New report says it is difficult to measure the economic significance of the sector by just looking at farm cash receipts
A recent study shows beef production in Canada contributes more to the overall economy than is shown by traditional measures such as farm cash receipts.
The recent Economic Impacts of Livestock Production in Canada – A Regional Multiplier Analysis, funded by the Beef Cattle Research Council, confirmed the beef sector continues to be a significant driver of economic activity.
“I think it’s really important as we look at setting priorities within industry, government and others to realize the potential and value in terms of how the beef industry contributes to the economy,” said Andrea Brocklebank, executive director of the Beef Cattle Research Council in Calgary.
Canfax Research Services did the project management, working with Suren Kulshreshtha at the University of Saskatchewan, who completed the study in April.
It updated earlier studies to more accurately reflect the economic impact of the beef sector.
Researchers found it’s difficult to measure the economic significance of the sector by looking only at direct impacts (farm cash receipts), which make up 25 to 50 percent of the overall economic impact.
The report found Canada’s beef industry contributed on average $9.1 billion per year during the 2016-2020 period. It contributed an average of 14.2 percent of total Canadian farm cash income from 2011-21.
While these numbers appear impressive at first glance, it underestimates the bigger picture, said Brenna Grant, manager of Canfax Research Services.
“When you then look at the red meat processing industry, which is the largest sector of the food manufacturing industry in Canada with revenues of $16.3 billion and total employment of 58,000 — lots of people just stop there at those two numbers and say, yeah, that’s impressive. That’s adequate.
“But when you actually add it all up and include all of the indirect and induced impacts, that’s when the cattle sector contributes $51.6 billion in goods and sales, contributing $21.8 billion to gross domestic product at market prices, including $11.7 billion in labour income,” she said.
The sector is also directly or indirectly responsible for the creation of about 347,000 full-time equivalent jobs.
“That’s where you start seeing the impact of the beef industry as just one part of the food sector and how big of an impact it really does have,” she said.
Indirect impacts are created through the purchase of various inputs required for production.
Induced impacts are a result of spending income received by owners of these resources, which creates more demand for commodities and increases production.
Each region of Canada benefits from direct impacts, as well as through indirect and induced impacts.
However, in Eastern Canada, the processing sector produces 1.58 times the activity for every dollar’s worth of farm level activity.
The study found this value is only 1.24 in Alberta, which is possibly affected by more beef exports to the U.S.
The study considered structural changes that have occurred over the last 10 years. The sector from 2018-20 had $51.6 billion in goods and sales and contributed $21.8 billion to gross domestic product at market prices, including $11.7 billion in labour income.
It directly or indirectly created 347,352 full-time equivalent jobs, which also included induced impact.
During this period, the sector contributed $3.35 to the Canadian GDP for every dollar of farm cash receipts.
The study also found that for every worker employed in the cattle sector, another 3.9 workers are employed elsewhere in the economy — with an employment multiplier of 4.86 person-years on a full-time equivalent basis.
Another $6.22 is created elsewhere in the economy for every $1 of income received by workers and farm owners, which resulted in an income multiplier of 7.22.
Brocklebank said she was not surprised there would be economic differences between western and eastern regions of the country.
In the West, the cattle sector contributed $3.34 to the regional GDP for every dollar of farm cash receipts, while in the East it contributed $3.41 to the GDP for every dollar.
“What was interesting to me is in Eastern Canada we saw that number actually a bit higher. Not a major difference, but I do think Western Canada has more significant beef production. The larger population in Eastern Canada supports more substantial processing industries, especially secondary processing industry, which contributes to that economic activity.
“We also see the flow from the dairy industry as well, which contributes to beef production particularly in Eastern Canada and that’s sometimes the forgotten fact,” she said.
“So I think sometimes regionally, we view one area as more significant than another and the beef industry recognizes all provinces play a role, whether supplying cow-calf or playing a role in processing — those types of things. So having those regional results is also useful for us and a friendly reminder of the roles different areas play.”
This study marks the latest in a series. The first multiplier study was completed in 1992 and was updated in 2012 to consider the expansion of the cattle feeding industry in Western Canada during the late 1990s and the expanding role of beef exports.
The most recent update considered structural changes like packing plant closures and expansion of feedlots in western regions since 2016.
Beef cattle herds have been declining, but slaughter numbers have increased because fewer fed cattle and slaughter cows are being exported to the United States.
Fewer calves and yearlings are being fed in the U.S., while imports of fed cattle and cows for slaughter have increased.
Employment in meat processing in Western Canada has also increased since 2016.
As the Canadian economy recovers from COVID-19, the study projects the beef industry will provide stability and employment opportunities.
However, retiring workers by 2029, combined with any growth, could result in a shortage of 14,000 workers.
There could also be labour shortages in other sectors that provide services to the beef industry such as veterinarians, trucking and feed, which could affect expansion plans for the beef sector.
However, forecasts have labour productivity increasing from 0.9 to 1.2 percent, which will help reduce the need for labour as it becomes more productive.
Agriculture Canada’s medium-term outlook forecasts the Canadian beef cattle herd to be five percent larger by 2027 than it was in 2020, which is based on normal weather and no prolonged droughts.
Beef prices are projected to rise from 2025-27 but then fall as the U.S. rebuilds its herd.
This U.S. expansion is expected to pressure Canadian domestic beef prices, resulting in a decline in wholesale prices of nine percent by 2030, according to the study.
During this period, major disruptions to the animal protein sector from alternative proteins are not expected.
Brocklebank said the 2021analysis will continue to build on past reports for communicating the sector’s role to the public, government and cattle producers.
“It’s used across a lot of different fronts in terms of trying to understand how we contribute to the overall economy. A lot of focus currently is on environment, but we also know that things like trade and trade growth are really important moving forward and I think we know the beef industry has an opportunity to play a further role in those areas,” she said.