‘600 million opportunity’ awaits cattle sector

The Comprehensive Economic Trade Agreement between Canada and the European Union will increase beef market opportunities for Canadian producers.

Though Canada has had access for its beef before, it was subject to tariffs and quotas that were cost prohibitive for most marketers. Under CETA, some of those previously existing conditions will improve, and new quota is slated to emerge.

In terms of previously existing trade, Canada has been eligible to fill part of the “Hilton quota” for beef to the EU since 1997, and the eligible amount has increased since then.

Named for the hotel chain in which the quota was finalized, the Hilton quota comprises 67,250 tonnes of fresh, chilled and frozen beef exported to the EU from Argentina, Brazil, Uruguay, Paraguay, United States, Australia, New Zealand and Canada.

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The U.S. and Canada shared access to 11,500 tonnes of that quota at a preferential duty rate of 20 percent, but the full quota was rarely filled.

For example, only four percent of the allocation was met in 2013.

That’s because it is expensive to produce beef for the EU market, and even then, the tariff of 20 percent discourages marketers who fear they won’t profit from the sale.

Canada’s access to the Hilton quota will change under CETA.

“What will happen on day one of CETA, with respect to that quota, Canadian beef gets in at zero percent, duty free, whereas U.S. beef under the same quota continues to be 20 percent,” said John Masswohl, director of government and international relations for the Canadian Cattlemen’s Association.

“So that’s 11,500 tonnes of new duty free access that we don’t have now.”

That tonnage is calculated in product weight. Essentially, that 11,500 tonnes equates to 15,000 tonnes in carcass weight.

The new quotas available under CETA are calculated as carcass weight and include 35,000 tonnes of duty-free fresh beef and 15,000 tonnes of frozen product, which total 50,000 tonnes.

Masswohl said Europe applies a 30 percent conversion factor to every tonne of boneless beef, so one tonne is counted as 1.3.

“In total, we got about 65,000 tonnes of new duty free access, which is significant.”

Canadian packers were consulted during CETA negotiations, and they said it makes best economic sense to ship only the products that bring the highest prices in Europe.

This means about 100 kilograms of meat per animal could be marketed. At an estimated $11 per kg on fresh product and $7 per kg on frozen, it becomes a potential $600 million opportunity.

“Europe, the price is right over there,” said Masswohl.

“The demand is there. It’s a market that consumes eight billion tonnes of beef a year, and they pay an awful lot for it.”

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