If you only look at prices charts it’s a great time to be in the cattle business. It’s only when you start looking longer-term that you see plenty of reasons to be anxious for the beef industry this August.
As of this issue going to press Canada is in what appears to be the final stretch run of negotiations for the Trans-Pacific Partnership agreement. The beef and pork industries have representatives on the ground in Hawaii but the dairy and supply management lobby are grabbing most of the headlines when it comes to agriculture. The cattle and hog industries specifically need the tariff reductions promised in this 12-country negotiation if they are to have any hope of remaining competitive in Asian markets, particularly Japan.
Canadian companies sold $100 million in beef to Japan in 2014 under the same 38.5 per cent tariff applied to all our competitors at the time. Since then Japan and Australia signed a free trade agreement that reduces the tariffs for fresh Australian beef to 31.5 per cent and frozen product to 28.5 per cent. The TPP is the shortest way for Canada to catch up.
Everyone in this country’s beef trade is hoping federal negotiators can pull this deal off. The memory of our free trade negotiations with South Korea that stuttered in 2007 and put us at a long-term disadvantage to U.S. and Australian traders still rankles.
China is not at the table in the TPP negotiations but it did sign a free trade agreement with Australia on June 17 — its first with a major economic partner. Australian beef and sheep farmers will see the current tariffs ranging from 12 to 25 per cent on their products progressively written down to zero under this agreement.
That has to send something of a chill down the backs of marketers at Canada Beef who have watched Canada’s sales to Mainland China climb from $12,000 in 2012 to $40 million in 2014 and Hong Kong shipments grow from $75.8 million to $201 million over the same time frame.
U.S. beef and pork producers still do not have access to China but you know their beef and pork industries are pushing every door they can find in Washington to move closer to that goal. Australia has obviously taken a big step in taking advantage of that opportunity. Canada has to do the same while we still have an edge in terms of access and a cheaper currency.
Closer to home the Canadian government is still waiting for an OK from the World Trade Organization to retaliate against the U.S. for refusing to rescind mandatory country-of-origin labelling legislation. Canada has asked for the power to impose more than $3 billion in punitive tariffs on a wide cross-section of U.S. imported goods. Whatever level of tariffs is approved it will be a double-edged stick.
America doesn’t always take Canada seriously but this particular threat has caught its attention. We are a big buyer of everything American so any slowdown in our purchases can affect U.S. jobs and profits.
The House of Representatives has already passed a bill to rescind the COOL legislation but the Senate Agriculture Committee remains split at this writing. The head of the committee, Pat Roberts, supports rescinding COOL while another faction led by Senator Debbie Stabenow is battling to keep a bill to rescind off the Senate floor. Her most recent proposal to adopt voluntary COOL was viewed mainly as a delaying tactic, and was flatly rejected by Ag Minister Gerry Ritz and Trade Minister Ed Fast late last month.
My guess is this story will drag on well into the fall, certainly after October 19. The Canadian government has steadfastly said it will impose tariffs if they are approved by the WTO, but I can’t believe any politician would want to go to the polls promising to drive up the cost of groceries, wine and a whole load of other U.S. products. That being the case the Tories will want to wait until well after the election before making any decision on tough tariffs.
That’s assuming the Tories win, of course. A minority, coalition or NDP-led government may have a totally different view of this situation.
To this we can add fears of drought, played-out pastures, and anguish over drenching rainstorms or tornadoes to our ball of potential worries about the future as we start the fall run of the 2015 calf crop.
In truth there is very little we as individuals can do about any of these issues, except the state of the pastures. You will find more on that topic in this issue.
In the meantime, as one of the authors in this month’s magazine advises, when faced with a problem you have no control over, take care of your family, take care of your land, and take care of your cattle. The rest you’ll just have to deal with as it comes.
Sounds like good advice in uncertain times.