2. Overview
• Trade
– Country of origin labelling in the US
– Canada-EU trade agreement
– Canada-Korea trade agreement
• Labour challenges
• BSE Surveillance
• National Beef Strategic Plan
• Price Discovery
3. COOL – Country of Origin Labelling
• WTO ruled in Oct that US has not complied
• US initiated its last WTO appeal option in Nov
– Hearing will be in Feb. Ruling expected late spring
– US will lose this appeal. Cda/Mex expect to be
authorized to retaliate in summer 2015
• Canada has already published a list of US products
targetted for retaliatory tariffs
• Gov of Cda support to follow through is strong,
but importers are lobbying to be excluded
4. COOL – How will it get resolved?
Nov US elections had positive results….new Congress to start
early January.
As potential retaliation looms closer, hope is for US Congress
to legislate a genuine resolution.
CCA advocating in US with allies to motivate action to achieve
the correct outcome.
We are working to convince Congress that the only way to
avoid retaliation is to amend the COOL legislation to
eliminate the need to segregate imported livestock.
Although expensive & time consuming, our admin cost is less
than 0.1% of COOL cost to producers: Resolution is in sight!
5. Canada EU Comprehensive Economic &
Trade Agreement (CETA)
• Negotiations complete & final text released in
Sept 2014
• Significant new duty free quotas for estimated
potential beef exports of $600 million /year
• Key will be getting the correct technical
conditions for meat processing:
– Commitment to negotiate equivalence of meat
inspection systems….work continuing
6. CETA – Tariff Rate Quotas for Beef
– New 50,000 tonne duty free quota:
• 35,000 tonnes fresh + 15,000 tonnes frozen
– Hilton quota to drop to 0% duty from 20%
• (11,500 MT PW = 14,950 MT CWE)
– Keep access to 45K MT MFN quota as long
as it exists
8. CETA TRQ Admin
- Annual TRQ divided into 4 quarterly sub-periods.
- Roll-over of unused amounts (but not end of year)
- Licenses valid for 5 months
- Historical importers get first crack at allocations
- 2nd chance expanded to wholesalers and processors
- 95 Euro/tonne security deposit for beef
- Proportionate refund as product is imported
- Full refund when 95% of allocation imported
- Partial refund for return of unused license quantities
- Underfill protocol
9. Cattle Production for CETA
Beef for export to EU has to be from cattle raised without
growth promoter technologies (no implants or beta agonists)
Will need about 500,000 head per year (with about 100kg
per animal going to EU)
Cdn cattle producers should make decisions as to
whether they want to participate
CCA has produced info documents for cow-calf producers
and feedlot operators on
10. Canada – Korea Trade Agreement
• Now in effect as of Jan 1, 2015
• Korean 40% beef tariff being reduced in 15
equal annual steps: enables Cda to keep pace
with US and Australia
• Korean 18% offals tariff being reduced in 11
equal annual steps: faster for Cda than US
and Australia
• Was a $40 million plus annual market in 2002
11. Access Priorities: Rest of the World
TPP or bilateral FTA with Japan
-seeking to eliminate Japan’s 38.5% tariff on beef
Upgrade to OIE Negligible Risk status
-Cda’s latest born BSE case was Sept 2004, so can apply
Fall 2015 for approval Spring 2016.
OTM access to Mexico
Approved for US: March 2014
Full UTM access to China
Facilities approvals
12. Challenge:
Who will process the animals?
• Major changes to Temporary Foreign Worker
program last June have severely limited access
to foreign worker supply and introduced caps
• While we don’t want “temporary” workers,
the changes have made transition to residency
or citizenship less likely
• This is tough for farms, but even tougher for
labour in packing plants.
13. Labour Challenges
• Value adding in packing plants is typically
labour intensive….lack of labour means
foregoing value adding opportunities.
• Reduced plant capacity – a $260 million issue
– Increased spread vs. U.S. prices: $210 million/year
– Lower than optimal slaughter levels reduces plant
efficiency: $21 million/year
– Missed value added: $29 million/year
14. Fixing Labour Challenges
• Increase the supply of labour
– Employers building awareness of job vacancies
– Promotion of agriculture careers
– Augment supply from abroad, facilitate moves to
citizenship of workers
• Improve knowledge and skills of workers
– Training and learning resources
– Invest in HR management and training
15. Fixing Labour Challenges
• Extend primary agriculture exemptions to
processors
• Allow foreign workers in Canada to stay
• Do not count provincial nominees in caps
• Longer transition period for caps
• Inclusion of butchers in Express Entry
More willing and able Canadian workers!
