A Conference Board of Canada report suggests meat packing, this country’s largest food processing sector, can expect only minor growth in the future.
Canada’s meat processing sector stepped up production to take advantage of a situation created by BSE restrictions, where beef but not cattle could be exported to the United States. But a conference board economist said that now that live animals younger than 30 months of age are allowed to be exported, processing may drop back.
“The production growth came from plants adding extra shifts and squeezing extra production,” said author Michael Burt.
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Meat processing is the largest part of Canada’s food manufacturing industry, accounting for 29 percent of shipments in 2004.
As more beef plants come into production in the next two years, Burt believes established plants will likely cut back.
“If some of these ones that have been planned do open, and I’m not sure all of them will open, I think we will see some production shifting away from existing facilities to the newer ones,” he said.
Even with more processing capacity, growth in meat consumption is not expected to be more than one or two percent.
“Consumers responded well to the Eat Alberta Beef campaign that was going after the BSE crisis. We don’t expect the North American market to see significant growth in terms of per capita demand going forward, so essentially where your growth is coming from is modest increases in population.”
However, there is potential for growth in newer offshore markets where people need more calories and higher quality food products.
“Those are opportunities for growth, but generally speaking, there are a lot of restrictions on food trade around the world and it is difficult to assess how much Canadian producers can benefit from raising demand in developing countries,” Burt said.
Dennis Laycraft, executive vice-president of the Canadian Cattlemen’s Association, is confident the processing sector can surpass those predictions.
“We’re heading toward 105,000 head capacity per week by the end of next year,” he said.
In pre-BSE days, less than 70,000 were processed per week.
To further protect the industry against future trade embargos, the beef business has a “90-10” strategy, meaning 90 percent of Canadian cattle should be processed here and the remaining 10 percent exported. Whether all the new plants can remain competitive given long-term tight margins is another question.
“Typically one to two percent return is not unusual, so a small difference in cost can be quite significant to an operation. So we are working to make sure the regulatory environment doesn’t interfere (with) keeping those plants in Canada,” Laycraft said.
The industry wants to develop special niches by offering beef from cattle with proven ages, as well as branded beef programs. That means continued access in the high quality markets around the world. More than 70 countries will accept Canadian beef and in most cases, more is going into those renewed markets than before BSE struck.
Success will depend on many factors, Laycraft said.
“It really is a combination of doing everything right. It is going to be everything we are doing on the live animal side in terms of our identification system, enhancements on traceback, our quality programs,” he said.
The conference board noted Canada’s success as a niche market player in food processing. Examples include the french fry industry, pork business and confectionary products. These also tend to be industries with few trade restrictions.
“They’ve (advanced) much more quickly, there’s been more product development and there is more innovation going on rather than trying to sell the same products again and again,” Burt said.
Whether food manufacturers can take up the challenge to increase food processing is also questioned.
Ottawa and the provinces want to to step up food processing. For example, Alberta set a provincial goal of $20 billion worth of value-added processing and $10 billion in primary production by 2010.
“It is an admirable goal and it certainly makes sense for us to move up the supply chain in the sense that we have difficulty competing with lower cost producing countries,” Burt said.
Allan Pelletier of Alberta Agriculture said the province is pushing hard for more domestic processing, particularly within mature industries like beef. Other opportunities are expected to appear in non-traditional areas like healthful functional foods and nutraceutical products.
“This is an industry we see with tremendous growth potential with an aging population and more concerns about health. We want to capture some of those opportunities here,” he said.
