Trade was much in the headlines last month starting with Agriculture Minister Gerry Ritz leading a trade mission to South Korea and Japan to follow up on the March signing of the Canada-Korea free trade agreement (FTA) and stoke the fires of a hoped-for agreement with Japan.
Canada Beef Inc. tied into the same news cycle with an upbeat press release to announce worldwide exports of Canadian beef in 2013 were up three per cent in volume and 10 per cent in value at $1.3 billion. It went on to report a 31 per cent increase in sales to Hong Kong and Macau and a 19 per cent increase in shipments to Japan after it agreed to take beef over 30 months of age.
It’s natural for marketing people to put the best spin they can on any topic and to be fair 2013 was something of a bounce-back year for beef exports, largely because our 2012 export sales were the lowest they’ve been since the bottom fell out in 2003. The chart in this month’s Beef Watch prepared by the analysts at Canfax gives a longer-term view of our exports since 2002.
Even so, the trend does seem to be heading back in the right direction. Statistics Canada data for the first two months of this year paints a positive picture with beef exports up 16 per cent overall. On the dollar side that works out to $242 million compared to $166 million last year.
The U.S. continues to lead the sales race with a seven per cent increase to 31,000 tonnes so far. Sales to Mexico are up more than 300 per cent to 3,600 tonnes for the two months, Japan is up 13 per cent, Taiwan 62 per cent and Hong Kong 12 per cent.
The icing on the cake is Mainland China which purchased 1,425 tonnes of Canadian beef in the first two months of the year compared to 471 in 2013. That bodes well for this huge potential market.
The only sour note is South Korea where shipments have continued to slide down to 98 tonnes in the first two months of this year compared to 325 over the same two months of 2013. It’s not hard to see why the Canadian Cattlemen’s Association is pushing the Canadian government to implement the recently signed free trade agreement as quickly as possible and begin phasing out South Korea’s 40 per cent tariff on Canadian beef.
The U.S./South Korea FTA was implemented in 2012 so the phasing out of tariffs on U.S. beef has already begun. The gap between U.S. and Canadian beef at the moment is eight per cent but it will continue to widen until Canada brings its FTA into force. There was a time when South Korea was a $40 million to $50 million-a-year market for Canada before it slipped to zero in 2003. The sales have struggled back, reaching $8 million to $11 million the past couple of years but without an active FTA in place Canadian beef will quickly be priced right out of this market.
The same situation could be happening in Japan. Australia recently negotiated an FTA with Japan that contains lower tariffs for beef. The U.S. is also locked in negotiations with Japan.
Going into the Trans Pacific Partnership negotiations and the Canada-Japan Economic Partnership Agreement sessions in March the CCA had lobbied for the elimination of Japan’s 38.5 per cent tariff on beef and the safeguard trigger that kicks the tariff up to 50 per cent when imports go past a pre-set level. All the cattle organizations in the Five Nations Beef Alliance, including the Cattle Council of Australia took a similar stand.
This seems an unlikely objective now that the Australia/Japan FTA calls for tariffs to be phased down to a floor of 23.5 per cent on fresh beef over 15 years, and 19.5 per cent on frozen beef over 18 years.
Let us not forget the Canada-EU Comprehensive Economic and Trade Agreement (CETA). The technical negotiations for beef are still slowly winding to completion. In all likelihood it will be some time yet before Canadians see any benefits from that agreement.
In the meantime I suppose we should start to wonder if Canada will still have enough cattle around to take advantage of these new marketing opportunities as they arise.
As the Beef Watch authors point out, there is “no growth in sight.” Total inventories were basically flat at 12.2 million head in January, with fewer cows in the breeding herd and no increase in the number of females waiting in the wings.
Cow marketings were up 22 per cent last year and while domestic cow slaughter has sagged a bit this year cow marketings are running at historically high levels just below liquidation levels.
Feeder prices are certainly sending a strong signal to expand but it remains uncertain how many producers have enough confidence left to answer the call. When they do get the numbers up, the doors to a much larger world should be open to them.