A lightbulb moment....

[kato]

I'm going to toss one out for discussion......

After reading the comments on the Border Beef thread, we had a good discussion around the dinner table. As we were grumbling about how the good point made in that thread about the Canadian packers not really wanting new market access was so true, a light came on over Hubby's head.

Here's the thought we came up with. Now, at the moment there are negotiations going on over trade with the EU. Word is that it is potentially as big a market as the U.S.

We're probably all in agreement that our packers aren't chomping at the bit to move into the realm of EU style trade hoops and hurdles. We also probably agree that small Canadian packing plants are not going to have easy access either, due to costs.

So does this mean we should have to sit here in our little captive market and watch such an opportunity pass by? No, I say! We do not.

What needs to happen right now, while things are still being negotiated, is for someone or some group to grab on to this and run. We need to form an alliance with people in the EU who will also see the potential here. People with capital who have a vision of what could be accomplished. People with the capital to take on the big boys. I bet there are such people there, and they just need to know that there are suppliers on this side of the ocean who would like to do business.

I for one do not mind the extra effort needed to access such a market since we're already doing 95% of it already, and doing it for free.

We've got traceability. We've got quality cattle. We've got producers who are fed up with the status quo. We also have the advantage of being a small enough group that we can get things done without years of U.S. style bickering and self interest group interference.

Maybe what we need to keep the big boys in line is another set of big boys. LOL

What do you guys think?

[greybeard]

The thing that worries me about exporting to the EU is the same thing that makes them attractive. They have probably the highest cost of production in the world, in no small part due to regulations and years of protectionist policies. Many of the regulations come to protect their producers and make it difficult for lower cost producers to access the market. Typically, they require all suppliers to have matching protocols. That means we take on an even higher costs reducing our competitive position in all export markets.
Obviously, it would have to be done as a niche market contract taken on by all those producers who are competent at record keeping. The market will dictate how much they get paid for it.
I have to remind you the Brazilians had a low enough cost of production they were paying the tariff (40% of value?) on nearly 2 billion worth of exports. The Irish NFU raised hell and insisted they follow a similar regulatory protocol as the EU. When Brazil sent in the first premises ID the EU sent them back suggesting they start with about 30 ranches. I expect there were some market disruptions when all that beef suddenly had no home. Dealing with that kind of protectionism scares me a bit. I expect you would find bigger margins are justified, and there is good reason some choose to ignore the market.
My experience with producing for niche contracts means increased costs and often increased risk and liability to the producer.
After all that, if Sunterra restarted Rancher’s choice and offered EU contracts I think it’s a risk we have to take as this road we are headed down looks we are at the dead end. Survival requires that we choose a different direction.

[grassfarmer]

I like your enthusiasm kato but think there are a number of things we need to learn about the EU.
While its true their herds are depleting and they need to import some beef they are not desperate to do so - in fact rather like the US they still have a large domestic production base which they need to top up. Like the US this makes them quite a difficult market to fill.
In the EU the retailer is king not the processor which means we have a very difficult person to negotiate with. These large retailers in Europe are likely the only ones big enough to challenge north American processors and fight our battle for us - unfortunately they are unlikely to do so as they are only interested in procuring low cost beef to supplement home grown supply. The big boys in retailing there (Tesco for one) are every bit as ruthless as Cargill and XL would only buy our product if they can't access product cheaper from South America, Africa or any other place that the EU has good import relations with. Bear in mind also that most of the EU countries have been traders for centuries - they know the ins and outs of shipping product better than your average north American company.
Realistically I think the opportunities in the EU are for niches - the high end Italian restaraunt trade is a good example. This will require us to have smaller/independent plants here to produce for them. We still have some work to do on traceability before we would meet EU standards. We would need to produce hormone free product. Bottom line we still need to deal with the packer issue in North America and realistically the Europeans will not be rushing in to fight this battle for us. I think the model you have in mind of a country investing in processing capacity here to ensure beef supply is good but would be more realistic in dealing with China or a pacific rim country with a rising population/prosperity level and limited domestic production potential.

[grassfarmer]

Just a little correction there greybeard - it was not the Irish NFU it was EU officials who just happened to be Irish that toured Brazil and raised hell. Rightly so as the beef was being imported on the pretext of being age/source verified but the cattle they saw were quite clearly being eartagged for the first time just prior to shipping for slaughter. Yes, they have tricky rules but so does any country - look at Japan Korea etc.

[kato]

Good discussion already.

My thinking was that if the processing was driven by a EU company, it would be more likely to succeed in the EU. The same can be said of any country, though.

Which export market it is is not nearly as important as getting some new faces at the table in this country. If no one in Canada has the resources, then let it be someone else, as long as it puts more bidders for live cattle in the game. And a foreign company buying out one of the two big players in this country is not what I have in mind. It only defeats the purpose. Canadian companies that may become big players are far off in the future at best, and in the meantime we need to take what we can get. Otherwise there will be no one left raising cattle, and it's all a moot point.

