double or nearly triple to about $300 million. Without it, the CCA estimates, we will likely lose around 80 per cent of the value of our beef exports to Japan.

Japan’s tariff rate on Australian beef has been reduced four times to 29.9 per cent on chilled beef and 27.2 per cent on frozen beef since the two countries signed a free trade agreement in 2015. Meanwhile the tariff on Canadian beef remains at 38.5 per cent.

As of July 1, beef imports to Japan went high enough to trigger a safeguard that put the most favoured nation tariff on frozen beef at 50 per cent. Australian beef is exempt because of its FTA with Japan.

If Canada signs the TPP the volumes required to trigger a safeguard tariff on Canadian beef would be much higher, and the regular tariff for Canada would decline in step with Australian beef until it reaches nine per cent.

That’s just beef. Other agriculture sectors could suffer even greater damage if Canada walks away from this agreement.

One other thing western producers can expect in 2018 is a larger check-off. Alberta Beef Producers (ABP) has approved a regulatory amendment that will introduce a $2.50/head mandatory national check-off on April 1, 2018, and the Canadian Beef Cattle Check-off Agency expects the other three western provinces to begin collecting the increased levy around the same time.

That might not be the only source of new money for the Alberta industry. Negotiations between the Alberta Cattle Feeders’ Association and ABP have come up with a plan to turn the $2 refundable portion of the Alberta check-off into a mandatory levy later this year or early next if they can agree on the final terms.

About $2.5 million of the $10.3 million the ABP collected last fiscal year was refunded to producers. The idea is to direct a significant portion of those refunds either to the cattle feeders or a Beef Industry Development Fund that would be controlled by representatives of the ABP, the cattle feeders and the Western Stock Growers’ Association. Some of the money would be used to fund the operations of these other groups, and the rest would be used to advance the industry. This fund may well end up playing a role similar to the now defunct Alberta Meat and Livestock Agency.

If the producers can agree on the details the next step would be to approach provincial minister of agriculture Oneil Carlier to conduct a producer plebicite to approve the plan.

With the potential for new trade agreements, new revenue sharing agreements and volatile markets, there will be plenty to watch out for in 2018. Meanwhile all of us at Canadian Cattlemen want to wish you and yours a peaceful and enjoyable holiday season before you head into this exciting new year.

About the author

Editor

Gren Winslow is editor of Canadian Cattlemen.

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