Beef, cattle export outlook mixed

(Resource News International) — Exports of Canadian beef to the U.S. are
expected to remain steady or decline slightly in 2008, whereas
beef exports to other key markets are expected to increase,
according to industry watchers. Live cattle exports,
meanwhile, are expected to remain steady.

Andrea Brocklebank, research analyst with CanFax, a
division of the Canadian Cattlemen’s Association in Calgary, said beef export levels to the U.S. in 2008 are
expected to decline slightly or remain at the anticipated 2007
level of 374,000 tonnes on a carcass weight basis. This
compares to the 2006 level of 370,00 tonnes and the 2005 level
of 469,000 tonnes.

The strength of the Canadian dollar relative to the U.S.
dollar in 2008 will play an important role in determining export
levels, Brocklebank said.

Another factor expected to limit beef export levels to
the U.S. market is reduced cattle inventory in Canada.

“With lower total cattle inventory in 2007 and expected
in 2008 due to higher cattle slaughter in Canada, we’re seeing
a smaller calf crop together with large feeder exports,” she explained.
“Essentially that reduces the amount of beef we are going to
have available for domestic consumption or export in Canada.”

With export levels to the U.S. not forecast to increase
from 2007, it will be important, Brocklebank said, for Canada
to successfully diversify its beef markets. According to Ted
Haney, president of the Canadian Beef Export Federation
(CBEF), Canada appears poised to do so.

Haney has confidence in Canada’s ability to export higher
volumes of beef to other international market, but he
acknowledged producers will be confronted with problems
already familiar to the industry.

Costs

“We’re expecting to see international beef exports
increase in 2008 even though it will be a struggle for the
industry to maintain its overall beef output volumes this year
and that’s because of currency-related and feed cost-related
issues.”

“Feeder cattle that would normally be fed out, finished
and processed in Canada are in the U.S. They’re
being fed out in a lower-cost environment,” he continued.

Haney remained optimistic, however, because he believes
demand growth and increased market access will work in the
industry’s favour. Demand in Mexico and various Asian
countries is expected to swell as incomes increase and more
middle-class families emerge, he said.

It will be important for Canada in 2008, Haney said, to
make inroads into markets which existed before the arrival here of bovine spongiform encephalopathy (BSE), and to re-
introduce products for which pre-BSE demand existed.

Beef exports to Mexico are forecast to increase by
roughly 20 per cent as beef derived from cattle over 30
months (OTM) is once again allowed.

Trade with Taiwan
meanwhile, is expected to normalize, Haney said. The
possibility of bone-in beef exports could result in an trade
increase of five to 10 per cent with Taiwan.

Finally, the
industry hopes both South Korea and Japan will re-introduce a
wider range of beef products as Canada works to re-establish
pre-BSE levels of trade.

Haney said the industry does not expect to immediately
surpass or even meet pre-BSE levels but he said the effect of
re-establishing those levels will be dramatic nonetheless.

While updated CBEF 2008 export forecasts will not be
available until February, Haney said he’s confident
exports will be in excess of 100,000 tonnes, an increase from
2006 levels and in line with 2007 forecasts thus far.

Haney suggested a proactive stance by the Canadian
government is required as the Canadian beef industry moves
forward.

Access “politicized”

“Simply doing things in Canada and expecting the rest of
the world to be confident in what we do as a natural course of
affairs is a traditional and historical approach to market
access. Market access has been politicized around the world.
This is an economic challenge. We believe, however, that the
government is prepared to make changes and recognizes the
economic imperative to ensure efficient and effective market
access in the future.”

Live cattle exports to the U.S., meanwhile, are forecast to
stay comparable to the 2007 anticipated level of 500,000 head.
Brocklebank noted, however, that the forecast is dependent on a
number of factors, all of which are subject to change. As was
the case with beef exports, the relative strength of the
Canadian currency will be a major determinant of the
competitiveness of the Canadian cattle industry.

The Canadian currency surged in the latter part of 2007,
rising at its peak in November to US$1.1040, its strongest
level since the central bank floated the currency in 1950.
While the Canadian unit has softened since November, it is
currently trading roughly on par with its U.S. counterpart.

Feed costs and feed grain acreage will also have an
important role to play, according to CanFax analysis.
Brocklebank explained that if U.S. feed costs increase due to
lower corn acreage, the cost advantage could potentially shift
to Canada, as long as barley acreage remains firm in Western
Canada. That could lower the amount of feeder cattle shipped
into the U.S.

Finally, slaughter utilization is also significant in
terms of live cattle exports. High labour costs, strong U.S. fed
cow demand and feed ban-related costs all limited Canadian
slaughter capacity in 2007, Brocklebank explained.

“We’re expecting utilization levels to remain steady or
improve slightly. With this you could see exports remain
constant.”

Labelling

Looking forward to the fall of 2008, the Canadian beef
and cattle industry will closely monitor the U.S. government’s implementation of
country-of-origin labelling (COOL). COOL legislation, a
provision of the U.S. Farm Bill, is scheduled to take effect in
September this year.

Canadian producers are concerned that COOL provisions
could result in U.S. packers and purveyors of meat segregating
Canadian meat in the U.S. market, resulting in a strong
disincentive to import Canadian slaughter animals and meat.

Brocklebank said a lot of uncertainty surrounds COOL.
“COOL is still being debated and how it actually ends up in
its final stage will be hard to tell. It may change several
times, over different phases, so until it’s actually
implemented and interpreted it’s hard to say what kind of an
impact it will have.”