Jack Hayden and David Chalack must have been pleased when they stepped off the plane from Beijing in October. Subject to some final Chinese inspections at the end of 2010, Canadian beef is expected to start flowing into China in January.
It’s been a huge hurdle, so the smiles were understandable on the faces of Hayden, Alberta’s agriculture minister, and Chalack, chairman of the board of the Alberta Livestock and Meat Agency (ALMA).
Canada had negotiated market access with China’s food agency completely independently of the U.S., and ALMA’s “incremental access strategy” was proving to be a winner.
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But what is ALMA, and why might it hold the key to Canada’s agricultural exports to the Pacific Rim?
When Alberta unveiled its new plan for its ailing livestock industry in 2008, it struck many Albertans as simply another go-nowhere idea, this time involving a collaboration between Alberta Agriculture and Rural Development, Agricultural Finance Services Corporation (AFSC), producers, and other stakeholders.
But a deeper read of the new strategy showed real change in the air. ALMA was born amid frank talk of why Canada had failed at differentiating its ag output and at creating value-added supply chains. And the beef industry’s model — where Canada saw itself as the world’s cheapest supplier — was bombing too, victim to Brazil, Uruguay and Argentina.
At the same time, while farmers had their hands full with currency volatility and high input costs, the beef industry was too fractured even to use the programs the government was already pushing.
But the market wasn’t waiting for us to get our act together. Asia was on the path to a spectacular new kind of growth. Urban populations in the Pacific Rim were congealing into mega-regions of 20 to 30 million people that can be individually targeted for beef sales. There’s the Kansai Region in Japan, the Seoul National Capital Region, the Beijing-Tianjian corridor, the Yangtze River Delta, and the Pearl River Delta, and they’re just the beginning.
It all adds up to the potential for massive new differentiated markets for our beef. In fact, it can seem things already aren’t going badly. The Canadian Beef Export Federation reports that in the first half of 2010, exports to Japan were 4,000 tonnes ($24.8 million). Exports to Hong Kong/Macau hit 9,200 tonnes ($37 million), and shipments to Taiwan reached 1,900 tonnes ($8.1 million). All were dramatic increases.
Then comes the China agreement signed by Stephen Harper and Hu Jintao in June 2010, expected to be worth $60 million a year just for starters.
For the past couple decades, University of Lethbridge economist Kurt Klein has been sharply critical of our livestock industry. “We are still trying to do everything for the least possible cost,” Klein tells me. “Australia and Brazil changed their industries overnight to access tricky markets. We did it with canola.
“Somehow we are still passing up opportunities to design our livestock industry to be more competitive,” Klein says. Maybe, 2010’s beef sales are a sign that we’re starting to get it right.
But clouds are gathering again, as in Canada’s ongoing standoffs over food safety in Japan and Korea.
The Taiwan example is as illuminating as any. Taiwan is a moderately important market, importing about $21.5 million in 2003 at the time of the BSE collapse. The Canadian Trade Office in Taipei has extraordinarily friendly relations with the Taiwan business community and Canadian suppliers and Taiwan importers have well-established ties that could easily be expanded once the market for age-verified bone-in beef is completely opened.
The Canadian Beef Export Federation also has an active office in Taipei, and Manitoba MP Candice Hoeppner was even able to lobby Taiwan president Ma Ying-Jeou in August 2010 to open up Taiwan’s market to Canadian beef.
But things should be going way, way better in Taiwan.
Some observers think that when Hoeppner and Ma were shaking hands last summer, what Ma was actually thinking was: “I almost lost my job over beef imports last December. You’re a politician — why don’t YOU get the Taiwan market open to Canadian beef?”
Disaster struck when Taiwan agreed to import American bone-in beef in October 2009. Politicians clamoured. Taiwan’s media erupted. One graduate student from Taiwan University even got a cow pie and made it into a “burger,” which he ate in front of the presidential palace for an enthusiastic YouTube audience.
Canadians might think this was an opening. After all, our robust traceability system should make us look great in comparison, right? Uh… not really.
Instead, everything swung toward “BSE-free” Australian product. Even beef noodle stands in the countryside prominently displayed signs saying they used only Australian beef.
Australia, of course, had already made Taiwan an important subsidiary market of Japan.
If the Taiwan example tells us one thing, it is that the cocktails-with-the-ambassador lobbying approach isn’t working in East Asia. Luckily, this is something that ALMA has understood from the beginning.
ALMA’s board of directors speaks volumes about the importance placed on international marketing. All 12 board members bring strategically important specializations, and all have extensive international experience. For example, Ted Bilyea retired in 2005 as executive vice-president of Maple Leaf Foods, a company with extensive activities in Asia, particularly Japan. John Weekes was Canada’s chief negotiator for the North American Free Trade Agreement and served as Canada’s ambassador to the World Trade Organization from 1995 to 1999. Current CEO Gordon Cove, the person tasked with implementing ALMA’s vision, has extensive experience in government and the international industry.
ALMA has a long and intimidating to-do list that includes establishing a food safety foundation; differentiating products throughout the supply chain; improving marketing effectiveness; reducing costs and bureaucracy; strengthening the supply chain and better engaging government.
If it sounds like too much too fast, livestock industries in the U.S. and Australia have already done all these things.
On the back of his business card Sean Royer, ALMA’s director of industry investments, has three words: “Ideas. Information. Investment.” They may sound like a mere slogan, but Royer tells me these three concepts really are how to turn Alberta’s livestock industry into a competitive one.
ALMA has set out to create a climate friendly to primary research, machinery and equipment upgrades, and product development, which means more than coming up with new ways to compete, ALMA says. It also means using partnerships to lift the whole industry. For instance, ALMA has been working with the Japan Meat Traders Association, representing big importers like Cargill and Sumikin Bussan.
Robust information channels running up and down our entire supply chain are also crucial. At the end of the 1970s, John Longworth of the University of Queensland went over to Japan and worked in its beef industry to the point where he knew more about their beef industry than the Japanese did. Until recently, we have been much less inquisitive, content instead to view livestock exports as a commodity. But ALMA is changing all this.
ALMA is also using traceability to connect producers to their markets. Once farmers can see the sales results, it believes, they are going to find it much less of a bother to check the RFID tag of a thousand-pound steer hurtling down a loading chute.
At the same time, ALMA is providing a unified industry voice to the federal market access secretariat, to DFAIT, to other provincial governments, and to international customers.
However, ALMA’s most important role may be the strategic channelling of funding. The key to Canada’s productivity puzzle is that we invest only one per cent of GDP in R&D, half the rate of the U.S.
So it is no wonder that the Government of Alberta is fed up with crisis funding for the livestock industry. Not only does it not help change the industry in the way needed, it diverts money from the places where it is going to count.
Since ALMA’s inception, it has invested more than $40 million on research, and it has leveraged an additional $182 million from industry and other funds.
ALMA has watched its strategy ripple out to other provinces as well. “People outside Alberta sometimes phone us and ask how they can apply,” Royer tells me. “We have to send them to talk to their own governments.”CG
Born on a Saskatchewan farm, Paul Sinclair has a PhD in economics from Osaka University for Foreign Studies and has worked in the Pacific Rim and Australia. Currently he is enrolled in the MBA program at the University of Alberta and maintains an interest in the family farm.
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If you want results, ALMA’s successes show, go for the very best directors and staff.
