the changing landscape may 2008
DESCRIPTION
The Changing Landscape May 2008. John Masswohl Director of Govt & International Relations Canadian Cattlemen’s Association. Facing Competitiveness Challenges: High Canadian dollar High input costs (feed, labor, energy) Impaired market access Higher regulatory burden. - PowerPoint PPT PresentationTRANSCRIPT
The Changing The Changing LandscapeLandscape
May 2008May 2008
John MasswohlJohn MasswohlDirector of Govt & International Director of Govt & International
RelationsRelations
Canadian Cattlemen’s AssociationCanadian Cattlemen’s Association
Facing Competitiveness Facing Competitiveness Challenges:Challenges:
High Canadian dollar High Canadian dollar
High input costs High input costs (feed, labor, (feed, labor, energy)energy)
Impaired market accessImpaired market access
Higher regulatory burdenHigher regulatory burden
Weekly AB Fed Steer Price vs Canadian Dollar
$30
$50
$70
$90
$110
$130
Jan
98
Jan
99
Jan
00
Jan
01
Jan
02
Jan
03
Jan
04
Jan
05
Jan
06
Jan
07
Jan
08
Cdn
$ p
er c
wt
$0.60
$0.70
$0.80
$0.90
$1.00
$1.10
Cdn
$ -
US
Ter
ms
AB Steer Dollar
Sour c e: C anf ax, B ank of C anada
Break Even vs Market PriceYEARLING STEER
$70
$80
$90
$100
$110J
un
-06
Sep
-06
Dec
-06
Ma
r-0
7
Ju
n-0
7
Sep
-07
Dec
-07
Ma
r-0
8
Ju
n-0
8
Sep
-08
Cd
n $
per
cw
t
Break-even Cash
Sour c e: C anFax T r ends Wes t
Canadian Regulations and Canadian Regulations and Other Government Other Government
InvolvementInvolvement Enhanced Feed Ban Enhanced Feed Ban
Between $5 and $34 per head Between $5 and $34 per head disadvantage versus the USA. disadvantage versus the USA.
Approval of new pharmaceuticalsApproval of new pharmaceuticals Zilmax - $18 to $24 per headZilmax - $18 to $24 per head
Feed Grain and Forage Research and Feed Grain and Forage Research and ApprovalsApprovals KVD / PNTKVD / PNT
Ethanol mandates and tariffsEthanol mandates and tariffs
Market AccessMarket Access Restricted market access continues to Restricted market access continues to
affect the “cut out” value of our cattle by affect the “cut out” value of our cattle by over $100 per head. over $100 per head.
Korea, Japan, Mexico, Russia, China, others Korea, Japan, Mexico, Russia, China, others
Newer issues with USNewer issues with US
Border testingBorder testing COOL COOL feesfees
• Increased costs and force greater product differentiation• Will widen basis on live cattle prices vs U.S.
How will COOL affect Canadian producers?
• In 2002, USDA acknowledged that COOL was forecast to add $ billions of cost to the North American market with negligible benefits•CCA estimated COOL could cost Canadian cattle producers up to $92 per head, or $300 million annually (due to reduced access)
COOLCOOL Does not apply to food serviceDoes not apply to food service Does not apply to exportsDoes not apply to exports Flexibility on trim will be crucialFlexibility on trim will be crucial
BIC building supplier relationships BIC building supplier relationships since 2001since 2001
Short TermShort Term
Higher costs for feed grainHigher costs for feed grain Lower relative prices due to currencyLower relative prices due to currency Conversion of cultivated pasture to “fuel Conversion of cultivated pasture to “fuel
grains or crops”grains or crops” Reducing numbers Reducing numbers Urgent need to address regulatory Urgent need to address regulatory
inequities and market access restrictionsinequities and market access restrictions Pursue value creation aggressively Pursue value creation aggressively
Longer Term:Longer Term:
Outlook and OpportunitiesOutlook and Opportunities
Canada is still the third largest beef and cattle exporter in the world, and the largest
exporter of grain fed beef.
Source: OECD/FAO Agricultural Outlook
Global beef consumption will continue to grow.
FEED GRAIN PRICESLethbridge and Omaha in barley equivalents
$60
$80
$100
$120
$140
$160
$180
$200
$220
Aug
-97
Aug
-98
Aug
-99
Aug
-00
Aug
-01
Aug
-02
Aug
-03
Aug
-04
Aug
-05
Aug
-06
Aug
-07
Cdn
$/t
onne
Lethbridge BarleyOmaha Corn
Barley and Corn have both reached record highs in 2008 at $220/tonne and $236/tonne; however, the differential has decreased so that COG is comparable.
Canadian boxed beef values higher Canadian boxed beef values higher than U.S. valuesthan U.S. values
US Choice/Canadian AAA spread
-20
0
20
40
60
80May-03
Sep-03
Jan-04
May-04
Sep-04
Jan-05
May-05
Sep-05
Jan-06
May-06
Sep-06
Jan-07
May-07
Sep-07
Cdn
$/c
wt
Source: CMC,
Industry Positioning:Industry Positioning:Establishing the “Canadian Beef Establishing the “Canadian Beef
Advantage”Advantage” Animal health & beef Animal health & beef
safetysafety Genetics/breedsGenetics/breeds Animal IDAnimal ID Age verification capabilityAge verification capability Production programsProduction programs
(QSH)(QSH) Product quality Product quality
(consistency, palatability)(consistency, palatability) Yield and profitabilityYield and profitability Service and Technical Service and Technical
support support
Canadian Beef AdvantageCanadian Beef Advantage1.1. Maximize the value of every cut and product Maximize the value of every cut and product
from every animal we sell. from every animal we sell.
2.2. Canada’s strength will clearly remain in the Canada’s strength will clearly remain in the production of high quality (grain fed) beef. production of high quality (grain fed) beef. (Likely shorter times on feed)(Likely shorter times on feed)
3.3. Global marketing efforts to differentiate our beef Global marketing efforts to differentiate our beef on the basis of quality and safety.on the basis of quality and safety.
4.4. We need to regain as full a range of market We need to regain as full a range of market access as we can in terms of both the scope of access as we can in terms of both the scope of products and countriesproducts and countries
5.5. Location to U.S. – only just in time fresh beef Location to U.S. – only just in time fresh beef import supplierimport supplier
Advanced Information AlignmentAdvanced Information Alignment Each sector in the value chain providing Each sector in the value chain providing
information to the rest of the chain will information to the rest of the chain will demonstrate cooperation in achieving the demonstrate cooperation in achieving the value proposition with everyone contributing value proposition with everyone contributing and benefiting.and benefiting.
All participating Canadian cattle are age verified All participating Canadian cattle are age verified through the CCIA database (register as being on through the CCIA database (register as being on VBP)VBP)
All participating feedlots report the arrival of All participating feedlots report the arrival of animals to the database and submit specified animals to the database and submit specified performance data (non-proprietary) on close out.performance data (non-proprietary) on close out.
All participating packers and abattoirs submit All participating packers and abattoirs submit specified carcass information linked to the animal specified carcass information linked to the animal ID to the CCIA databaseID to the CCIA database
Effect of Fed Cattle Prices on 550 lb Feeder Price
$141.36$129.09
$116.82$104.55
$92.27$80.00
$67.73
$0.00
$20.00
$40.00
$60.00
$80.00
$100.00
$120.00
$140.00
$160.00
$75.00 $80.00 $85.00 $90.00 $95.00 $100.00 $105.00
Fed Cattle Price
Fee
der
Cat
tle P
rice
QUESTIONS?QUESTIONS?