Meet the international trade expert who is helping support the Canadian beef industry abroad

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John Weekes, an independent business advisor who has worked with the National Cattle Feeders’ Association (NCFA) on trade issues, is the subject of this week’s Meet the Team series profile.

John is an expert in international trade policy and a senior business advisor at Bennett Jones in Ottawa. He has been a huge asset to NCFA in developing a strategic approach to negotiating with government and stakeholders.

Supporting Canadian cattle feeders in Ottawa

During his career, John has been chief negotiator for the North American Free Trade Agreement (NAFTA), Canada’s ambassador to the World Trade Organization (WTO), chair of the WTO General Council, and ambassador to the General Agreement on Tariffs and Trade (GATT) during the Uruguay Round of GATT negotiations. His insider’s perspective on governments’ approach to trade matters has been invaluable to NCFA.

Trade files he has worked on include:

Country-of-Origin Labelling (COOL)

In 2002, the U.S. introduced a regulation requiring all beef (and some other agriculture products) to have a label stating where it was from. To be labeled as U.S.-sourced, the animal had to be born, raised and processed in that country. Processing plants in the U.S. were required to keep Canadian born and raised animals separate from those born and raised in the U.S., a requirement that was costly to adhere to. As a result, Canadian exports to the U.S. suffered, and some U.S. plants were forced to close. Many jobs were lost on both sides of the border, and COOL cost the Canadian beef industry billions of dollars. 

Canada appealed to the WTO in 2008 and, in December 2015, won. The U.S. Congress repealed COOL to avoid $1 billion in retaliatory tariffs authorized in the WTO ruling. 

As Canada’s former ambassador to the WTO, John was uniquely positioned to provide advice through the complex web of WTO tribunals and the excruciatingly long appeals process. John worked with NCFA and others on this, including advising federal government officials. His contacts within the U.S. were also helpful in getting NCFA’s messages through in Washington, and he helped us communicate with Canadian importers who might have been harmed if Canada retaliated against U.S. imports into Canada.

Canada-E.U. Comprehensive Economic and Trade Agreement (CETA)

This free trade deal between Canada and the EU came into effect on September 21, 2017. It will allow Canada to ship 65,000 metric tonnes of beef into the EU, without duty or tariffs. This could be worth hundreds of millions of dollars to Canada’s beef industry. John did a great job monitoring developments, needs and the political climate within the EU, and is continuing to contribute while the details are being finalized.   

Trans-Pacific Partnership (TPP) 

Canada was not part of the group that began this trade negotiation, but NCFA urged the Canadian government to become part of the TPP process, which it did. John offered advice on what Canada should secure in this negotiation. Now that the U.S. has chosen not to ratify the deal, John will lend his expertise to a new round of negotiations with other TPP partners, if talks go ahead.

North American Free Trade Agreement (NAFTA) 

As Canada’s former Chief Negotiator for NAFTA, John has an unrivaled understanding of the ins and outs of the agreement, and his opinions are sought by industry and government during the current and ongoing negotiations with NAFTA.

Why international trade matters

Canadian beef is renowned worldwide for its great taste and high quality. A healthy export industry contributes to a healthy Canadian economy. Expertise such as John’s is vital to NCFA in securing the conditions our beef producers need to develop profitable relationships with customers across the globe.

You can read more about international trade issues in ‘Canadian beef trade with China takes a serious blow’, ‘Cattle feeders head to Ottawa to support NAFTA negotiations’, ‘Feeding the world: why the agri-food industry must be an economic priority’ and ‘How people in 58 countries enjoy Canadian beef’.

Why new federal tax changes will hurt Canadian agriculture

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Farmers and other small business owners across the country are worried that planned changes to the Income Tax Act pose a direct threat to the viability and profitability of their operations.

Why small businesses are concerned

Federal Finance Minister Bill Morneau announced the plan to update the act on July 18. The planned changes, however, will subject small businesses to higher taxes and eliminate many of the exemptions that make it possible for them to operate and build their businesses.

As with all small business owners, farmers take on tremendous risks and are subjected to much more income and financial volatility than a typical salaried taxpayer. The risk assumed by the small business owner is not always met with a matching reward.

Small businesses account for 30 per cent of Canada’s GDP. A tax structure that helps them weather financial downturns and survive challenges makes sound sense for individuals and for the Canadian economy.

