Changing dynamics in the world meat market have taken a toll on export dependent Canada over the past five years, say two international market watchers.
A weakening American dollar, strong new competitors, changing demands for red meat and export markets lost due to animal disease added up to major market disruptions, said Fiona Boal, who works for Rabobank in New York.
“A heavy export dependence by some countries can lead to a significant market disruption both internationally and domestically.”
Boal told the International Livestock Congress in Calgary Oct. 2 that major exporters such as Canada, the United States and the European Union were the big losers when these changes occurred, while Brazil, Argentina and Uruguay were big winners.
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Argentina and Brazil have plenty of room to take advantage of genetic improvements and better feeding programs to produce quality beef.
They are already smart competitors in places such as Japan, which must import 40 percent of its beef, said Peter Barnard, manager of international markets and economic services for Meat and Livestock Australia.
Brazil has gone from holding 10 percent of the world meat trade in 2000 to 35 percent in 2006, shipping to Europe, Japan and South Korea.
Australia has 20 percent of the world export beef trade and it has felt the edge of Brazil’s competitive sword in markets it once controlled. Australia fears further losses when trade normalizes between Asia and the U.S. and Canada.
“We expect to be reversed at least partly in the next couple years as the United States and Canada get back into northern Asia markets,” he said.
Diversification presents other challenges.
Russia has a high demand for meat but within the next decade the spotlight will be on Asia as its gross domestic product continues to improve, Barnard said.
“With growing populations and growing incomes, Asia is going to be where the action is, in our opinion,” he said.
China and India have large populations and growing incomes but there is cultural resistance to beef in those countries.
Part of the Australian promotion campaign is directed at working to generate better attitudes toward beef in those developing markets.
Although meat exporters eye China, no one is sure what is happening there because of poor data, Boal said.
It is known the hog herd is suffering from a disease similar to foot-and-mouth and about 20 percent of China’s hogs have been lost. Pork is the meat of choice in China and it will take two years to recover those losses, which means opportunities for Denmark, Canada, France and the U.S.
China is not expected to buy much beef because the country buys according to price and may only take cheaper cuts.
There are also struggles in North America, where farmers are shaken by high costs for land, labour and feed corn.
Probably 25 percent of this year’s corn harvest will be used by the ethanol industry, Boal said.
Another difficulty is the impact of disease on the global market.
“It is very difficult to decipher what is disease and what is politics,” Boal said.
Canada has gained little access in four years of living with BSE and it is falling behind the U.S., which is recovering lost markets in Japan and South Korea.
However, consumer acceptance is a big issue and Japan is not likely to change its mind about beef this year, even with the new World Organization for Animal Health ruling that countries with BSE under control may safely export beef from cattle of any age.
Canada has limited trade with Japan and should not expect South Korea to open before the end of this year.
As beef tries to sort itself out in the changing world, the real competition is not from other countries but from pork and poultry, Barnard said. People turned away from beef in key markets such as Asia because of BSE scares.
Recovery of lost beef consumption is critical in those countries.
“Our job in the next few years is the recovery of this disastrous loss in beef consumption,” he said.
Japanese beef consumption is down 26 percent and South Korea is down 12 percent from five years ago, Barnard added.
