Canada. Poultry and Products Annual. Jul 2013 Ноя. 6, 2013
Under Canada’s supply management system, poultry farmers are able to pass on production costs to processing plants, making them less vulnerable to fluctuations in feed prices. Given that competing proteins will remain in short supply and will show increased prices, the poultry sector will take advantage of the situation and present a moderate growth in 2014, after a better than expected performance in 2013.
• With supply management, poultry farmers in Canada recover their costs of production from processing plants. Farmers are, therefore, sheltered from the impact of fluctuating feed costs. However, poultry processors' ability to pass on input costs to downstream customers is limited, making them more vulnerable to market conditions. Nevertheless, anticipating feed prices to remain within tolerable margins, and given a relative short supply of red meats at elevated prices, Post forecasts a moderate growth of 1.4 percent in broiler meat production in 2014, up to 1,070,000 metric tons (MT).
• For 2013, Post estimates the broiler meat production to be 1,055,000 MT, a level reflecting a better than expected performance in the sector, as the industry steadily increased production throughout the year to meet a solid demand. As such, the 2013 broiler meat production is estimated to be 1.7 percent higher than in 2012.
• Canadian imports of chicken meat are regulated under a tariff rate quota (TRQ) which is a function of the previous year's production level. The global quota for 2014 is projected at 79,100 MT. In 2013 the TRQ level is 77,800 MT.
• In recent years, Canadian poultry companies have been increasingly utilizing the Department of Foreign Affairs, Trade and Development’s (DFATD) Imports for Re-Export Program (IREP). Through IREP, Canadian chicken processors import chicken meat duty free for use in processing, provided they re-export the associated processed products. As a result, total chicken imports are about double the TRQ volume, as attributed to IREP imports.
• The year 2012 marked the emergence of a new trend in the imports for re-export business, namely the use of a competing program offered by Canada Border Services Agency (CBSA), the Duties Relief Program. Post anticipates that by 2014 half of Canada's imports for re-export will be part of CBSA's program, to the detriment of the traditional IREP.
• Moving into 2014, Canada’s turkey market will remain flat, with production forecast to stay at 165,000 metric tons, virtually unchanged from 2013.
Broiler Meat Production
With supply management, poultry farmers recover their cost of production from processing plants. In this way, farmers are sheltered from the impact of fluctuating feed costs. The same cannot be said about poultry processors. Their ability to pass on high input costs to downstream customers is limited. Nevertheless, in the current market conditions, an expected short supply of red meat coupled with elevated red meat prices represent an opportunity for poultry meat as an alternative source of proteins. For 2014, Post forecasts a moderate increase of 1.4 percent in broiler meat production, up to 1,070,000 metric tons (MT).
For 2013, Post revised upwards to 1,055,000 MT the initial forecast of 1,045,000 MT, as the industry steadily increased production throughout the year to meet a more solid demand. As such, 2013 broiler meat production is estimated to be 1.7 percent higher than in 2012.
Canadian broiler production experienced a period of rapid growth during the 1990s, with an average annual growth rate of 5.8 percent for the entire decade. This growth reflected a strong domestic market demand both from the retail and foodservice sectors and a change in consumer preferences away from red meat and towards a perceived healthier chicken diet.
During the decade beginning in 2000, broiler production expansion slowed down, achieving a much more modest average annual growth rate of 1.6 percent. This slowdown in expansion reflected a matured market that seems to have maximized its potential. For the time being, future growth will be mainly supported by the annual increase in Canadian population, and by the ethnical composition of Canada's immigration, where many newcomers of Asian or African origin have a stronger preference for chicken meat versus red meat.
Canada operates a supply management system in the broiler sector. Unlike in the United States, the industry is not vertically integrated. Canada has a multitude of independent chicken farmers, often operating family businesses, supplying live birds to processing companies. Production is tightly controlled through a quota system. Decisions on the production volume are taken before every 8-week production cycle, with the national volume allocated to each of the ten producing provinces, and subsequently further allocated to individual producers based on the total production quota.