16. BSE Surveillance
Surveillance is still necessary to demonstrate
that our control measures are effective and we
are on track to eliminate the threat of the
disease from the Canadian herd.
Alberta and Saskatchewan have fallen behind on
the numbers required to meet our international
obligations….Could become a problem in trying
to obtain negligible risk status.
17. BSE Surveillance
CCA is working with CFIA and the provincial
CVOs for AB and SK to communicate the value
of BSE surveillance and to determine what
may be required to ensure the numbers are
stabilized.
19. National Beef Strategic Plan
• Canadian Cattlemen’s Association, National
Cattle Feeders, Canada Beef Inc., Beef Cattle
Research Council, Canada Beef Breeds Council
and all provincial cattle associations make up
the National Beef Strategic Planning Group
• We are currently drafting the final plan
• Beef Advisors Group to engage value chain
20. National Beef Strategic Plan
Vision:
A dynamic, profitable Canadian cattle and beef
industry.
Mission:
To be the most trusted and competitive high
quality beef cattle producer in the world
recognized for our superior quality, safety, value,
innovation and sustainable production practices.
21. National Beef Strategic Plan
Pillars and Goals
• Beef demand: Increase cutout value by 15%
• Competitiveness: Reduce cost disadvantages
relative to main competitors by 7%
• Productivity: Increase production efficiency by
15%
• Connectivity: Enhance synergies within industry
and connect positively with consumers, the
public, government, and partner industries
22. Lobbying
• The beef cattle business is one voice among
many
• Beef cattle contribution to GDP = $33 billion
• Canada’s GDP
= $1.8 trillion
• That is 1.8%!
Canada's GDP
Beef
All other
23. Price Discovery
• Price discovery is critical for sending the correct price
signal from the consumer to the producer
• A market whose participants are starved for
information will have much wider price dispersion
than one that is information rich. - Ted Schroeder
• Cash Markets Becoming Thin
– Still require cash market information
24. Accurate Market Prices Critical
1. For producers making marketing and risk management
decisions as well as business planning (LT breeding decisions)
2. Program requirements for price insurance, income and
disaster programs
3. Policy and regulatory development requires reliable historical
data for strategy development by industry and government
(including defending against trade actions)
• A Lack of data could result in less accurate program benefits,
and/or delayed program benefits for producers
• For Price insurance, more noise = higher premiums
25. New Fed Market Price Reports
• New! Net Formula Prices
– Collected post slaughter once final settlement price is known
• New! Base Contract Prices/Basis
– Fed prices and volumes contracted for future deliver, reported
when negotiated
• Both include domestic and Export Sales
• Only producers who contribute see Report
To Report prices contact: (403) 275-5110
This presentation is not meant to cover everything CCA is involved in but to give a sample and update on some of the current issues. If you are presenting and do not see your issue covered add a slide or two. – Ryder.
Here is a list of topics that this presentation will goes into.
The WTO ruling on whether the May 2013 changes to COOL comply with the ruling that COOL discriminates against trade in live cattle is expected soon.
If it is in Canada’s and Mexico’s favour as expected then Canada & Mexico are one step closer to being able to seek permission from the WTO to retaliate against the U.S. by instituting tariffs on U.S. exports to Canada and Mexico. It is expected the U.S. would appeal the ruling so retaliation is still a ways off.
To fix the problem requires legislation from the U.S. Congress. This of course has to wait until after the upcoming election. A “lame duck” session of Congress will take place before Christmas.
CCA has been working with U.S. and Mexican allies in fighting this trade distorting measure. This has meant working together in advocating but also in a court case against the rule, challenging it on constitutional grounds. The first round in this fight was to ask for a preliminary injunction ahead of the hearing. That was denied and an appeal of that was also denied. The group is moving forward to have the case heard on its merits.
To date the Government of Canada, especially Ministers Ritz and Fast have been very strong on this file. The government of Canada along with CCA’s assistance has done the job at the WTO. We continue to urge them to continue speaking of Canada’s commitment to retaliation once the WTO grants us permission. This is the only method of making the issue real to the majority of members of the U.S. Senate and Congress who do not have livestock or processing in their districts. Recognize that importers of goods on the list of potential retaliation are lobbying to be excluded. It was a victory to get the list published in summer of 2013 and it is important that the government hears support for continuing down this road. We continue to deliver this message and so can individual producers.
