1. The Changing Landscape May 2008
John Masswohl
Director of Govt & International Relations
Canadian Cattlemen’s Association

2. Facing Competitiveness Challenges: High Canadian dollar High input costs (feed, labor, energy) Impaired market access Higher regulatory burden

5. Canadian Regulations and Other Government Involvement
Enhanced Feed Ban
Between $5 and $34 per head disadvantage versus the USA.
Approval of new pharmaceuticals
Zilmax - $18 to $24 per head
Feed Grain and Forage Research and Approvals
KVD / PNT
Ethanol mandates and tariffs

6. Market Access
 Restricted market access continues to affect the “cut out” value of our cattle by over $100 per head.
Korea, Japan, Mexico, Russia, China, others
Newer issues with US
Border testing
COOL
fees

7. How will COOL affect Canadian producers?
Increased costs and force greater product differentiation
Will widen basis on live cattle prices vs U.S.
In 2002, USDA acknowledged that COOL was forecast to add $ billions of cost to the North American market with negligible benefits
CCA estimated COOL could cost Canadian cattle producers up to $92 per head, or $300 million annually (due to reduced access)

8. COOL Does not apply to food service Does not apply to exports
Flexibility on trim will be crucial
BIC building supplier relationships since 2001

9. Short Term Higher costs for feed grain
Lower relative prices due to currency
Conversion of cultivated pasture to “fuel grains or crops”
Reducing numbers
Urgent need to address regulatory inequities and market access restrictions
Pursue value creation aggressively

10. Longer Term: Outlook and Opportunities

11. Canada is still the third largest beef and cattle exporter in the world, and the largest exporter of grain fed beef.

12. Global beef consumption will continue to grow.
Source: OECD/FAO Agricultural Outlook

13. Barley and Corn have both reached record highs in 2008 at $220/tonne and $236/tonne; however, the differential has decreased so that COG is comparable.
In March, Lethbridge barley prices reached $220/tonne ($4.80/bu).
At the end of 2007, Lethbridge barley prices were ranging from $ /tonne ($ /bu).
As compared to $ /tonne ($3.50-$3.60/bu) at the end of 2006
which was a substantial increase from the average price in 2005 of $112/tonne ($2.44/bu).
July 2008 barley futures currently priced at $243/tonne ($5.29/bu)
Omaha corn prices broke records in April 2008 by going over $6/bu ($236/tonne)
For the first three months of 2008 corn prices have averaged $5/bu ($197/tonne)
Compared to a 2007 average of $3.56/bu ($140/tonne), and $2.33/bu ($92/tonne) in 2006.
These are both significant increases of the 2005 average of $1.78/bu ($70/tonne).

14. Canadian boxed beef values higher than U.S. values
Canadian boxed beef values have been higher than US boxed beef values in 2007 partly due to the exchange rate changes which prices have been slower to respond.
High boxed beef prices has encouraged beef imports

15. Industry Positioning: Establishing the “Canadian Beef Advantage”
Animal health & beef safety
Genetics/breeds
Animal ID
Age verification capability
Production programs
(QSH)
Product quality
(consistency, palatability)
Yield and profitability
Service and Technical support

16. Canadian Beef Advantage
Maximize the value of every cut and product from every animal we sell.
Canada’s strength will clearly remain in the production of high quality (grain fed) beef. (Likely shorter times on feed)
Global marketing efforts to differentiate our beef on the basis of quality and safety.
We need to regain as full a range of market access as we can in terms of both the scope of products and countries
Location to U.S. – only just in time fresh beef import supplier

17. Advanced Information Alignment
Each sector in the value chain providing information to the rest of the chain will demonstrate cooperation in achieving the value proposition with everyone contributing and benefiting.
All participating Canadian cattle are age verified through the CCIA database (register as being on VBP)
All participating feedlots report the arrival of animals to the database and submit specified performance data (non-proprietary) on close out.
All participating packers and abattoirs submit specified carcass information linked to the animal ID to the CCIA database

19. QUESTIONS?