Canada’s beef industry has been no stranger to difficulty in the past few years. COVID-19 has required many slaughterhouses and meat processing plants to shut down because of outbreaks, while knock on-effects to the restaurant industry, supply chains and international trade further disrupted long-standing patterns of supply, delivery and demand.

A recent, atypical case of Bovine Spongiform Encephalopathy (commonly known as ‘Mad Cow Disease’) detected on an Alberta farm has compounded these issues and exposed the sensitivity of Canada’s international export industry in this space.

Background

In December 2021, a case of Bovine Spongiform Encephalopathy (“BSE”) was detected on an Alberta farm — Canada’s first BSE case in six years.

Significantly, this particular incident of BSE was classified as atypical – which means that it resulted naturally and spontaneously in an older animal (and not from contaminated feed) – and the animal in question was euthanized without entering the food or animal feed chain.

This contrasts with the 2003 BSE outbreak in Canada, which devastated the industry and resulted in 40 countries barring Canadian imports.

Despite no apparent immediate risk from this more recent atypical case, several countries took temporary precautionary measures and banned Canadian beef imports. These included the Philippines (which imports about $13M worth of Canadian beef annually), South Korea ($90 M), and, most significantly, China ($170 M), Canada’s third-largest international market for beef. Fortunately, all temporary measures have been lifted, save for China’s!

While it is unclear how long China’s restrictions will last, the Canadian Food Inspection Agency (“CFIA”) stated that each country has “asked Canada for additional information about the atypical BSE case” and that a “response with information on Canada’s BSE safeguards was provided.”

Price Consequences

While some hoped that these international bans on Canadian beef would have led to cheaper domestic beef for Canadian dinner tables — this does not appear to have happened. Over the course of the pandemic, the beef industry has been more limited by supply than demand. Canada’s beef is overwhelmingly destined for domestic consumption – in 2018, international exports were worth less than 14% of the total supply and demand of beef in Canada.

While still substantial, this means that the overall impact on supply (and resulting price changes) was likely muted. Instead, any ban on imports would likely end up disrupting existing supply chains in the short term, which could result in further difficulties for ranchers and have negative consequences throughout the supply chain.

Other short-term factors have had a more pronounced effect on beef prices. For instance, inflation (on account of pandemic-related supply chain issues and oil/grain commodity instability) has rocked many Canadian households, leading to substantial price increases in Canadian beef.

Additionally, a record-setting drought in 2021 conspired to make feed difficult to source, with an unheard of 20-30% cull of breeding stock expected in Western Canada in 2022.

Commentary

All in all, though the Alberta BSE case is unlikely to have long-term consequences for health or the markets. Instead, it serves as a reminder of the difficulties faced by Canada’s beef industry at large – from ranchers, to plant workers, as well as the food services industry.

The remaining Chinese import ban will hopefully be lifted in short order, but the impacts of COVID-19 as well as price shocks from international events are likely to linger. Businesses in this area should pay close attention to any further developments and potential import bans if any new BSE cases are discovered.

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