The niche markets are exactly what the smaller Canadian facilities should be going after now. Stay under the radar, and quietly go about their business in such a way that they can profit and become bigger players.

[jensend]

i see one of the biggest obstacles being the federal govt. it may help some now that we're going into free trade negotiations with the eu but the federal bureaucracy, including cfia, has been thinking harmonization with the americans for so long that it's an entrenched philosophy. i would think that there is lobbying going on to relax our srm regulations to those of the states and then we're screwed as far as europe or anywhere else goes. it would be shortterm gain for longterm pain. it's not difficult to see there are options but convincing ottawa (no matter which party is in government) to adapt will be very difficult.

[per]

Convincing Ottawa will require all of us and our groups old and new to be on the same page. Not the page of status quo or harmonization but of being independent of but not necessarily adverse to the US. The old testing argument would be a good example. Our mainstreamers never lobbied the Gov or CFIA to allow testing so why in the world would anything change. The one thing that has to change is status quo.

I have to apologise to the Boarder guys. I committed to come but my hay got dry 2 days ahead of schedule and I selfishly chose to put it up. Sounds like a good useful gathering.

[grassfarmer]

Good points raised - kato, you say a foreign takeover of an existing big processor wouldn't help and I don't think I agree with that line of thought. Not saying it is likely to happen but what if, say the Chinese, bought out one of the large existing plants in Alberta and took all the beef they processed offshore? Canada would then need to become a net importer - which would actually put us in a lot better position - we could play the patriotic card with consumers and that makes it difficult for retailers to import willy nilly. Imagine it would have a fair impact on the US too - they can't get beef as easy from anywhere else as they can from Canada. As I say I'm not predicting this will happen but if it did it has potential to help producers.

Jensend raises a good point about CFIA - as long as they are allowed to continue operating as an extension of USDA our options are limited. We will remain tied to the US as their captive supplier of beef. Try setting up a new plant and see if you can get it certified for EU exports in under 3 years - I think not.

I wondered where you were Per - hay? what kind of excuse was that? not like it's going to rain any time soon ;o)

[smcgrath76]

GF - I think your experience here is a
huge asset. I don't think we need to
ask the industry to change to access a
market like the EU. I look at the EU as
a collection of markets that interested
producer group may seek to access. I
like the idea of attracting outside
capital from the market country. I can
think of a very good example out of New
Zealand that has made a fortune in a
west German meat counter.
This is the opportunity for the
interested and the pursuit of these
markets is a lot easier if we don't have
to drag disinterested parties along.
We looked at EU certification and have
even investigated ISO standards to some
degree. The costs are high, so the
benefits must be higher to convince the
guy on the ground with the cows.

[grassfarmer]

My experience of the EU is rapidly becoming outdated Sean - it was 2000 I left. Still I guess I have more background than many folks here in the EU meat industry.
We still have killing plant problems to face although I'm guessing the Lacombe plant could export to Europe, I believe they are doing so with a lot of bison already. Prairie Heritage are selling into the EU now too - are they getting custom kill done by XL? The annoying thing is a lot of the groundwork has been done on this - I've seen the Informa research commissioned by CBEF at a cost to levy payers of $100k a year. It lists the buyers names and phone numbers plus the types of beef they would potentially buy in every country - and what have CBEF done with this info in the last few years?? SFA in my opinion - kept it buried and told producers you can't export into Europe because of the tariffs. All helping to keep our beef captive in North America - what a coincidence, hmmm who could CBEF be working for? maybe the same people as CFIA?

[perfecho]

GF, you mentioned playing the "patriotic card". Why would we play it under those cicumstances, but do not at this time?

[grassfarmer]

Perfecho, its a matter of effect. Playing that card now is largely irrelevant as we are a net exporter and couldn't eat all our beef even if we stopped imports. Once that situation changes and Canada had to import to feed it's people, then the people can influence where their food comes from and we can influence their decision by playing the patriotic card.
It has been used to good effect in Europe by informing consumers that beef from south America for example is not produced to the same standards of traceability and animal welfare as their domestic product. It is an effective weapon to counter imports from a country you can't compete with on price.

[perfecho]

I see where you are coming from.
I do wonder why we should not play the card now to encourage Canadians to support our product?
Not that out of country would have to be labeled, but certainly our product should be labeled Canadian (or by province) and since we have the technology, we could include birth date, forcing the hand on processors bring in lower quality, older beef and passing it on at higher margins.
My concern is that we cannot force this issue now, so how could we in the future?

[15444]

We need to get away from this idea that we are dependent on being a beef exporting country. Lets get on the supply managed bandwagon with hogs on the way to long-term stability.

[Sawbones]

One of the major problems with supply management is that we still are exporting over 1/2 of our beef even if it is to the US and you will have to decide which producers would be forced into retirement. Most of the product would come from dairies as beef is not the main source of their income so they could produce beef at a much lower cost