On the heels of a year when feed costs, a massive recall, a lethargic U.S. dollar and new legislation hammered the red-meat sector in Canada, industry officials are looking for better times ahead in 2009.

Trade challenges hinder cattle industry

Canada’s cattle industry took a beating in 2008, so much so that the president of that country’s largest cattle association, Brad Wildeman, believes many producers have simply "given up."

"We’re seeing a lot of cow-calf producers exiting the business right now," says Wildeman, president of the Canadian Cattlemen’s Association. "We can tell by the kind of cattle that come to market and the fact that we’re seeing a lot of calves of all weights and sizes showing up.

"That’s usually an indication that the herd dispersal is not just culling the herd, but people actually exiting the business permanently."

Wildeman says he’s seeing a lot of 250-, 350- and 400-lb calves going to market, which is a good indication that producers are "selling everything and getting out."

Cattlemen north of the border entered 2008 facing skyrocketing grain prices and a rapidly rising Canadian dollar that inflicted a tremendous amount of economic damage on the beef industry. At first, the high grain prices just affected the feeding sector, but before long, the prices were passed down the line and throughout the marketing system.

"A year ago, we were spending a lot of time in Ottawa – just like the auto industry – looking for some relief because the losses were so tremendous," the head of the CCA says. But, despite these efforts, very little assistance was actually given to the industry.

This was closely followed by the Country-of-Origin-Labeling debate south of the border.

"There were a lot of mixed messages about that and a lot of us, both in the U.S. and Canada, thought it wouldn’t be as onerous as what we had feared right up until the last few weeks when Tyson says they were going to market their product as products of the U.S., Canada or Mexico. A lot of people thought that was OK," he says.

But, this quickly changed when the Senate and Congress told the industry that this is not what they had expected and the Tyson approach did not meet with the intent of the COOL legislation.

"This threw the whole industry in turmoil," Wildeman says.

Several packers in the U.S. – packers that Canadian producers relied upon – were unsure about the legislation and indicated their intent to slaughter only American cattle unless the cattle were fed in the U.S.

"This really limited opportunities for Canadian cattle to enter the U.S. for slaughter," he says. "For the past 100 years, we’d been exporting cattle back and forth from the U.S. The industry in Southern Alberta [Canada’s largest beef producing province] was really built on the ability to access those markets."

Wildeman feels there is still a great deal of uncertainty among U.S. companies as to how many plants will slaughter Canadian cattle, on what days and in what volumes.

Clearly, the gate on the Canada-U.S. border is closing and, unfortunately, even though there have been ongoing attempts by cattle associations and Ottawa to reopen markets in Asia to Canadian beef, there have been very few major success stories.

While increased access to Asia would have eased some of the pain caused by COOL, the Korean market is still closed to Canadian beef and access to Japan and Taiwan remains very limited.

All of these factors taken together have been discouraging for cow-calf producers, most of whom are near retirement age and are among those holding on throughout the bovine spongiform encephalopathy crisis before selling.

In spite of the difficulties being faced by the industry, Wildeman believes there is still a long-term future for Canada’s beef business, thanks to a growing global population and a growing demand for protein in countries where personal incomes have increased. But as he says: "There’s a lot of weariness in the country right now."

‘Squeal of disapproval’

Problems that started in 2007 rolled into 2008 for pork producers on the Canadian side of the border. The increased value of the Canadian dollar vis-à-vis the U.S. dollar and the high costs of fuel and feed put producers in a price squeeze that eventually pressured the Canadian government to launch a breeding swine-cull program intended to slash the Canadian pig herd by 10 percent, or about 150,000 sows. Under the program, Ottawa offered to supplement cull sows and boar prices received by producers to C$225 per animal plus slaughtering costs. While the program did not reach its 10 percent target, an estimated 121,000 sows were either culled from the national herd or were eligible to be culled.

Martin Rice, executive director of the Canadian Pork Council – the producer group that managed the cull program – estimates 20 percent of hog producers exited the business between July 1, 2007 and July 1, 2008.

"Nobody can have any long-term future under these circumstances," Rice says. Producers continue to lose money and if something doesn’t happen to create sustained profitability by the first half of next year, a lot more producers will leave the business or "be pulled out by their financial institutions," he says.

The implementation of COOL has created uncertainty for U.S. finishers whose bankers are now wondering if they need a line of credit to buy Canadian pigs. Rice says there are a number of American processors working hard to secure Canadian animals, perhaps by designating a plant to kill Canadian born – but U.S. finished – pigs.

On the other hand, the legislation does favor keeping pigs in Canada and finishing them there. "This would be fine if we could get the value back to the producer," he says. However, there would not be sufficient finishing capacity north of the border to handle all the pigs going to the U.S. at present, which is about 7 million feeder pigs annually.

Also, while Asian markets may be slow in opening their doors to Canadian beef, pork sales have been on the rise. For the first three-quarters of 2008, Canadian exports to China/Hong Kong doubled to roughly 100,000 tonnes compared to the same period in 2007.

Both Japan and South Korea showed modest increases during the same period and Taiwan has shown significant increases.

"For Asia, as a total we’re probably looking at an additional 100,000 tonnes going to those markets," he says.

These increases are a bright spot for the industry, Rice says, and Canada’s hog-slaughtering industry, which is operating under capacity, has the ability to handle additional increases in 2009 and beyond.

Food-safety woes

During the summer of 2008, Canada was hit by a Listeria monocytogenes outbreak that was eventually traced back to the 97B Maple Leaf Foods plant in Toronto, Ontario. The contamination of a wide assortment of deli meats affected primarily consumers in Ontario where 40 of the 53 confirmed cases were reported and where 15 of the 20 known deaths occurred.

"It did affect everybody," Jim Laws, executive director of the Canadian Meat Council, says. "Sales were down significantly for all of the plants."

However, while Listeria rattled the industry to its roots, 2008 did bring with it some good news for packers. One piece of news was the provision by Ottawa of a Canadian Food Inspection Agency "fee remission" that resulted in more than C$2 million in fees being remitted back to the beef and pork slaughter industry as either a payment or credit. The program was the result of a two-year effort by the meat council to obtain some relief from the C$20 million in meat inspection fees paid by the industry annually.

Also, a Temporary Farm Worker Program was launched by the federal government during the year and brought relief to plants, particularly in Alberta, that were operating at reduced capacity because of a severe labor shortage created by high-paying jobs in the oil patch.

The program provides immigrant workers, mostly from the Philippines and Eastern Europe, with temporary two-year visas if they have a job waiting in the packing industry. After the temporary permit expires, the workers can apply for permanent immigrant status.

Laws says he has received nothing but good reports about the performance and work ethics of the immigrant workers from the packing industry.

Additionally, the packing industry saw the licensing of Econiche by Bioniche Life Sciences Inc. of Belleville, Ontario, in October, 2008. The vaccine, the first of its kind in the world, reduces the shedding of E. coli O157:H7 by cattle. Studies have shown the reduction in shedding can be as much as 60 to 70 percent.

The new vaccine was developed by a strategic alliance between the University of British Columbia, the Alberta Research Council, the Univ. of Saskatchewan’s Vaccine & Infectious Disease Organization and Bioniche, which holds the rights for worldwide commercialization of the vaccine.

Perhaps coincidentally, the Econiche license was approved by Health Canada following an outbreak in North Bay, Ontario, where more than 200 people reported symptoms of E. coli and roughly 40 cases were confirmed including one case of Haemolytic Uremic Syndrome. The illnesses were traced to a fast-food outlet in the community.

This article can also be found in the digital edition of MEAT&POULTRY, January, starting on Page 38. Click