The sad state of the beef industry

The most recent massive recall at Alberta-based XL Foods is the last thing the Canadian beef industry needed

Sylvain Charlebois, Guest Columnist – Troy Media

The most recent massive recall at Alberta-based XL Foods is the last thing the Canadian beef industry needed, especially as it supplies 40 per cent of all beef consumed domestically.

This incident may yet again damage the industry’s already fragile image, particularly considering that the USDA may have discovered the outbreak before our own Canadian Food Inspection Agency (CFIA).

As consumers are questioning their relationship with their steak or hamburgers, the beef industry in Canada continues to work to recover from the 2003 mad cow crisis. Given the potential impact of this recent incident, it may never.

On May 20, 2003, international borders were closed to the import of Canadian beef almost immediately following the 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 in history 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 toward their farmers. Indeed, Canada Food Day, a national event that celebrates local Canadian food products, began as a response to the mad cow crisis. Overall, from the perspective of Canadian consumers, this potentially disastrous incident never became a food safety-based confidence issue.

However, nine years later, times have changed. More Canadian consumers are having serious conversations about diets, trends and global food systems; that is, they care more about where their food comes from. In addition, aggregated food demand in the country is fragmenting faster than ever; many consumers are increasingly shopping with a conscience, asking questions about such issues as conditions of production, which includes the issues of animal welfare, fair trade and organic farming.

As these and other questions get deeper traction in our collective Canadian 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 the sector almost a decade ago. To make matters worse, the sluggish economy has compelled consumers to opt for options such as cheaper proteins like chicken and other substitutes.

The beef industry is also facing some major challenges in international markets. In 2003, the Canadian dollar was at 73 cents US; as a result, America, historically our biggest export market, considered Canada as an affordable source of fresh beef products. Now, with the dollar hovering at around parity versus the American greenback, the Canadian beef industry is regarded differently down 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 contracted by more than 15 per cent and the XL Foods episode will definitely not enhance the industry’s quality image abroad. To add to the systemic pressures the Canadian 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 is worse, though, is that consumers themselves are in a different place as well. With this latest recall at XL Foods, the Canadian beef industry is facing some major headwinds. In 2003, in the midst of the mad cow crisis, the Canadian consumer came to the rescue.

It is unclear whether Canadian 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 associate dean of the College of Management and Economics at the University of Guelph.

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