Calgary, Alta. – Canadian beef producers need to start looking beyond North America if they want to grow their businesses.
An economist at BMO Capital Markets says in the face of rising feed costs and flat demand in developed markets such as the U.S., Canadian beef producers need to look at emerging markets.
Aaron Goertzen, an economist with BMO Capital Markets, says the beef industry will struggle if it doesn’t look beyond North America.
“It will become increasingly important for the Canadian beef industry to go where the growth is, and that growth, as we’ve seen, is taking place in emerging market economies,” says Goertzen.
India and Brazil, for example, are two countries that have rapidly growing populations and faster economic growth.
They are also two countries that have increased their beef consumption and, according to the United Nation’s Food and Agriculture Organization, it doesn’t look like that demand will slow down at least over the next decade.
In fact, total domestic consumption of beef and veal in India was more than two million metric tonnes last year – an increase of 73 per cent since 2000; in Brazil, consumption was nearly eight million metric tones, which is up 29 per cent.
In contrast, Canadians consumed just over one million metric tonnes last year.
Not simple, but doable
Goertzen advises that exporting overseas is not a simple undertaking and will depend on domestic and foreign regulatory factors.
But, “experience in other countries suggests that it can be done. With countries like Australia and New Zealand exporting beef heavily, it’s also difficult to argue that Canada’s relative isolation – excluding our large neighbour to the south – is a limiting factor,” he says.
Mike Darling, vice-president, Southern Alberta Commercial District at the BMO Bank of Montreal, says that Canada’s livestock sector and agriculture industry overall are both strong economic drivers in Canada.
Even a recent survey conducted by BMO found that Canadian consumers love homegrown beef. In fact, more than half of respondents frequently purchase locally produced beef.
“That being said, while this demand remains crucial, we encourage farmers to remain competitive beyond our borders by increasing productivity and focusing on efficiency through innovation and scale,” says Darling.
Goertzen says only the most efficient producers, within Canada and globally, will be able to generate profits reliably in this challenging environment. And with feeding costs increasing, producers will feel the pressure on their margins.
“It is therefore imperative that the industry maintain an unwavering focus on productivity growth and cost management through both innovation and scale,” says Goertzen.