MANITOBA CO-OPERATOR — It’s hard to find the proverbial bright side of Canada’s current tariff tangles, but a long-time Canadian meat industry executive and consultant says he is optimistic that the nation will not only survive tariffs, but will build a stronger economy because of them.
Ted Bilyea, former executive vice-president at Maple Leaf Foods and now a consultant with the Canadian Agri-Food Policy Institute and elsewhere, turned to history to back his argument. There are examples of pioneers in the Canadian food industry who turned tariffs imposed by the governments of the 1800s and 1900s into an opportunity for quality Canadian products, he noted.
“I don’t think we can compete with commodity products,” said Bilyea. “But if we can search out or develop products that differentiate themselves in the marketplace — develop a product that is different, that the consumer sees as better, perhaps better quality or healthier, for example — that’s what we need to target.
Ted Bilyea says there are economic opportunities buried in Canada’s trade war problems. | Photo courtesy Manitoba Co-operator
“It may sound like supplying a niche market, but be prepared,” he added. “What might seem like a niche market in Canada can become a massive market on the global front. The idea is to start out supplying a niche market in Canada, but then the manufacturer or supplier needs to have the resources and ability to scale up production to supply a global market.”
Consumers are willing to pay for a “better” or higher quality product, regardless of tariffs, he also said.
The pork example
One such historical example has helped shape part of the Canadian pork business. In the late 1850s, U.K. businessman William Davies arrived in Toronto with a plan to market dressed pork to Toronto and Montreal, as well as export meat back to England.
It was a tariff-free environment between Canada and the U.S. and many Canadian farmers were busy selling wheat, oats and barley to the Americans. Canadian pork producers in those days focused mainly on producing a boxy-shaped hog breed well suited for a lard market.
Davies began introducing British hog breeds, Tamworth and Yorkshire, which were genetically suited to be processed into pork and specifically well suited for bacon — in high demand in the U.K.
Davies was among those building processing plants that, by the late 1890s, led to Toronto being known as “Hog Town.”
In the years following the end of the U.S. Civil War in the late 1860s, the U.S. economy had less need for Canadian imports and began imposing tariffs on Canadian products, including barley. That levy started out at 25 cents per bushel, but increased to 48.4 per cent by 1890.
Canada’s response, in part, included a real push to open Western Canada to more agricultural production.
Pork is one commodity that Canadian producers and processors have found global niches to fit into and grow, Ted Bilyea says. | Photo by Alexis Stockford
Davies, who by that time had built a successful hog processing business in Toronto, realized that as the door to the U.S. barley market closed, it created a surplus of cheap barley in Eastern Canada. At the same time, the U.K. was dealing with animal disease issues and there were crop failures in Germany. This meant that the U.K. and Europe in general were short of meat.
Davies ramped up production of high-quality Canadian pork, fed on Canadian-grown barley, to help fill that pork gap in the U.K. Even though Canadian pork cost more compared to U.S. pork, it was in greater demand. Coming from British hog breeds, it had the quality U.K. consumers wanted.
Export of consumer food products
Bilyea says Canadian manufacturers have capitalized on several market opportunities, particularly for processed foods.
“Going back to 2012 it was a common perception that Canada was only a supplier of raw materials,” says Bilyea. “The example often cited was that we exported oats and imported Cheerios. But by 2015 things had changed. Canada now has an export surplus particularly in several areas of consumer food products.”
For example, Canada has a “few billion dollars surplus” in baked goods to the U.S. Dare Foods has manufacturing plants on both sides of the border and, after Grupo Bimbo of Mexico (the largest bakery in the world) acquired Canada Bread from Maple Leaf Foods, Bimbo now exports a wide range of bakery products from Canada to the U.S. and many other countries.
Canada is also a major exporter of chocolate products, thanks in part to multinational Ferrero Rocher, which has one of its largest plants in Brantford, Ont. Canada is also a major exporter of certain types of vegetables such as frozen French fries. And Canada remains a major exporter of pork products.
“There are essentially two types of pork in demand,” said Bilyea. “The European market is mostly interested in hog genetics that produce hams for processing. Whereas in the North American market, there is a large demand for table meat, which means producing breeds of hogs that produce more marbling, which therefore has more flavour. U.S. processors and producers have been somewhat ambivalent about supplying this market, so that’s where Canada comes in with quality pork well suited for the table meat market. We have a well established reputation for producing the best table meat.
“So there are several areas among the consumer food products where Canada is supplying what, in some respects, is a niche market, but on a global scale it becomes a massive market,” says Bilyea.
The United States cannot produce as much beef as its consumers require, Ted Bilyea argues, making tariffs against major U.S. trading partners fraught. | Photo by Lisa Guenther
When it comes to the beef market, Bilyea isn’t sure how the U.S. will function if it imposes tariffs on beef from its major supplying trade partners. “The U.S. cannot produce enough beef to supply its own needs,” he said. “The country is net importer of beef products. Brazil, Australia, Canada and Mexico all export beef to the U.S. The U.S. can talk about tariffs, but the fact is that the American people want their hamburgers.”
Bilyea says tariffs will no doubt create some short-term economic hardships for affected sectors, but there will also be opportunity for producers, processors and manufacturers to look for other markets and supply “a different or better product” for those niche opportunities.
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Beef Specialist Ndsu Extension Service
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