Will Canada’s little piggies go to market, or stay home?
By Geoff Geddes
Though rarely flying first class, Canadian pigs and pork products travel the globe. While they don’t earn frequent flyer miles, they do sustain the Canadian pork industry by meeting the needs of various markets for safe, high-quality food.
With a new government in Ottawa, what will their priorities be for pork exports in the years ahead? Perhaps more importantly, what should they be?
“We export 70 per cent of pigs and pork products from this country,” says Gary Stordy, director of government and corporate affairs at the Canadian Pork Council (CPC) in Ottawa. “As a result, three aspects of trade are of paramount importance to producers: building and maintaining good relationships with trade partners, ensuring there are no new impediments that could disrupt trade, and dealing with current obstacles in a timely fashion.”
As both a hog producer and a director with Ontario Pork, Eric Schwindt has a unique perspective on the stakes involved.
“Pork is no different from other industries in that trade has increased exponentially over the last 20 years as the world gets smaller,” he says. “As producers, if we don’t have a home for our pork, the processor won’t be buying our market hogs every week. Over the last two to three years, we’ve suffered a loss of processing capacity in Eastern Canada, so we would be in deep trouble were it not for the vast opportunities abroad.”
Given that dependence on trading partners, Schwindt is heartened to see a sizeable pork demand worldwide, something he feels we must continue to foster.
Ready, set, grow
“We believe the focus should be on growth opportunities in Asian countries where pork is the protein of choice, such as Japan, Vietnam, Singapore and South Korea,” says Schwindt. “We must ensure that Canadian pork is front and centre when those nations are making buying decisions.”
Of course, Canada’s trade prospects for pork are largely influenced by China, where relations have been strained of as late with the Huawei controversy and detainment of the two Michaels.
Now that the tension is easing, the industry hopes the government will focus on mending the damage.
“We’re dealing with a situation where about 70 per cent of our processing capacity doesn’t have access to China at the moment,” says Stordy. “That’s something we see as a top priority, and that we continue to discuss in terms of how to improve conditions.”
To that end, the CPC was front and centre in travelling to China prior to the pandemic, meeting with importers, logistics companies and customers to discuss problems and identify ways of addressing them.
“We wanted to demonstrate that the relationship between our two countries is important to us, and the Chinese market is one that Canada does not take for granted,” says Stordy. “At the same time, if there are obstacles to shipping pork to China, we’ll find other options, but it’s a critical market that we don’t want to turn our backs on.”
Given China’s importance for Canadian pork exports, the CPC is asking the federal government to bring forward an action plan for rebuilding the relationship with China.
This includes a call for placement of a senior-level official in the Canadian Embassy in Beijing to address agricultural issues.
“As I am optimistic by nature, I look at China and see a huge population and a massive demand for pork,” says Schwindt. “When you have such a substantial need, and a country like Canada that can fill the need with a high-quality product, surely we can find a way to get it done.”
Wheeling & dealing
Central to maximizing trade for the pork sector in other regions are deals like the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP). The free trade agreement includes Canada, Mexico and nine other countries in the Asia-Pacific region: Australia, Brunei, Chile, Japan, Malaysia, New Zealand, Peru, Singapore and Vietnam.
The pact offers Canadian beef and pork exporters preferential access and tariff reductions for key global markets and could serve as a blueprint for future agreements.
“The CPTPP is a great first step,” says Schwindt. “We’re glad it’s in place and are strongly in favour of any chance to expand it. In this regard, it’s incumbent on pork producers, packers and government to form those business-to-business relationships and find opportunities to fill market needs.”
Though overseas markets are critical for tapping into opportunity, Canada has another key trading partner right on its doorstep.
“The United States is our closest market and one that takes both pork products and pigs,” says Schwindt. “It’s a two-way street between economies that are highly integrated, so it’s beneficial for both countries. I get concerned when I hear about things like COOL (Country of Origin Labelling) possibly being revived, as it could increase importer costs, but that talk is focused mostly on the beef sector at present.”
In the wake of the recent U.S. election, could our pork sector benefit? As with most questions around agriculture and politics, the answer isn’t a simple one.
“The departure of Trump has definitely changed the trade dynamic from a reactionary process to one based more on thoughtful decision making,” says Schwindt. “The Biden administration is better at playing by the rules than its predecessor, but that doesn’t mean it’s more trade friendly. When it comes to protecting U.S. interests, Biden is as protective as Trump was, if not more so.”
Too close for comfort?
While a strong working relationship with our American neighbours is essential, there’s a potential downside to forging such close ties.
In North America, by the time pork is grown, processed and placed on store shelves, it may cross the border multiple times before it gets to the consumer. With such an intertwined system, the border becomes more and more critical, and this could backfire in a crisis such as African swine fever (ASF) reaching our shores.
“If there’s an outbreak in either country, pork movement would essentially stop, and the entire production chain would have to brainstorm next steps,” says Schwindt. “As pigs are born every day, we don’t have the luxury of stockpiling animals and pork for 60 days while we figure it all out.”