How the changes will affect farmers

There are four changes – two proposed and two scheduled for introduction. Because agriculture is a unique industry and families are typically so heavily involved in operations, farmers stand to be particularly harmed by the changes.

Income splitting: Starting Jan. 1, 2018, income splitting with relatives is subject to new restrictions and a “reasonableness” test. Even though children often do a significant amount of farm work, the rules will make it harder for them to be paid via a dividend, leaving less cash in the farmer’s pocket, and making it harder to fund their business in a capital-intensive industry.

Lifetime capital gains exemption (LCGE): Starting Jan. 1, 2018, rules regarding this exemption will penalize children under 18, eliminate eligibility for capital gains from a family trust, and introduce a “reasonable” test that will be difficult to follow.

Holding of passive investments: Increases to corporate tax will leave less cash in the farmer’s pocket to fund future business operations and capital investments.

Transferring the business to the next generation: The proposed changes will make it more profitable for farmers to sell their business to a third party than to the next generation.

NCFA Submission to Minister Morneau

Like all agricultural operations, cattle feeders are worried about the impact these changes will have on their operations, on their families, and on their long-term prospects for profitability.

On Oct. 2, The National Cattle Feeders’ Association (NCFA) highlighted the negative impacts in a submission to Morneau and the Department of Finance. The changes will leave farmers under undue financial stress, the submission argued, limiting their ability to expand their operations and making it even more difficult to transition farming operations to the next generation. It strongly urged the minister to reconsider the proposed changes and amendments.

You can learn about another taxation issue in Why Lethbridge County cattle feeders could be leaving via new roads.

Canadian beef trade with China takes a serious blow

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Recent trade developments between China and the U.S. have some Canadian beef producers seriously worried.

Their concern stems from the disparity between the types of product China will now accept from the U.S. and those accepted from Canada:

    • Currently, Canadian producers are only allowed to ship boneless, Under Thirty Months (UTM) frozen beef and only from individual processing plants that have been audited and approved by Chinese officials and certified for export to China by the Canadian Food Inspection Agency.
    • China’s trade deal with the U.S. allows American producers to ship boneless beef, bone-in beef, chilled beef, and certain offals from any federally-inspected and approved processor.

Canadian beef producers already suffering the impacts

Producers and industry associations have written letters to Agriculture Minister MacAulay, as well as trade officials, to inform them of the impacts this has on the Canadian beef market. Producers are trading directly into China and have met all the requirements necessary for sale of beef into China – and this is a tremendous opportunity that may fail without similar access to that achieved by the U.S.

Some Canadian producers are selling their product under the branded ‘Farm Gate to Chinese Plate’ program, and have a custom processing contract with a large processing plant here in Alberta. These producers have invested substantial time and capital over the past four years to build a strong relationship with their Chinese partners. In 2016, 10,000 head of Canadian cattle were exported to China. Producers were looking forward to increasing that to 15,000 head in 2017, but their Chinese customers have informed them they may change the order, and want it for a lower price.

Canadian producers are selling product into China for high-end retail and restaurants, but they can only ship frozen, boneless product. The fact that the U.S. is now allowed to ship fresh or chilled bone-in beef puts Canadian producers at a distinct disadvantage in this marketplace. This may end trade with the Chinese for Canadian beef producers as a result.

Canadian trade with China

To date, China has expanded its acceptance of Canadian product in stages, where additional product lines are allowed access over time. For instance, China agreed to accept Canadian bone-in beef back in September 2016, but the agreement has not yet been finalized, so currently, no bone-in product is being shipped. However, the recent agreement with the U.S. shows that China can work on opening many beef product lines at the same time. The hope is that Canadian negotiators can secure the same treatment for Canada.

Canadian beef producers have expressed concerns over the fact that their industry depends on global trade – they need to be competitive for the growth and sustainability of their industry. China is a market where producers need the Canadian government to step up its efforts to gain access similar to that achieved by the U.S.

Learn more about Canada’s beef trade with China from Agriculture and Agri-Food Canada.

Cattle feeders head to Ottawa to support NAFTA negotiations

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Canada’s beef producers are anxious to preserve the North American Free Trade Agreement (NAFTA) because it is a great example of how free trade should work. U.S. President Donald Trump, however, has threatened to pull his country out of the pact.