COOL is about discrimination against live exports. It is costly enough to plants in the U.S. that some just do not buy Canadian cattle any more. Others buy on reduced days or do other things to manage the required segregation (including bidding less, or not buying on weeks they have enough domestic supply). This reduces the number of bidders in the Canadian feeder and fed cattle markets and costs around $100 per head whether we are selling our cattle to Canadian buyers or to U.S. buyers.
That $100 per head continues to occur and would be forever if this does not get overturned.
To date this has cost the industry through legal and advocacy: $
That money comes right out of provincial checkoffs paid by your provincial organization to the Canadian Cattlemen’s Association.
The Comprehensive Economic and Trade Agreement (CETA) between Canada and the European Union reached a milestone on September 26 when it was announced that negotiations were complete and the text was posted on the web.
This means the big things such as quota amounts are finalized. There is still some work remaining on the technical details of trade. For example within a quota what production methods are allowed, what food safety rules have to be met etc. We are still working on this to make sure potential access becomes real access.
This is coming, we expect the issues such as food safety system approval to be successful. Next is producing for this market. This means production without growth promoting additives. It also means under CFIA EU protocol to prove that. Many people are doing some form of growth promotant free production, very few are CFIA registered. So if you think you might be able to serve that market, getting ahold of your CFIA vet is a good step to take. Exporters are already calling around looking for supply. Talk to your cattle feeders or your feeder suppliers about this option. Production going to this market might also fit into other markets looking for free from type provisions. But for the EU the farm has to be part of the program from birth so if the agreement goes into force in late 2015 or in 2016 then it is calves being born this coming spring (or even those born this fall or last spring) who could be the first under the new access into the EU. To keep the option open for you talk to CFIA and learn what is required.
This activity takes a lot of resources. Mainly it is time on the ground at negotiations and in between negotiations making sure negotiators know what is meaningful for our industry. There are big differences between frozen or fresh or high quality or ungraded access for example. A ton does not equal a ton given different terms and conditions. Negotiators do not know what each detail means and that is where we come in. As offers evolve, we calculate what that would mean and whether it is worth saying yes. Be assured that negotiators want to get to yes so they can say they have a deal. Red meat is one of the most protected sectors around the world so there is a very real danger of a “deal” happening without meaningful access for Canadian beef exports. That is why we have to be there to make sure our interests are well served.
We are in the home stretch here. Legislation has been tabled and read two times and committee hearings have been held including with our own John Masswohl testifying on October 2. Those wrapped up on October 9th. (this could be even further along later in October as it will be sent back to the House following the meeting on the 9th.)
Korea was an over $40 million market prior to BSE. In recent years we have seen reducing volumes as the U.S. achieved a free trade agreement in 2012. Our agreement with Korea follows the same tariff elimination schedule for beef (15 annual equal steps) and is faster for offals (over 11 years).
This agreement is seen as an important step into Asia. We tend to look at these agreements through our eyes as opportunity to sell but Korea also has a competitive advantage over other Asian countries in exporting to Canada and the United States.
Not insignificant is the NDP coming out in support of this agreement. This reflects our work to not only influence government but to influnece whoever may help or hinder policy and goals of the Canadian Cattlemen’s Association.
Korea is a great illustration of the need to open up every market that we can to send each cut to the best market. A plant such as High River or Brooks can send boxes of one or two cuts wherever they need to and thereby add value to each carcass. Some cuts that would be rendered or go to pet food become high value with the right market access. For Korea it is short ribs and chuck rolls for example.
The industry needs more workers on farms, in feedlots, in processing plants and in other areas such as driving trucks. Canadians are not applying for these jobs in enough numbers. Those that do are not sticking with them.
Canadian processors already pay employees better than U.S. plants. If plants have to pay more than their (mostly union negotiated) current wages it comes out of what they can pay for cattle.
Plants are already running below capacity. This reduces profitability. Plants are also not doing all the value added processing they could do in Canada.
Plants are already running below capacity. This contributes to the spread between Canadian and U.S. prices (the basis). Increasing daily processing in Canada has been estimated to be able to reduce the spread by $210 million per year. This also is cost inefficient for plants. Maximizing production is estimated to improve the costs by $10 per head or $21 million per year.
Plants are also not doing all the value added processing they could do in Canada. It is estimated $14 per head is being left on the table there or $29 million.
