Canada a beef competitor and customer: Over the Hooks with Steve Martyn

With the implementation of the SFC regulations in Canada it is now a requirement for Australian meat exporters to provide an SFC licence number of the consignee on all Health Certificates with each shipment from October 1. This could impact some approaches to trading as it will require working with their importer to get their SFC number well in advance in order to clear customs.

A replacement health certificate can cost $500.

This is a typical example of the continuous change that occurs in all export markets and the need for Australian processors and exporters to work with governments to ensure they are adhering to import country requirements to avoid any problems at port of entry.

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As most shipments to Canada, let alone the rest of the world, are sold on a CIF (cost insurance and freight) basis, it means the importer only takes ownership of the shipment after it clears health and customs.

Canada is both an important beef and sheepmeat market for Australia as well as being an international competitor. Canada remains the single largest exporter of beef to the United States, shipping over 202,000 tonnes in just the seven months to July this year, as well as over 300,000 head of live cattle.

Canada is also a fellow member with Australia of the Comprehensive and Progressive Agreement for Trans- Pacific Partnership which has delivered significant reductions in import tariffs on beef for both countries in markets like Japan.

Canada also exported over 8280 tonnes of pork to Australia in those same seven months this year. The pork is used for further processing into ham, bacon and other further processed pork items, one of only half a dozen countries certified to do so.

As an important export market for Australian beef, on 1 January next year, quota-free access should prevail.

Under the CPTPP our country specific beef quota with Canada under the WTO remains at 35,000 tonnes but with a zero tariff.

The out-of-quota tariff of 26.5pc was reduced to 22pc on entry into force of the CPTPP and has been reducing ever since to the current rate of 4.4pc.

On January 1, it is scheduled to be eliminated, meaning the quota theoretically becomes null and void as all Australian beef will have free access to Canada at zero tariff with no volume restriction.

It will be important for the Australian Government to confirm this outcome with Canada. The Canadian beef market has acted in the past as an important safety value with its US neighbour such that in some years Australian beef shipments to Canada have been as high as 70,000 tonnes but in 2021 was around just 7,000 tonnes, about 30pc of which was chilled.

Canada is also an important market for sheep meat, taking over 9600 tonnes of Australian lamb in 2021, around half of which was high quality chilled.

The US Meat Exporters Federation reports that China imported 277,556 tonnes of beef in the month of August, up 42pc from a year ago.

As a reflection of China's impact on the global trade in animal protein, for the first eight months of this year (January through to August), China's combined imports of pork, poultry, beef and sheepmeat totalled 4.615 million tonnes. This was actually down 28pc on the previous year but still substantially above any other country in the world.

In addition, China's beef imports in August were actually higher than the beef import volume of all other Asian markets combined including Japan, Korea, Taiwan and Hong Kong, according to the US MEF.

They estimate that China's beef import bill for the first eight months of this year was around US$11.56 billion.

China's rapid rise as the world's premier meat importer has changed the global market dynamics for meat considerably. Within that rise to prominence is also a significant change in the import mix.

Actual imports of pork, poultry and sheepmeat have fallen this year but beef has continued to increase such that beef is now moving to surpass pork as the number one imported animal protein in China by volume.

It has already done so on value, something no one would have imagined seven years ago.

Pork is still the number one animal protein in China but the impact of African Swine Fever has hurt Chinese pork production over the last few years.

With Chinese pork production on the increase again, pork imports have been falling back.

Of interest from an Australian perspective is that China is also our largest sheepmeat market (mutton and lamb shipments combined) as it is now for New Zealand.

China imported in the eight months to August over 244,000t of sheep meat from all destinations at an estimated value of US$1.5 billion according to the USMEF.

This was 20pc down on the same period last year but still larger than any other single sheep meat market in the world.

There used to be a saying 30 years ago that if the US beef market coughed the Australian beef industry got pneumonia. Our dependence on any one country has diversified since the 1980s but China's influence on the global meat market is now substantial.

The Meat Importers Council of America has advised that US Customs and Border Protection's newly implemented eCert2.0 quota certificate reporting platform is rejecting what are otherwise valid beef quota shipments from Australia due to data incompatibility with the new system.

Following discussions with MICA, the CBP has agreed to institute a phase-in period where shipments will not be rejected when uploaded information is not accepted by the new CBP system allowing time for the importer and exporter to match the data.

No time has been set as yet as to how long the phase-in period will last.

The USDA reported US beef imports are steady this week with limited demand as high domestic supplies influenced by drought are still present and importers are waiting to see the impact on supply chains following the disruption of last week's hurricane.