Per capita broiler meat consumption had been stagnant and slightly declining since it peaked in 2007. Post forecasts the flat trend to continue into 2014, with a per capita level of 30.5 kg, modestly up from an estimated level of 30.3 kg in 2013. The Canadian market is now mature and supply of broiler meat has not kept up with increases in population. In addition, following the recent recession, and the still fragile economic recovery, consumers are showing restraint in increasing demand. Post also believes that declining consumption levels do not necessarily mean that people eat less broiler meat – it may be the case that given the existing difficult economic environment consumers, both individual and institutional, are less wasteful with the products they purchase.
Despite these recent trends, total domestic chicken consumption in Canada has almost doubled in the past 30 years. The increase was partly due to the country’s population growth which increased almost 39 percent from 24.5 million in 1980 to about 34 million in 2010. At the same time, the increase in consumption can also be attributed to chicken’s increasing popularity among Canadians during the period. Overall, Canadian preferences have shifted towards chicken primarily due to an increase in health awareness and the perception that chicken is leaner and therefore healthier than other meats. Price is not a major factor since poultry prices, due to the supply management system, are consistently higher than pork and a number of beef cuts, which are not under supply management schemes.
In recent years, the pattern of Canada’s immigrant population is one that is more likely to have dietary preferences for chicken rather than beef or pork. In addition, Canada’s food service providers are continually introducing chicken menu items in creative ways, or as an ingredient in ethnic-style food offerings, that are becoming increasingly popular. Chicken Farmers of Canada's Strategic Plan for 2009-2013 listed as an industry objective to increase annual per capita consumption of chicken to 33 kg, an ambitious goal given the current conditions.
With the supply management system, chicken producers receive a fixed price for their live birds, which is determined every 8-week production cycle based on production costs. Ontario is the largest chicken producing province in Canada, capturing about one-third of the market, and therefore Ontario live bird prices are the basis for the calculation of prices in other provinces. Due to the supply management system, producer prices have remained remarkably stable over time, and only showed a more substantial increase in the past few years due to the dramatic increase in grain and feed prices.
Like with most agriculture products, broiler meat retail prices are minimally impacted by farm gate prices. The Canadian supply management system guarantees prices only for producers and not downstream for the other participants in the supply chain. Wholesale and retail broiler meat prices are usually reflective of market conditions in terms of supply and demand. They are also reflective of consumer preferences for various chicken cuts, and of their quality and degree of transformation.
Similar to consumers in United States, Canadian consumers tend to prefer white meat (breast and wings) rather than dark meat (legs). The most expensive chicken cut is the fresh boneless skinless breast, widely used in restaurants and a preferred barbecue item for Canadians. Wings are seen as a good complement to beer and are very popular during the winter hockey season. Leg quarters have traditionally been the least expensive chicken cuts in groceries, cheaper even than the whole birds. However, as the ethnic mix changes in the general population, and for economic reasons, leg quarters are slowly becoming an increasingly popular item, as reflected by a sustained upward trend in retail prices over the past few years.
For 2014, imports are projected at 145,000 metric tons (MT), up 5,000 MT from the estimated level for 2013. Under the supply management system, broiler meat imports are controlled and subject to a tariff rate quota (for more information consult the policy section of this report), which is a function of the production level. Market conditions in the United Sates also play a significant role in import decisions, since a large price differential between the lower U.S. broiler meat prices and the higher Canadian ones is a strong incentive for importers to bring in more American meat, especially under programs that provide a customs duty exemption, such as IREP (imports for re-export program).
The United States is Canada's largest supplier of broiler meat, with a market share close to 90 percent in the most recent years, followed by Brazil at just under 10 percent market share. In general, some Canadian importers are discouraged from importing Brazilian chicken, despite its lower cost, because it cannot be re-exported to the United States.
Product Control for Brazilian Poultry: Since USDA does not permit imports of Brazilian chicken, the Canadian Food Inspection Agency (CFIA) has strict import procedures to ensure that Brazilian chicken in Canada does not enter the United States. Under CFIA regulations, poultry meat imported from Brazil may not be exported to the United States and may not be used in the manufacture of meat products exported to the United States.
Canadian poultry slaughter and processing establishments that import poultry meat from Brazil are not eligible to export poultry meat products to the United States. All poultry meat and meat products present in the non-eligible establishments must not enter Canadian establishments that have full export status for the United States. All Canadian establishments (including storage facilities) must maintain inventory records regarding origin of all meat present on their premises and the destination of meat shipped from the premises.