What NAFTA has meant to the Canadian beef industry

NAFTA’s tri-lateral market access — without tariffs or quotas for either beef or live cattle — has resulted in healthy trade between Canada, the U.S. and Mexico.

According to the Canadian Cattlemen’s Association, in 2016, Canada exported 270,000 tonnes of beef and 764,000 head of live cattle to the U.S., valued at more than $3 billion ($1.7 billion was beef and $1.4 billion live cattle). A further 16,000 tonnes of Canadian beef valued at $109 million went to Mexico, making that country Canada’s fourth largest beef export market.

In fact, almost 72 per cent of Canada’s beef exports go to the U.S., and six per cent to Mexico. Almost 59 per cent of our beef imports come from the U.S.

Beef industry submission to federal governments supports NAFTA

In May 2017, the National Cattle Feeders Association (NCFA) joined with other Canadian beef industry groups in a submission to the governments of Canada, U.S. and Mexico, stressing that NAFTA works well for beef and the relevant provisions should not be changed. The arrangement has produced an integrated North American beef industry that benefits the three countries, and has allowed Canada to build an industry that is also more competitive internationally.   

While the NAFTA talks could lead to a fine-tuning of some details – such as the elimination or reform of certain border regulations and export impediments, and the aligning and harmonizing of veterinary drug approvals – we believe it’s important for Canada’s beef producers, and the Canadian economy, to preserve this agreement.

How Canada’s beef industry is represented at the negotiation table

Agriculture and Agri-Food Canada has a trade division that provides advice to the chief NAFTA negotiator. The trade team has received input and advice from industry representatives, and has held briefings for industry stakeholders prior to each round of the NAFTA talks. NCFA is planning to be at the upcoming briefings for the second round that will be held in Ottawa on September 23-27. 

How Canada’s beef industry could be negatively impacted by changes to NAFTA

Any changes that would restrict the free flow of live cattle and boxed beef across the borders to the U.S. and Mexico could have a profound effect on Canada’s beef producers. Another concern is any reimplementation of Country of Origin Labelling (COOL), which has been historically damaging to the beef industry.

You can read the full submission to the governments of Canada, U.S. and Mexico  here.

Meeting with MPs helps foster understanding of cattle feeders’ issues

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One of the primary mandates for both ACFA and NCFA is to act as an information source for government policy makers, and to build champions for Canadian agriculture and agri-food. 

Every year, when Parliament breaks for the summer, we get the opportunity to reconnect with MPs as they return to their constituencies. On Aug. 22, NFCA’s Bryan Walton, president and CEO, and Casey Vander Ploeg, vice-president, met with MPs and feedlot operators to discuss a number of pressing issues facing cattle feeders.

Who attended the meeting

The meeting was attended by Rachel Harder, MP for Lethbridge, Glen Motz, MP for Medicine Hat-Cardston-Warner and John Barlow, MP for Foothills.

In addition to Bryan and Casey, the ACFA’s members were represented by feedlot operators James Bekkering, Leighton Kolk, Rick Paskal, Cody Schooten, Shane Schooten and Larry Sears.

Important industry issues to watch for

Meetings such as this provide an opportunity for a semi-formal conversation about the issues and concerns of cattle feeders. This gives their representatives in Parliament the information they need for informed and balanced decision making. Some of the issues discussed at the meeting included:

1) Trade. Always a top priority, the agenda included updates on the following trade issues:

    • Trade with China. John Barlow provided a report on a recent Governor General’s Mission to China, which he attended. In addition, a recent agreement to expand U.S. exports to China has left Canada behind, and the need for the federal government to secure the same access for Canada was discussed.
    • NAFTA, and its importance to the cattle feeding industry.
    • Trans-Pacific Partnership, which needs to be altered and rebooted since the U.S. has pulled out.

2) Labour, and the chronic agriculture labour shortage both in Alberta and throughout Canada.

3) Rural Infrastructure.

4) Transportation Regulations.

5) Canada Food Guide.

As with any such meetings, we are confident this meeting provided government officials with a better understanding of the issues facing Alberta’s cattle feeders, and how to support them as they continue to feed Canadians and contribute to the economy.

You can read more about the cattle feeders’ top issues in ‘5 feedlot issues to watch for in 2017’.

Infographic: How does Alberta produce world-class beef?

