Canadian beef producers need to focus on exports to emerging economies to maintain growth, particularly in the face of rising feed costs and flat demand in developed markets such as the US, BMO Economics suggests.
"Canada's beef industry will struggle to expand production and sales if it focuses exclusively on traditional markets, such as North America, for its products," said Aaron Goertzen, economist, BMO Capital Markets. "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."
Emerging markets such as India and Brazil, with rapidly growing populations and faster economic growth, have steadily increased their beef consumption - a pace that the United Nations' Food and Agriculture Organization expects will be sustained over the next decade, Goertzen noted. Total domestic consumption of beef and veal in India was more than 2 million metric tonnes last year - up 73 percent since 2000. Consumption in Brazil was nearly 8 million metric tonnes - up 29 per cent. In contrast, Canadians consumed just more than 1 million metric tonnes last year.
"With countries like Australia and New Zealand exporting beef heavily, it's also difficult to argue that Canada's relative isolation -- excluding our large neighbor to the south -- is a limiting factor," he added.
The livestock sector and agriculture, overall, are key economic drivers in Canada. A recent survey BMO found Canadians love homegrown beef, with more than half frequently purchasing locally produced beef, said Mike Darling, vice president, Southern Alberta Commercial District, BMO Bank of Montreal. "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,” he added.
Only the most efficient producers, within Canada and globally, will be able to generate profits reliably in this challenging environment, Goertzen concluded.