Post forecasts 2014 broiler meat exports at 155,000 MT, up 5,000 MT from the estimated level for 2013. Increased activity under the imports for re-export program (IREP), sustained demand on certain Asian markets, and a new interest from Cuba are the driving forces behind Canadian exports in 2013.
Generally speaking exports fall into two broad categories: the majority of them represent the "re-export" side of the IREP, exports being a requirement of the program since the original imports are prohibited from entering the domestic market, while the rest of them reflect "genuine" exports. The latter category is made up mostly of dark meat cuts (such as leg quarters) since, like in the United States, the Canadian domestic market shows a stronger preference for white meat (breast).
Tariff Rate Quota
Canada controls imports of chicken under a tariff rate quota (TRQ). The minimum access level (into Canada) under the World Trade Organization (WTO) commitment is 39,844 metric tons (MT) but Canada applies the higher access level under NAFTA, which is equal to 7.5 percent of the previous year's domestic chicken production as reported by Statistics Canada. For 2014, the global permit allowance is forecast to increase to 79,100 MT based upon 2013 production. For 2013, the global chicken TRQ is 77,800 MT as based on the 2012 production level. Actual chicken imports under the TRQ may be slightly higher or lower than the allocated amounts, based on prevailing market condition in each year.
Under the TRQ, imports are subject to low "within access commitment" rates of duty up to the predetermined limit, while imports over this limit are subject to higher "over access commitment" rates of duty. However, Canada regularly issues supplementary import permits for: 1) periods when there are product shortages; 2) the chicken Import to Re-Export Program (IREP), under which import allocations are issued to Canadian poultry processors whose finished manufactured products are intended for re-export, and 3) to Canadian poultry companies, commonly referred to as the FTA (free trade agreement) sector, who compete in the Canadian marketplace with similar, imported processed products that receive zero-tariff treatment under the NAFTA. Information on the chicken TRQ, other supplementary imports and the process of importing broiler meat into Canada is located on the web site of the Department of Foreign Affairs, Trade and Development (DFATD), at the following link.
Imports for Re-Export Program: In recent years, the majority of supplementary imports have been comprised of imports under the IREP program. The program requires that the resulting processed chicken product be exported, since the diversion of product imported under IREP to the Canadian (domestic) market is prohibited. It is a policy that helps Canadian poultry processors remain viable by giving them access to lower priced imported chicken, but offers little to Canadian consumers who pay high retail prices for chicken under the supply managed regime. Canadian proponents of the IREP program argue that it allows Canadian chicken processing plants to achieve economies of scale they could not otherwise achieve if restricted to available supplies of domestically produced chicken. IREP imports became popular at the end of the 1990s and have continued to grow significantly, to the point where in 2008 they exceeded for the first time the import volumes under the global TRQ. IREP imports may be sourced in any country, but in practice almost the entire volumes are imported into Canada from the United States, and once processed they return back to the U.S. market.
Duties Relief Program: The year 2012 marked the emergence of a new trend in the imports for re-export business, namely the use of a competing program offered by Canada Border Services Agency (CBSA), the Duties Relief Program. Post anticipates that by 2014 half of Canada's imports for re-export will be part of CBSA's program, to the detriment of the traditional IREP.
Special Agricultural Safeguard (WTO)
In 2008, Canada gave notice of the volume and price triggers that will be used to operationalize the World Trade Organization (WTO) Special Agricultural Safeguard (SSG) for Canada’s supply-managed products (i.e. products under a tariff rate quota). The Special Agricultural Safeguard is a provision that allows additional duties to be triggered when import prices fall below a certain price level or exceed a certain volume level. Price triggers are also to be listed on the same website. Unit prices which would theoretically trigger the SSG are currently much lower than current import price trends and activation of the safeguard is not expected. In the event that import prices do decline to levels below trigger prices, the SSG would not automatically be activated, but the situation would be evaluated on a case-by-case basis requiring formal WTO notification and an Order in Council (i.e. federal cabinet approval).
Moving into 2013, Canada’s turkey market will remain flat, with production forecast to stay at 165,000 metric tons, basically the same level as in 2012. This development is expected after a better than anticipated year in 2012, when turkey production is now estimated at 165,000 MT, up 3.4 percent from the previous year. Post forecasts per capita turkey consumption at 4.46 kg (eviscerated weight) in 2013, a very modest increase from the estimated level of 4.45kg in 2012