Ontario cattle prices have been trading at a significant discount below Alberta for nearly two years, and Quebec is worse
Beef producers in Eastern Canada face a compounding economic crisis with no end in sight.
“We are a mess right now,” said Joe Hill, president of the Beef Farmers of Ontario. He operates a feedlot north of Guelph.
Ontario cattle prices have been trading at a significant discount below Alberta for nearly two years. At times the basis levels have been at minus $27 with the Nebraska price.
Quebec cattle prices are below those of Ontario, forcing producers to leave the business, said Kirk Jackson, vice-president of the Quebec Beef Producers.
“The short-term outlook is not prosperous,” said Jackson.
A dairy producer on the Quebec, Ontario and New York borders, he has watched the Quebec feeding industry drop from about 200,000 to 85,000 head in the last decade. Feeders in both provinces have been losing close to $200 per finished animal since January.
Data from Ontario estimates collective beef cattle farm losses in the two provinces have exceeded $100 million since the start of the year. On the cattle feeding side, the industry is losing more than $2.5 million per week on average.
Eastern producers are feeling frustrated by low prices and loss of markets, said Hill.
“The trade disruptions this year have been almost the icing on the cake. We have been beat up by our processing capacity shortage, lost markets to Saudi Arabia, and Europe is not really opening up to us. It hasn’t been a positive environment around here for a number of years and the Chinese closure really put us in a tough spot,” Hill said.
The economic sanctions imposed by Saudi Arabia in August 2018 have had a significant impact on exports from Ontario, a market that had grown to more than $26.5 million in 2017.
Quebec has also been hit with increasing veal imports from Europe since the Comprehensive Economic and Trade Agreement was signed between the EU and Canada. European veal is ending up in stores and restaurants in Ontario and Quebec, displacing locally produced product.
Conversely, there is only one EU-certified veterinarian to oversee potential producers and there is no approved packing plant that meets European standards so eastern Canadian producers have been unable to make headway into Europe.
The two provinces are also struggling with a shortage of packing capacity and limited buyer interest from the United States. Processors there are running at full capacity because of a surplus of cattle, as well as a rule that requires Canadian animals to be sorted at the plants.
Canada agreed that if it had another BSE case it would halt exports to South Korea. The U.S. wrote a rule that Canadian and U.S. cattle must be segregated so only American beef goes to South Korea. That market is growing and there is less interest for the U.S. to bring in more cattle from Canada.
Further, some U.S. plants are not processing dairy cattle that may have come from Canada, partly because of the surplus.
“They are in a position where they can pick and choose and some of their customers want all the cattle to come from beef animals. That has been something more recent as numbers increased south of the border,” said Dennis Laycraft, executive vice-president of the Canadian Cattlemen’s Association.
All of Eastern Canada is suffering from Ontario to the Atlantic provinces, he said.
Atlantic Canada’s needs are slightly different and they are looking at establishing a price insurance program similar to what is available in the West. Other issues like labour shortages, wide basis levels and transportation regulations are all hitting them hard.
“While there are losses more recently across the country, these have been more chronic and things that can be resolved with more labour and the potential to have some investment in some of the facilities there,” Laycraft said.
“There are circumstances that are more severe in that part of the country. It has been dire at times, which is frustrating. One of the most efficient costs of gain in North America is Eastern Canada with the price of corn. There are efficiencies there if we can get some of these issues resolved. We do view Eastern Canada as one of the growth areas,” he said.
Ontario and Quebec want the new federal agriculture minister to develop a beef cattle investment and assistance program to help farmers mitigate the harm of recent trade and market disruptions.
They have had no feedback from federal election candidates so far.
Jackson is convinced politicians have abandoned rural voters, so commodity organizations must push for a response and an action plan.
“We are trying to motivate our local people to get out and talk to candidates and ask them what they are prepared to do about it,” said Hill.
“Ideally, all the parties would recognize something needs to be done fairly quickly and really they should be calling us. They should be well aware of the hurt that is happening out here,” he said.
Ontario and Quebec offer risk management programs for all the major commodities but these appear to be underfunded and are not providing adequate help, said Hill.
Federal programs have been cut back. In 2013, the Canadian government reduced spending on business risk management programs by more than $500 million. As a result, high participation costs for BRM programs now exceed the income and payment benefits for beef farmers.
The CCA has developed a list of election issues and due to the ongoing trade impediments with China, the organization has asked for significant priority and financial investment in three key areas:
- Establishment of a meat market access group.
- Investment in an Export Diversification Fund to support sustainable trade in Canadian beef that seeks to resolve the China issue, and address unresolved technical issues in the European Union, Korea and the U.S. The fund would also assist with marketing efforts to re-establish relationships with lost customers.
- Make the Western Livestock Price Insurance Program permanent and expand it beyond the western provinces.