The Canadian Perspective:
A dialogue between John Masswohl, director international relations, Canadian Cattlemen’s Association and Barbara Young
Q: What is the status of the Canadian cattle industry?
A: We have become too dependent on the U.S. slaughter facilities to market our live cattle. We have grown beyond that and have seen over the course of the past nearly two years now how devastating it is to our ability to grow our business.
Q: Explain how this happened.
A: It’s a combination of things. More than 50 percent of Canada’s beef cattle are in the Province of Alberta. That industry has gotten used to getting higher U.S. prices, and relationships exist between the U.S. buyers and the feedlots in Alberta, which were comfortable and profitable. Cargill and Tyson are the two biggest U.S. packers and also in Alberta. Looking at things from their perspective and their corporate structure, they were comfortable with where the cattle were and where the capacity was. Therefore, there was no real impetus to change things. Now there is a driver for change.
Q: What exactly is that driver for change?
A: Pre-BSE weekly slaughter capacity rate in Canada was 72,000 head a week with an actual kill rate of between 63,000 and 68,000 head a week. At that time we actually had over capacity. So why not build more then? The answer is we could not keep enough animals in Canada then, given all the things we just talked about. Since then, we have realized we need to build more, so right now our target is to get to about 110,000 head a week. We think there is a need for big plants as well as medium sized operations in Canada. It is not just about how much you have nationally, but rather where it is located, what are the kinds of things that can be done for marketing. It is not just about building to capacity, but how do you ensure the product can be marketed and there is access to markets. To that end, we are working on a long-term scenario.
Q: What happens to this plan should the border open allowing live cattle shipments from Canada to the U.S. to resume?
A: We want these things to be viable whether the border opens for cattle or not. If it does not open until next year, which might as well be forever, we have to get off this price roller coaster. We have to have this done to see good bidding and good prices in Canada. As these things come on line, we are working with the Canadian Food Inspection agency, the equivalent of APHIS, FSIS, and FDA all rolled into one, in terms of certification programs. Some of the smaller Canadian operators are talking about having flexibility so they can maybe run a single day, more than a day, do all grass fed, all corn fed, or all organic. That means working with the government in terms of getting certification so if there is a market for that product we could ship to it. We are thinking of places like Europe, where perhaps we could do more hormone free for the European market, and even getting into some of the ethnic products such as halal or kosher certification.
We have even thought about what to do if we get into what we would call a catastrophic scenario, such as a judge would even decide to shut off the boxed beef that we are shipping to the U.S. We would have to move a lot of product somewhere. If we get into a scenario like that, we start to think about BSE certification for marketing purposes.
Q: What are you hearing from your U.S. partners concerning your new direction?
A: We are hearing a lot of concern, but we also are hearing a lot of understanding. Our organization has always tried to have a good and cooperative relationship with U.S. beef associations, such as National Cattlemen’s Beef Association. We have always tried to work together to resolve issues, but I think they understand the time has passed for us to be able to sit and wait. I think it concerns them quite a bit, because what they see is if we are building more slaughter capacity in Canada they likely will lose slaughter capacity in the U.S.
On a national basis in the U.S., there are probably those for whom it won’t make a difference, such as those in Nebraska and Illinois — maybe cattle producers in those areas will not feel the difference. But if you are a feedlot owner that has built your business by being close to a packing capacity that closes down, then the effect is either they won’t survive but more likely they will have to get used to shipping their cattle a longer distance and taking the cost of transportation as a discount. They have not had to do that in the past, but we have. We see that putting us in an advantage. We talk to them about this not being our preferred alternative because we want to go back to the partnership we had in the past with us and the U.S. working together to be globally competitive.
But when we are faced with the scenario of do we survive or do we work together, well you have to survive first.
Q: What do you hope to gain from discussions like this?
A: We are trying to raise public awareness of what we are being forced to do, so that as people make decisions they can make them in the fullness of knowledge of what is actually happening and that there is a down side. Maybe if some of these things happening in Canada are not past the point of no return, maybe we won’t get to there and we can continue to have a partnership in the future. This is a survival for right now. In the long term we also see that Brazil, Uruguay, Argentina, New Zealand, and Australia will get stronger as competitors in the global marketplace. Canada and the U.S. will be more competitive in the long run if we can work together and not have these artificial restrictions between us. If we are competitors with each other, it will be more difficult in the long run to compete on the global marketplace. I think we will be stronger together.