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Growing demand, trade deals a boon for beef

Canadian beef producers have an advantage over the United States because of their country’s membership in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership.  |  Jeannette Greaves photo

The world will need 16 million more tonnes of beef, or 35 billion pounds, by 2030, and Canada is expected to benefit

RED DEER — Canada is on an upward trend for agriculture exports and imports due to trade agreements signed in recent years.

In 2017, 63.5 percent of Canadian exports went to countries where a free trade agreement is in place or where one is being negotiated, said Marie Noelle Desrochers, director of trade negotiations with Agriculture Canada.

The Comprehensive Economic and Trade Agreement with the European Union and the Comprehensive and Progressive Agreement for Trans-Pacific Partnership are providing Canada preferential access into wealthy markets, she added.

In force with seven countries since Dec. 30, the CPTPP gives members, including Canada, preferential access to markets such as Japan, an important move for the beef trade because tariffs are coming down progressively.

“There is interest and trade has already increased,” she told the recent Alberta Beef Industry Conference held in Red Deer.

“As a high value market, this is very attractive to Canada.”

Beef-producing nations such as Canada, Australia and Mexico have an advantage over the United States because of their membership in the CPTPP.

Beef duties to prime destinations such as Japan are dropping to nine percent, but the U.S. will pay 38.5 percent until it can reach a bilateral agreement with Japan. However, Japan has told the U.S. it will not give any better access than the CPTPP offered.

Canada is keen to diversify its trade portfolio and is committed to continuing negotiations with China, where there have been three years of exploratory discussions.

Many countries are keen to do business with China and India, where improved incomes and the demand for food makes them attractive, said Brett Stuart of Global Agritrends.

With a focus on meat, he predicts the world will need more protein very soon.

By 2030 the world will need 16 million more tonnes of beef, or 35 billion pounds. The U.S. produces 26 billion lb. per year.

The global beef base did not expand from 2006-16, but since 2016 the world has added 6.3 million beef cows.

Prices went up as the population grew because of solid demand.

“When you can put higher volumes out there and get higher prices for it, people are looking for your product. Global beef demand is alive and well,” Stuart said.

“The global market is paying top dollar for high quality beef. Fifteen years ago, beef was beef.”

China is the disruptive force.

The Asian country came from nothing in 2007 to importing US$9 billion worth of beef in 2018. This year it will import $10 billion worth with most of the product coming from Brazil, Uruguay, Argentina and India.

Last year Canada shipped 3,200 tonnes to Hong Kong and China.

Beef is a luxury item in China. It is sold in restaurants, and demand goes up during holidays such as New Year.

However, the large Chinese population can influence the taste for imported meat. The wealthiest 10 percent of China totals 140 million people, which is greater than the population of Japan.

“The wealthy Chinese consumer is driving a lot of change in the consumer marketplace,” Stuart said.

Canada and the U.S. have limited access to the beef market because China has zero tolerance for beta agonists and growth hormone residues.

The Chinese also want traceability to the ranch of origin, which Canada can offer.

The ongoing trade war between the U.S. and China also affects meat sales, said Stuart.

The U.S. placed 10 percent tariffs on $250 billion worth of Chinese goods, and China retaliated with $110 billion in duties on American goods. Within that list of duties is a 50 percent punitive tariff against U.S. pork, as well as another 12 percent duty and a 16 percent value added tax.

“Every pound of pork going to China pays 78 percent tariff right now,” Stuart said.

Negotiations are ongoing, and U.S. President Donald Trump has threatened even higher tariffs on China if his complaints against alleged intellectual property theft, dumping, subsidized production and market access are not resolved.

“The reality is the Chinese economy is struggling. The 10 percent tariffs have hurt their economy and could go up to 25 percent if negotiations fail,” said Stuart.

However, Scotiabank deputy chief economist Brett House said many of Trump’s actions are purely cosmetic.

“The White House is claiming that China is paying the tariffs. That is completely at odds with the data we have,” he said.

“China allowed its currency to depreciate by about 10 percent last year. That 10 percent depreciation has completely wiped out the effect of the tariffs,” he said.

Recent economic data also shows that 90 percent of the effect of the tariffs is being paid by American consumers rather than Chinese exporters.

However, American pork and soybean producers are being hit hard, so their exports to China are down. They have sent more to Europe instead.

“Canada has seen a huge boom from the trade war,” House said.

“We have seen about a 60 percent increase in commodity exports to China over the last couple years.”

However, canola is now at risk over a diplomatic spat, he added.

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