September 10, 2012 / 8:13 PM / 5 years ago

Canada too dependent on cattle, beef sales to U.S.: report

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WINNIPEG, Manitoba (Reuters) - Canada's dependence on cattle and beef sales to the United States leaves it at risk of becoming a net importer of beef from the U.S. as it buys back higher-value processed products, a report on the C$6-billion ($6.1 billion) industry said on Monday.

Canada, the No. 5 beef exporter, ships 85 percent of its beef and cattle exports to the United States, racking up C$1.8 billion in 2011 sales. Much of those supplies, however, are backfilling the U.S. market, allowing the American beef industry to process more meat to take advantage of higher value and margins, said the report by the Canadian Agri-Food Policy Institute.

"Today the mindset seems to be to produce cattle and beef for the United States," said David McInnes, chief executive of the policy organization, from Ottawa. "And they're getting the value off it."

Canada shipped C$1.4 billion worth more beef to the United States than it imported in 2002. But by 2011, that net trade surplus fell to just C$42 million, as Canada sends to the United States live cattle and beef, then imports back higher-value processed products.

At the same time, the Canadian beef industry is failing to take advantage of new, lucrative export markets that have opened to them after a blitz of political visits in recent years, according to the report.

Canadian ranchers and beef processors have gained access to South Korea, China and numerous smaller markets in the past few years and should create a strategy for reaping the benefits by adjusting production and processing to suit those higher-paying countries, McInnes said.

"It's not like we're going to forego the United States for pursuit of other markets abroad, it's how do we find the right mix and align it from producers - the source of cattle - right through to the retailer and exporter?"

Boosting exports, however, depends on having supplies, and Canada's cow herd has shrunk by 20 percent since 2005.

The institute interviewed officials from a broad cross-section of the Canadian industry, including beef processors, government officials and ranchers.

"While recognizing that the U.S. will always be a key market for Canada, we have also attained beef access in China, Korea and other growing markets," said Agriculture Minister Gerry Ritz, in a statement. "We will continue to work with the beef industry as they develop a road map to ensure that they can take advantage of new market access and opportunities."

Cargill Ltd CARGIL.UL spokeswoman Brigitte Burgoyne said the company, one of Canada's biggest beef packers, is reviewing the report.

($1=$0.98 Canadian)

Reporting by Rod Nickel in Winnipeg, Manitoba; Editing by Marguerita Choy

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