Key Takeaways:
- China has reopened its market to Canadian beef, which is unlikely to increase prices at home or reduce already tight supplies.
- The deal is expected to boost the long-term resiliency of the Canadian beef industry, which is volatile and has razor-thin margins.
- China’s growing demand for beef, particularly premium cuts, presents an opportunity for Canadian beef producers to diversify their trade portfolio and benefit from consumers with different tastes.
- The deal may help Canadian beef processors sell unwanted parts of the carcass, such as offal, to China, resulting in wider margins for slaughterhouses.
- The Canadian beef industry is expected to benefit from the deal in the long term, with potential for growth and development of new markets.
Introduction to the Deal
The Canadian beef industry has received a significant boost with China’s decision to reopen its market to Canadian beef. The move is expected to have a positive impact on the industry’s long-term resiliency, despite not having an immediate effect on prices or supplies. The deal, which was announced on January 20, allows for Canadian beef to be shipped to China subject to a quota, with any imports over the limit being tariffed at 55%. This development is seen as a significant step forward for the industry, which has been facing challenges in recent years.
Impact on the Canadian Beef Industry
The deal is not expected to have a significant impact on beef prices in Canada, which have hit record highs over the past year. However, it is expected to improve the industry’s long-term resiliency by diversifying its trade portfolio. Currently, over 70% of Canada’s beef is shipped to the United States, making the industry vulnerable to fluctuations in the US market. The addition of China as a trading partner is expected to help mitigate this risk and provide a more stable market for Canadian beef producers. According to Kevin Boon, general manager at the BC Cattlemen’s Association, "It’s more of what, I’d almost say, a sugar high for the trade negotiation having happened… It’s an added benefit."
Growing Demand in China
China’s growing demand for beef presents a significant opportunity for Canadian beef producers. Beef consumption in China is forecast to climb by 8.7% between 2026 and 2034, driven by increasing demand from a growing middle class. Chinese consumers are also developing a taste for premium cuts of beef, which Canada is well-positioned to supply. According to Darin Friedrichs, director of market research at Sitonia Consulting, "Pork is the No. 1 protein in China; however, as diets westernize and more of the population moves into the middle class, beef demand is climbing." This growing demand is expected to drive growth in the Canadian beef industry, with potential for increased exports to China.
Benefits for Canadian Beef Processors
The deal is also expected to benefit Canadian beef processors, who may be able to sell unwanted parts of the carcass, such as offal, to China. Offal is considered a delicacy in many Asian markets, and Canadian processors may be able to capitalize on this demand. According to Mike von Massow, an agricultural economist at the University of Guelph, "Canadian beef also has potential to play to its advantage and sell premium cuts to wealthy Chinese buyers." This could result in wider margins for slaughterhouses, which currently operate on razor-thin profits.
Long-Term Benefits
The deal is expected to have long-term benefits for the Canadian beef industry, including the potential for growth and development of new markets. The industry is currently facing challenges, including a looming labour shortage and a cyclical nature that makes growth difficult. However, the addition of China as a trading partner is expected to help develop much-needed resiliency in the industry. According to Prof. von Massow, "While this isn’t going to be a big deal right now, we are going to see our cow herd expand… Developing new markets will perhaps help us flatten out these big extremes that we’ve had in the past." This is expected to have a positive impact on the industry’s overall stability and profitability.
Conclusion
In conclusion, the deal between Canada and China is expected to have a positive impact on the Canadian beef industry, despite not having an immediate effect on prices or supplies. The addition of China as a trading partner is expected to improve the industry’s long-term resiliency, diversify its trade portfolio, and provide a more stable market for Canadian beef producers. The growing demand for beef in China, particularly premium cuts, presents a significant opportunity for Canadian beef producers, and the deal is expected to have long-term benefits for the industry, including the potential for growth and development of new markets.
