Thursday, 4 October 2012
Like Your Local Beef Producer Now?
The numbers are stunning: one plant in Brooks Alberta slaughters a third of all cattle in Canada, supplies forty percent of the beef sold in the country. The benefits of size is cheaper hamburger, but we're now beginning to better understand the risks too. This is one of the smarter comments on the XL recall, and don't forget that it's the lowest rung on the marketing chain that eventually gets hurt with this kind of disruption, and that's the ranchers, cow calf operators, and cattle farmers, the very people not responsible for what's happened.
Will consumers save Canada’s beef industry this time?
The massive recall at Alberta’s XL Foods is the last thing the Canadian beef industry needed, as that meat-processing plant supplies 40 per cent of all beef consumed domestically. Trade-wise, this incident may yet again damage the industry’s already fragile image, given the fact that the U.S. Department of Agriculture may have discovered the E. coli outbreak before our own Canadian Food Inspection Agency.
As consumers question their relationship with their steaks and hamburgers, Canada’s beef industry continues its attempt to recover from the 2003 mad cow crisis. Given the potential impact of the XL Foods incident, that may never happen.
Nine years ago, international borders were closed to the importing of Canadian beef almost immediately after an announcement that mad cow disease had shown up in an Alberta Black Angus breeder cow. Thankfully, the cow didn’t get into the human food chain – but the damage was done. The embargo lasted more than two years and the industry lost more than $4-billion.
Domestically, however, Canadians kept on buying beef. In fact, Canada became the only country to have seen its beef retail sales go up after discovering its first native mad cow case. In a time of crisis, Canadians showed solidarity with their farmers. Indeed, Canada Food Day, a national event that celebrates local Canadian food products, began as a response to the mad cow crisis. From the perspective of Canadian consumers, this potentially disastrous incident never became a food safety confidence issue.
But times have changed. More and more Canadians are having serious conversations about diets, trends and global food systems – in other words, they care more about where their food comes from. In addition, aggregated food demand in our country is fragmenting faster than ever. Many consumers are increasingly shopping with a conscience, asking questions about the conditions of production, including issues such as animal welfare, fair trade and organic farming.
As these and other questions get deeper traction in our collective food space, producers must recognize that critical consumers are increasingly a force to be reckoned with. As a result, demand for beef has been shrinking slowly but surely since mad cow hit our country almost a decade ago. To make matters worse, the sluggish economy has compelled consumers to opt for cheaper proteins, such as chicken and other substitutes.
The beef industry is also facing some major challenges in international markets. In 2003, the Canadian dollar was at $0.73 U.S; as a result, the United States, historically our biggest export market, considered Canada an affordable source of fresh beef products. Now, with our dollar hovering around parity, the Canadian beef industry is regarded differently by our neighbour to the south.
For Americans and other export markets, the macro-economic environment has forced our beef industry to charge more for virtually the same product. Since 2003, the Canadian beef processing industry has contracted by more than 15 per cent; the XL Foods affair will certainly not enhance the industry’s quality image abroad. To add to the systemic pressures our beef industry is facing, input costs are also increasing, which makes its business case weaker almost by the day.
The global market landscape for beef has changed. What’s worse, though, is that consumers themselves are in a different place as well. With the XL Foods recall, the Canadian beef industry is facing some major headwinds. In 2003, amid the mad cow crisis, the Canadian consumer came to the rescue. This time, it’s not clear that consumers are willing to give the industry another chance, as more options and substitutes are offered to them. Only time will tell.
Sylvain Charlebois is a professor of food distribution and policy at the University of Guelph’s College of Management and Economics.