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Canadian beef – and Alberta’s in particular – is internationally recognized for its quality and taste. But what are the key difference makers in Alberta beef production? What sets our province apart?

Take a look at our infographic below to gain a better understanding of how Alberta’s cattle feeders produce world-class beef. For more information, check out our overview of beef production in Alberta.

Beef production in Alberta:

Beef production

Why Lethbridge County cattle feeders could be leaving via new roads

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Here in Alberta, beef is a $5 billion industry. It supplies 75 per cent of our province’s meat exports, and 40 per cent of all agricultural exports.

But the hard-working Albertans who keep Alberta’s heritage industry running are worried about their future. They are dealing with increased costs from the province, taxation by municipalities and protectionist threats from the United States, all of which put untold pressure on their operations.

There’s not much we can do about threats from south of the border, but on a more local scale, our cattle producers are faced with issues that jeopardize their livelihoods. One such issue is the livestock head tax in Lethbridge County.

The county has proposed the tax to help raise money to build and repair roads and bridges. Few would argue that this infrastructure is not needed, but the burden will fall disproportionately on local cattle feeders, who will be paying 85 per cent of the tax.

What a livestock head tax means for cattle feeders

At any given time, there are more than half a million cattle in feedlots in Lethbridge County. This business contributes over $600 million to the local economy. But an independent analysis of the tax concluded that cattle feeding operations will either close or move to other jurisdictions. Feeder cattle will migrate to US feedlots. This means Alberta will lose a value-added component of the beef industry which has taken generations to build.

Why a dysfunctional property tax system lies at the root of the problem 

Lethbridge County argues that the infrastructure money it needs can’t come from increasing property tax on farmland because Lethbridge already has one of the highest farmland tax rates in Alberta. At first glance, this appears to be true – farmland property taxes in Lethbridge County are 2.3 per cent of assessed value compared to a provincial average of 1.1 per cent. But this requires a closer look:

    • Comparing taxes paid as a per cent of assessed value is not the way to measure tax burden. This can only be measured by comparing taxes paid to personal or net business income. 
    • When measured as a percentage of per capita income, taxes paid on farmland in Lethbridge County are about 40 per cent lower today than they were in 1996.
    • The property tax system does not properly assess and tax land used for intensive livestock operations. 
    • Assessment rates have not been updated since 1983.  As a result, the property tax burden is not being fairly shared among owners of farmland. 

The Alberta government has long known about these issues with the property tax system. It commissioned a review in 2002, resulting in recommendations which were subsequently ignored.

Ignoring the problem is no longer an option. It’s time for the government to modernize and update the farmland property tax system so municipalities can raise the revenue they need to serve their citizens and support their livelihoods.

We have called on the Minister of Municipal Affairs to work with us in designing a province-wide solution for this province-wide issue. We need fair, equitable, and transparent tax policy. It’s the only way to support the businesses on which our economy is founded.

You can learn more about other issues that are of concern to Alberta’s cattle feeders in ‘5 feedlot issues to watch for in 2017.’

Quiz: how has cattle feeding contributed to 150 years of Canadian prosperity?

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2017 is a momentous year for Canadians, as we celebrate our nation’s 150th birthday. But did you know that the Canadian beef industry has been around for about that long too?

As we move toward Canada 150, we thought we’d have a little fun with a look at how the cattle feeding industry has contributed to Canada over the last century and a half. Take this quiz to find out how well you know your feedlot history:

Canada’s come a long way in 150 years – and so has the beef industry! You can learn more about the history of Alberta’s feedlots in ‘From Start to Finish: An Illustrated History of Cattle Feeding in Alberta’ (PDF).

 

If you enjoyed this quiz, you might also enjoy this earlier one from our blog: ‘How well do you know your beef?’

Canadian beef in demand: feeding the European market and why it matters

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Global trade is a mark of success for any business, and that holds true for the beef industry as well.

One market that has not reached its full potential is Europe, where Canadian beef is in high demand. To learn more about this market, and why more Canadian beef doesn’t head east across the Atlantic, we spoke with Jason Hagel of Hagel Feeders.

His feedlot is one of the few in Canada that feeds cattle bound for the European market. The business was started by Jason’s grandfather in the mid 1950s and now feeds about 5,000 head of cattle each year, in addition to a cow/calf operation comprising about 1,000 head. Hagel Feeders can be found just east of Linden, Alberta.

