The beef market and the cattle market that feeds it are on a roll.
I am excited about the next several years, but it will be easy to lose sight of what is important. As I watch markets soar to record levels and try to stay grounded in my business decisions, I wonder if we as producers have clearly identified what is important?
To further this discussion, let’s start with a fundamental assumption that Canada’s domestic market for beef is the anchor for the industry.
Our Canadian customers rally around the beef industry in times of beef recalls and border closures. However, now that the long awaited rise in market prices is appearing and export markets have the potential to pull prices higher, is it safe to assume that Canada will continue to supply itself with beef?
The Canfax 2014 annual outlook suggests that Canada will need to import more beef to meet consumer demand. Is this an indication that Canada is exporting so much beef that we have a domestic shortfall? Should a secure domestic beef supply be No. 1 on the Canadian industry’s list of priorities?
I think it should be, but if it is, the message is lost in discussion of potentially lucrative export markets.
A domestic beef security index could be developed to identify the risks and rewards of the export market, especially if it is at the expense of domestic beef supply. If such an index already exists, there is no better time to dust it off and revisit Canada’s domestic beef supply security.
As an example, consider the export potential to China. The potential for Canadian beef exports is often extrapolated from China’s rapidly rising gross national product. But what is the relationship between China’s demand for beef relative to China’s GNP?
China’s worth is impressive when compared to other countries, but I don’t understand the intricacies of China’s beef consumption. Is a $1 increase in China’s national worth correlated with a $1 increase in Canadian beef purchases? If not, why not?
The answers will help develop a more focused picture of the opportunity for Canadian beef exports to China. The same questions should be asked of all of Canada’s export markets.
The strength of Canada’s cattle industry can be partially attributed to the freedom each producer has to make production choices that fit their operation. Each new market opportunity comes with the potential for profit but also the risk of loss when those export markets close. More clearly identifying market risks and rewards will serve the local and national policy discussions well and help with long-term decisions about production methods and related infrastructure needs.
If the history of cattle and beef production in Canada can teach us anything, it is that global market fluctuations and politically motivated border closures are a reality. I think we owe it to ourselves and those who will follow to better understand the risks of entering a particular export market.
We have strong domestic and global demand for Canadian beef, and there are several exciting years ahead. It would be a shame to sell ourselves short on beef supply and long-term thinking.
Ross Macdonald, M.Sc., P.Ag., ranches in southern Saskatchewan.