This means $260 million per year is not being captured due to labour shortages. There are examples JBS and Cargill have given of specific orders they cannot fill due to shortages of labour. It would take two more workers per shift to do a specialty cut but that would mean two from somewhere else. These plants are short hundreds of workers.
This is just at the plant level. How many farms or feedlots have let opportunities pass by due to labour challenges?
Domestic supply is the biggest and easiest. Need to augment with workers that want to become Canadians. Facilitate the move to citizenship. The June 20 changes do not help with that facilitation. Express Entry program announced for January 2015 does not currently work for butchers. Adding butchers to that program would help.
The bottom line is we need more willing and able Canadian workers. Some MPs seem to think industry is just not paying enough. We are already paying a good wage more than competitive with those in the U.S. More spent on labour is less spent on other things like fat cattle or feeders. Or it reduces competitiveness to the point that jobs are lost and plants are in danger. The Brandon Maple Leaf hog plant is already shifting production to a Chicago plant so these are not threats they are realities.
To finish up a couple of slides on the unfolding National Beef Strategic Plan. This work involves several organizations working together including the CCA, National Cattle Feeders Association, Canada Beef Inc, the Beef Cattle Research Council, the Canada Beef Breeds Council and all the provincial cattle associations making up the National Beef Strategic Planning Group. That group is drafting the plan.
A subset of that group makes up the Beef Advisors Group that is engaging the rest of the value chain. Retailers and processors do not contribute to industry funds so they are not involved in the planning process for those funds. But they are recognized as important to the success of those investments and thus need to be part of the process. The Beef Advisors Group works to engage and hopefully gain buy in from these important value chain partners.
These are the overarching pieces of the plan.
The vision is A dynamic, profitable Canadian cattle and beef industry.
The Mission:
To be the most trusted and competitive high quality beef cattle producer in the world recognized for our superior quality, safety, value, innovation and sustainable production practices.
This is an ongoing process designed to set out what we are looking to achieve, the resources needed to get there and to ensure we are not sideswiped on the way to those goals.
There will be further development and communication of this plan. There have been several meetings involving provincial leadership. There has been a webinar and there will be more as this gets closer to full shape.
This one takes a couple of clicks as it unfolds showing how small of a piece of the whole economy beef cattle production is.
This drives home the point of what the Canadian Cattlemen’s Association and SCA face. Any time we ask government to prioritize our industry it is our small voice against many others that make up the pink piece of the economic pie.
We are successful in this because we continue to bring forward solutions instead of complaints. We are also successful because we are continuously present to ensure our issues stay toward the top of the list.
Producers can help in this. Talk to your MP, MLA and your department officials. If it is about farm production, call the Deputy Minister’s of Agriculture’s office. If it is about other issues do the same with other departments (e.g. labour, environment). Write them an email or letter.
Better yet, talk to your SCA and CCA people ahead of talking to government to see what the latest on your issue is. We get told when we are taking something forward “okay but I have not heard about this issue direct from producers.” That sounds like a copout because that is why you have SCA and CCA. But it is also something you can change by picking up the phone and telling these people what they can do to help our industry.
Discovered prices provide immense information about expected supply and demand conditions. Because we cannot observe precise demand and supply, cash and forward prices are discovered based on what participants believe demand and supply conditions will be given available market information. – Ted Schroeder
Today’s thin cash markets mean that just a few loads can make a far greater difference now than just a few years ago. For those with cash cattle it is critical that prices be reported to Canfax
AFSC will need to publish black out periods for next June and July without more data.
These blackout periods will grow as data is currently insufficient to support the program.
Therefore expanded fed price reported is required.
In designing an enhanced fed price reporting framework the following assumptions were made:
1. Forcing producers to go back to cash for price discovery negates many of the advantage of marketing agreements and forward contracts.
Any reporting system must reflect marketing realities, and not force the use of any one marketing method for the system to work.
As cash trade disappears enhancing cash reporting will not serve the industry in the long run. We need to expand reporting to include other pricing mechanisms.
2. Enhancing reporting on cash cattle will not serve the industry in the long run
“The market is evolving – in 10 years we may not have a cash market at all” - Cattle-Fax
3. All three uses of data (producers, programs, policy and regulatory) are critical to the LT industry sustainability
As such Canfax is now collecting price information on net formula sales (after premium and discounts are applied) and on base contracts – collected at the time they are negotiated.