In 2005, Jason was approached by a group of ranchers who had started a brand called Prairie Heritage. They were looking for a feedlot for their beef, which was supplied to local restaurants and grocery stores. The brand was based on providing beef grown by certified beef producers, with an environmental farm plan in place, and without the use of growth promotants or antibiotics. Success in the domestic market was eventually followed by expansion into the European market. “Even though tariffs made the product expensive to the European consumer,” said Jason, “they were hungry for it. About one-third of our product was being shipped there.”

In 2014, the Prairie Heritage brand was sold to One Earth Farms, but Hagel Feedlots continues to feed the cattle.

The cost of European beef exports, and why they matter

The main requirement for export to Europe is that the beef must be produced without the use of growth promotants. “It costs about 18 to 22 per cent more to finish an animal without growth promotants,” explained Jason, “because they take longer to finish, and require more feed.”

The animals must also be segregated, and RFID technology is required to provide the data needed to guarantee that the animals have been raised and fed as stated.

“Nonetheless, it’s very important for Canada to stretch out her arms to countries other than the U.S.,” he continued. “We send the majority of our product down there and that reduces our bargaining power when it comes to price. We have two American packing plants in Alberta, which have no real interest in going to anywhere other than the U.S. because it’s easy and they can buy a premium product for a lower price.”

CETA and tariffs: beef industry implications

The Canada-European Union Comprehensive Economic and Trade Agreement (CETA), ratified in February 2017, is designed to encourage free trade between Canada and Europe. However, Canada already enjoys a tariff-free quota for beef exports. “Right now we don’t send much beef,” said Jason, “so we don’t even reach those quotas. It’s not because we don’t have the beef to send, but because there are not enough packing plants that are qualified to send beef to Europe.”

With the opening of Harmony Beef in Balzac, Alberta, later this month, that may well change. Stay tuned for an upcoming post in which we will feature this new business and discuss the implications for trade and for the Alberta economy.

Europe’s not the only market where our beef is in demand. Check out this earlier post to learn how people in 58 countries enjoy Canadian beef.

Feeding the world: why the agri-food industry must be an economic priority

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Canada’s agricultural industry has long been in a severe labour crisis. As young people move toward the cities, and rural populations age, our farmers struggle more and more to find the manpower they need to run their operations. Despite this labour crunch, agricultural production in Alberta is worth about $5 billion a year, so finding solutions for the people who produce our food is a top priority.

The Federal Advisory Council on Economic Growth recently recommended to the Federal Government that the agriculture and food sector be named a growth priority. This introduces opportunities for industry and government to come together in partnership to strategically remove growth constraints and leverage untapped potential. The labour shortage will be one of the high-impact issues to be addressed by action teams consisting of various stakeholders.

Why this matters

Canadian farmers will always try to employ Canadians first. But when they have positions that Canadians aren’t applying for, they must have access to alternative sources of labour. Only then can our farmers produce the high-quality food Canadians expect, and have the capability to supply a healthy export market.

Canada has an international reputation for high-quality food and exceptional food safety standards, and prioritizing growth will help secure our place as a global leader in the provision of top-quality, trusted agri-food products to the world.

Changes to the Temporary Foreign Worker Program

This is not the first ray of light that has been offered to this struggling industry. In December 2016, the Federal Government announced changes to the Temporary Foreign Worker Program that promise to help alleviate the labour shortage. Some of the changes include:

  • Removal of a rule stating that foreign workers could only work in Canada for four years at a time.
  • Changes to caps and exemptions.
  • A commitment to developing pathways to permanence for foreign workers.

How these changes support the Canadian Agriculture and Agri-Food Workforce Action Plan

The Canadian Agriculture and Agri-Food Workforce Action Plan is an industry-led ‘roadmap’ to help alleviate the labour shortage. The recommendation to make agri-foods a growth-priority industry supports the plan’s two main recommendations:

  • Increase the supply of labour to meet immediate and future requirements for skilled and unskilled workers.
  • Improve the knowledge and skills of workers to meet immediate and future labour requirements.

These recommendations also closely align with the Economic Advisory Council’s recommendations regarding a ‘FutureSkills Lab’ and represent immediate targets to support the agriculture industry on this front.

To learn more about Canada’s agriculture labour shortage, check out: