As we cross the threshold into a new year, it is a good time to take stock of the past year and consider the new. The past year brought an improvement in price fundamentals for cattle and continued improvement in market access opportunities. We experienced some of the most challenging weather to hit Western Canada in some time. The abnormal weather on the Prairies left many areas saturated with water, which resulted in unseeded crops as well as increased mud conditions in feed yards and pastures.
Price fundamentals for cattle saw a marked improvement in 2010, and they remain strong as we head into the new year. The remarkable fact is that this price improvement comes at a time when we have a par dollar, relatively high feed costs and continued soft demand for higher value cuts in the U.S. Very tight supplies of cattle in North America are the reason for this market strength, helped in part by increased Canadian and U.S. beef exports. It should be noted, however, that continued increases in feed costs and/or currency levels will negatively affect cattle prices.
Last year brought further gains in market access opportunities for Canadian beef products. Good progress was achieved in Russia, including access for some boneless over-30-month (OTM) products. Remaining work here includes getting additional facilities approved for export since Russia has not yet approved a systems approach.
The Canada-Colombia FTA was ratified by Parliament in June, two months after the last Colombian bovine spongiform encephalopathy (BSE) restrictions on live cattle were removed. Once the Colombian legislature ratifies the agreement, Canada will have preferential access over U.S. beef to that market until the U.S. Congress acts to ratify their agreement.
In August, the Philippine Government agreed to open its markets to Canadian animal-rendered byproducts including bone meal, blood meal, poultry meal and fats. Securing key new markets for the bovine byproducts goes a long way in helping Canadian producers maximize returns.
The groundbreaking agreement with China marks the first time China has resumed imports of beef from a country that has had a case of BSE. This agreement, which calls for a staged opening, has not yet resulted in Canadian beef exports. Chinese officials inspected Canadian facilities in December, and we are hopeful trade will begin early in 2011.
Late in 2010, we finally obtained access to the European Union (EU) 20,000-tonne duty-free quota awarded to the U.S. as a result of a positive WTO panel ruling regarding our collective hormone challenge. Our Federal government is currently negotiating additional volume to be added to Canada’s quota. This quota will expand to more than 45,000 tonnes in two years, and will provide good commercial opportunity for supply chains that are able to meet the EU protocol.
During 2010, significant time and resources were devoted to the U.S. country-of-origin labelling (COOL) WTO case. The CCA remained fully engaged with the capable Canadian Government team in developing the arguments and gathering evidence. In 2010 there were two substantial written submissions, two oral hearings in Geneva, and detailed responses to hundreds of questions from the panel. While it is a challenging case, we believe the Canadian submission presented a very compelling argument to the panel.
The difficult weather experienced in the prairies in 2010 was followed with calls from producers for government assistance. While provincial associations called on their respective provinces, the CCA called on the federal government to work with the provinces to assist the hardest hit producers. Federal and provincial governments responded with a pasture recovery program related to the 2009 drought, and several other assistance packages related to the wet conditions of 2010. The programs did provide assistance to many, even though the timeliness and geographic application in some cases were less than perfect.
Whenever lines are drawn on the map and trigger dates are used, inequities will occur. This experience has reinforced the importance of working proactively with governments to, whenever possible, use a scientific approach to determine when real disaster assistance is required. This will move the decision from being politically- based to being scientifically based, and the increased transparency will allow the industry to make appropriate and timely business decisions.
I will conclude by stating that as producers, we must never lose site of the fact that we must ultimately take responsibility for our business affairs when events create increased hardship. The Agri- Recovery program should be implemented only when extreme events have left the industry unable to cope, such as those that took place in some areas in 2010. If we bought land and invested in an area where excessive moisture, drought, or frost are frequent events, the land prices should have reflected those risks and we need to manage for them. Government assistance offsetting normal business risk events will distort market forces, lead to more government intrusion in our industry, and negatively affect our image with the public. It will also mean less available funding for research, an effort that is essential in ensuring our long-term competitiveness.
Our industry was built by folks who took responsibility for their affairs, valued their freedom and independence, and looked to the marketplace to provide direction. In my opinion, these principles continue to be relevant today.
TravisToews ispresidentof theCanadian Cattlemen’s Association