Canadian Cattlemen’s Association Update – Jan 2015

CCA Vice President

Dan Darling

Overview

• Trade

– Country of origin labelling in the US

– Canada-EU trade agreement

– Canada-Korea trade agreement

• Labour challenges

• BSE Surveillance

• National Beef Strategic Plan

• Price Discovery

COOL – Country of Origin Labelling

• WTO ruled in Oct that US has not complied

• US initiated its last WTO appeal option in Nov

– Hearing will be in Feb. Ruling expected late spring

– US will lose this appeal. Cda/Mex expect to be authorized to retaliate in summer 2015

• Canada has already published a list of US products targetted for retaliatory tariffs

• Gov of Cda support to follow through is strong, but importers are lobbying to be excluded

COOL – How will it get resolved?

Nov US elections had positive results….new Congress to start early January.

As potential retaliation looms closer, hope is for US Congress to legislate a genuine resolution.

CCA advocating in US with allies to motivate action to achieve the correct outcome.

We are working to convince Congress that the only way to avoid retaliation is to amend the COOL legislation to eliminate the need to segregate imported livestock.

Although expensive & time consuming, our admin cost is less than 0.1% of COOL cost to producers: Resolution is in sight!

Canada EU Comprehensive Economic & Trade Agreement (CETA)

• Negotiations complete & final text released in Sept 2014

• Significant new duty free quotas for estimated potential beef exports of $600 million /year

• Key will be getting the correct technical conditions for meat processing:

– Commitment to negotiate equivalence of meat inspection systems….work continuing

CETA – Tariff Rate Quotas for Beef

– New 50,000 tonne duty free quota: • 35,000 tonnes fresh + 15,000 tonnes frozen

– Hilton quota to drop to 0% duty from 20%• (11,500 MT PW = 14,950 MT CWE)

– Keep access to 45K MT MFN quota as long as it exists

CETA Phase-in(assuming 2017 implementation & no TTIP)

Fresh Frozen Hilton MFN (pw)

2016 0 0 14,950 48,200

2017 9,300 2,500 14,950 45,000

2018 14,440 5,000 14,950 45,000

2019 19,580 7,500 14,950 45,000

2020 24,720 10,000 14,950 45,000

2021 29,860 12,500 14,950 45,000

2022 35,000 15,000 14,950 45,000

CETA TRQ Admin

- Annual TRQ divided into 4 quarterly sub-periods.

- Roll-over of unused amounts (but not end of year)

- Licenses valid for 5 months

- Historical importers get first crack at allocations

- 2nd chance expanded to wholesalers and processors

- 95 Euro/tonne security deposit for beef

- Proportionate refund as product is imported

- Full refund when 95% of allocation imported

- Partial refund for return of unused license quantities

- Underfill protocol

Cattle Production for CETA

Beef for export to EU has to be from cattle raised without growth promoter technologies (no implants or beta agonists)

Will need about 500,000 head per year (with about 100kg per animal going to EU)

Cdn cattle producers should make decisions as to whether they want to participate

CCA has produced info documents for cow-calf producers and feedlot operators on

Canada – Korea Trade Agreement

• Now in effect as of Jan 1, 2015

• Korean 40% beef tariff being reduced in 15 equal annual steps: enables Cda to keep pace with US and Australia

• Korean 18% offals tariff being reduced in 11 equal annual steps: faster for Cda than US and Australia

• Was a $40 million plus annual market in 2002

Access Priorities: Rest of the World

TPP or bilateral FTA with Japan

-seeking to eliminate Japan’s 38.5% tariff on beef

Upgrade to OIE Negligible Risk status

-Cda’s latest born BSE case was Sept 2004, so can apply Fall 2015 for approval Spring 2016.

OTM access to Mexico

Approved for US: March 2014

Full UTM access to China

Facilities approvals

Challenge: Who will process the animals?

• Major changes to Temporary Foreign Worker program last June have severely limited access to foreign worker supply and introduced caps

• While we don’t want “temporary” workers, the changes have made transition to residency or citizenship less likely

• This is tough for farms, but even tougher for labour in packing plants.

Labour Challenges

• Value adding in packing plants is typically labour intensive….lack of labour means foregoing value adding opportunities.

• Reduced plant capacity – a $260 million issue

– Increased spread vs. U.S. prices: $210 million/year

– Lower than optimal slaughter levels reduces plant efficiency: $21 million/year

– Missed value added: $29 million/year

Fixing Labour Challenges

• Increase the supply of labour

– Employers building awareness of job vacancies

– Promotion of agriculture careers

– Augment supply from abroad, facilitate moves to citizenship of workers

• Improve knowledge and skills of workers

– Training and learning resources

– Invest in HR management and training

Fixing Labour Challenges

• Extend primary agriculture exemptions to processors

• Allow foreign workers in Canada to stay

• Do not count provincial nominees in caps

• Longer transition period for caps

• Inclusion of butchers in Express Entry

More willing and able Canadian workers!

BSE Surveillance

Surveillance is still necessary to demonstrate that our control measures are effective and we are on track to eliminate the threat of the disease from the Canadian herd.

Alberta and Saskatchewan have fallen behind on the numbers required to meet our international obligations….Could become a problem in trying to obtain negligible risk status.

BSE Surveillance

CCA is working with CFIA and the provincial CVOs for AB and SK to communicate the value of BSE surveillance and to determine what may be required to ensure the numbers are stabilized.

BSE Surveillance - Video

National Beef Strategic Plan

• Canadian Cattlemen’s Association, National Cattle Feeders, Canada Beef Inc., Beef Cattle Research Council, Canada Beef Breeds Council and all provincial cattle associations make up the National Beef Strategic Planning Group

• We are currently drafting the final plan

• Beef Advisors Group to engage value chain

National Beef Strategic PlanVision:

A dynamic, profitable Canadian cattle and beef industry.

Mission:

To be the most trusted and competitive high quality beef cattle producer in the world recognized for our superior quality, safety, value, innovation and sustainable production practices.

National Beef Strategic PlanPillars and Goals

• Beef demand: Increase cutout value by 15%

• Competitiveness: Reduce cost disadvantages relative to main competitors by 7%

• Productivity: Increase production efficiency by 15%

• Connectivity: Enhance synergies within industry and connect positively with consumers, the public, government, and partner industries

Lobbying• The beef cattle business is one voice among

many

• Beef cattle contribution to GDP = $33 billion

• Canada’s GDP

= $1.8 trillion

• That is 1.8%!

Canada's GDPBeef

All other

Price Discovery

• Price discovery is critical for sending the correct price signal from the consumer to the producer

• A market whose participants are starved for information will have much wider price dispersion than one that is information rich. - Ted Schroeder

• Cash Markets Becoming Thin

– Still require cash market information

Accurate Market Prices Critical

1. For producers making marketing and risk management decisions as well as business planning (LT breeding decisions)

2. Program requirements for price insurance, income and disaster programs

3. Policy and regulatory development requires reliable historical data for strategy development by industry and government (including defending against trade actions)

• A Lack of data could result in less accurate program benefits, and/or delayed program benefits for producers

• For Price insurance, more noise = higher premiums

New Fed Market Price Reports

• New! Net Formula Prices

– Collected post slaughter once final settlement price is known

• New! Base Contract Prices/Basis

– Fed prices and volumes contracted for future deliver, reported when negotiated

• Both include domestic and Export Sales

• Only producers who contribute see Report

To Report prices contact: (403) 275-5110

Questions?

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