Faced with these vulnerabilities, it may be more critical than ever to build, or re-build, bridges with China and other Asian countries. As part of staying competitive, some observers stress the need for Canada to avoid self-sabotage.
“We must avoid pursuing policies which make it harder to prevail on the world stage,” says Schwindt. “The hot button issue today is carbon. While I believe we’re constantly improving in terms of efficiency and using less carbon, we must be realistic as far as what we can do. The Canadian government needs to ensure that our carbon rules are like our competitors so we don’t find ourselves at a disadvantage.
“Given a level playing field, we, as Canadian producers, believe we can hold our own with anyone, but if carbon gets priced here at three times the level of the United States, Spain or Brazil, it puts us at a deficit right from the outset.”
As any producer can attest, the pork business is constantly affected by trade policy cycles, both for better and for worse. It’s a reality that industry and government must face and use to guide their approach to trade.
The ins & outs of ups & downs
“The negative impacts of protectionism and isolation have often been mitigated by periods of openness when barriers are torn down and people and goods move a bit more freely,” says Cam Dahl, general manager of the Manitoba Pork Council. “For Canada, the late 1980s through the early 2000s was a period of openness. We negotiated a free trade agreement with the United States, later expanded to include Mexico. Large trade pacts were also reached with the European Union (EU), Comprehensive Economic and Trade Agreement (CETA) and CPTPP.”
As well, Canada has additional individual free trade agreements with countries in Latin and South America, Asia and Europe.
Like strong pork prices during the porcine epidemic diarrhea virus (PEDV) era, however, the trend towards openness was too good to last.
“Protectionism and isolation are back in vogue,” says Dahl. “This is dangerous and we need the government of Canada to push back. Countries that have signed agreements to open trade are finding new non-tariff barriers to block imports. Calls for protectionism have been boosted by the COVID-19 pandemic, with policies of self-sufficiency becoming a key part of politicians’ talking points.”
As a result, Dahl wants the Canadian government to do more than sign trade agreements, namely to show leadership to ensure that these deals deliver on the expected market opportunities.
A prime example would be CETA, which Dahl sees as falling short of expectations thus far.
“Almost all sectors of Europe’s agri-food industry have seen a significant increase in exports to Canada since CETA was signed,” says Dahl.
“Despite initial optimism, there has not been an equivalent gain for Canadian farmers. This is because the EU wins Olympic gold when it comes to finding new barriers to trade. The EU has developed non-tariff barriers to Canadian agricultural products, including pork, beef, canola, and durum wheat and this should not be acceptable.”
Fight, not flight
In Dahl’s view, Canada should use the World Trade Organization and the dispute processes in agreements like CETA and CPTPP to challenge non-science-based trade barriers.
“Europe’s refusal to accept our scientifically equivalent food safety standards for meat should be confronted more determinedly,” says Dahl. “Canada should not be willing to accept labelling laws that are thinly disguised barriers to our food.”
Simply put, Dahl stresses the need for Canada to act un-Canadian in this instance, and stop being so polite.
“Canada also needs to dedicate new resources to fighting protectionism,” says Dahl. “We should be posting new technical, science-based experts at our embassies abroad to proactively deal with trade irritants before politicians turn them into trade barriers. Having a science-based rapid response team available in key markets would go a long way to making sure that farmers realize the benefits that were expected when our trade agreements were signed.”
Though this move to protectionism may have been accelerated by the global pandemic, Dahl says it began before COVID-19 and he wants to see a sense of urgency when it comes to the government’s response.
“Unscientific and unjustified policies to limit Canadian exports are costing farmers millions,” says Dahl.
“There are no quick solutions to this challenge, but farmers need a government that’s willing to dedicate additional resources to securing market access and launch a more strategic approach to combating trade barriers, with Canadian farmers and exporters as partners.”
Added to these trade challenges is the reality of fluctuating pork demand, a problem with no clear solution.
“There’s a lot of volatility involved in our industry, and some of it’s captured in the longer-term hog futures chart,” says Abhinesh Gopal, market analyst with Farms.com. “Disease pressures like ASF, PRRS (porcine reproductive and respiratory syndrome) and PEDV (porcine epidemic diarrhea virus), macro issues such as COVID-19, supply chain disruptions – especially for a commodity that’s reliant on cold storage – and competition from other meats like beef, are some of the factors that influence demand. Some of the macro and disease pressures, in both importing and exporting countries, may ease once COVID-19 and ASF are under control.”
Turn the page & re-engage
It may sound like a lot of doom and gloom, yet there’s cause for hope if government and industry chart the right course.
“The Canadian pork sector is fortunate that we have knowledgeable producers working in a regulatory system that gives our global trading partners confidence,” says Stordy. “They know they’re buying a safe, quality product, and that in itself is one of our strongest attributes.”
From here on, those who are bullish about pork stress the importance of reconnecting with a lot of those customers, as well as countries that may not currently buy our product for one reason or another.
“Maybe they have found other suppliers, or we didn’t have the supply they needed,” says Stordy. “We have to engage with those parties more substantially than we have over the past two years because of the pandemic, whether that’s through trade missions, face-to-face meetings or other opportunities to discuss the Canadian pork market and all it has to offer.” BP