Thank you for inviting us to this forum today.
I think many of you know who we are at CPI. We are the export market development agency of the Canadian pork industry. We were established in 1991, about the same time as Groupe Export, and it is a joint initiative of the Canadian Pork Council and the Canadian Meat Council. Our organization deals primarily with market access issues, the promotion of Canadian pork abroad, providing market intelligence, as well as working on other significant export-related issues.
Although Canada has been exporting pork for over 100 years, Canadian pork exports have grown considerably in the last 20 years. From 250,000 tonnes worth $600 million shipped to 54 countries in 1991, they grew to 1.1 million tonnes worth $2.8 billion shipped to 108 countries in 2010. Export statistics for 2011 are yet to be published, but based on the figures for the first 11 months, we can already state that it will be a record export year for our industry. For the first time, our exports will exceed $3 billion and should almost reach 1.2 million tonnes.
With close to 20% of the world's total pork trade, Canada is the third-largest pork exporter behind the United States and the European Union. We should retain that position in the foreseeable future. Our major markets are the U.S., Japan, Russia, China-Hong Kong, and South Korea—and that's one reason why we are so adamant about getting the FTA discussions resumed with South Korea.
Close to 60% of Canadian pork production is exported, which makes our industry very dependent on exports. It is worth noting that Canadian pork exports to the U.S. now represent less than 30% of the country’s total exports. When CPI was first established, this market represented more than 75% of the total exports. This is proof that our strategy to diversify away from the U.S. and be less dependent on one market was successful. However, one must keep in mind that past success is no guarantee of future results. Current forecasts indicate that in 2012 the world pork supply will be tight, which could provide some relief to an industry that has suffered in the last few years, especially at the farm level.
At the same time, the per capita pork consumption in Canada is declining, and imports have increased to the point that 25% of pork consumed in Canada is now imported. This is not a situation that can be taken lightly, and the Canadian pork industry intends to address it in the months to come.
Canada’s pork industry operates in a challenging, highly competitive environment. Canadian hog producers and Canadian pork packers and processors must compete in a global marketplace while facing challenges from the rapid strengthening and appreciation of the Canadian dollar, the cyclical nature of prices, and increasing costs of production such as feed grain, fuel, and regulatory costs. All of these factors have created the need to improve Canadian competitiveness in the global marketplace.
Because of these challenges, the Government of Canada provided CPI with $17 million in multi-year funding under the International Pork Marketing Fund in June 2009. Currently the IPMF enables CPI to undertake its four strategic priorities of market access, market development, market intelligence, and product promotion. Based on Mr. Coutu's comments, that's exactly the kind of funding he would be looking at—similar to what we have. But we have to say that it's the only time since it has been established that CPI has received financial assistance outside the regular programs, like the agrimarketing program and its predecessors, CAFI and AIMS. Since this special fund was designed to assist the industry in very challenging times, we have to assume that after March 31, 2013, when the IPMF runs out, future financial assistance from the federal government will come from the agrimarketing program or its successor, and then we will be asking for the same thing as Mr. Coutu has—a renewal of multi-year funding.
As stipulated in our IPMF contract, a third-party performance evaluation was just completed to assess the relevance and effectiveness of the IPMF funding. The full report will be submitted to the Minister of Agriculture and Agri-Food, the Hon. Gerry Ritz, soon. Since all our regular members were to be contacted, we seized the opportunity to request the evaluators to also ask about the relevance of CPI.
Our members made it very clear that without federal funding CPI would have to scale back export market development activities, which would significantly affect the industry and the CPI membership. In turn, without the CPI program support, members would reduce their export marketing activities, bringing these activities in-house.
Continued export marketing by specific companies without the CPI marketing that differentiates Canada and the Canadian pork brand would present additional challenges to individual companies. Interviewees noted that growth in exports from current levels would be challenging, that it would be difficult to meet and develop sales to new clients, and that sales would likely be lost to non-Canadian competition that would benefit from the supports that foreign governments continue to provide to these competitors. Foreign competitors would be increasingly present in these markets and, especially in the absence of a strong Canadian presence, would be expected to attempt to increase their sales to clients currently buying from the Canadian industry.
Based on the qualitative comments during interviews with members who are active on a day-to-day basis in all of Canada's pork export markets outside of the U.S., interviewees estimated that support from the CPI activities funded by the federal government contributed to an estimated 5% to 30% of export sales for specific members.
With Canada's total export sales of about $3 billion annually, based on these interviews, it would be most conservative to estimate that the program is helping the industry to make at least 10% of these export sales or to prevent this level of sales from being lost to competitors. This translates to at least $300 million of additional export sales each year. If a higher estimated amount were used, each additional 1% would represent an additional $30 million. We can only conclude that federal funding represents good value for money. We believe it is also the case for the other export-focused associations that participate in agrimarketing.
Although, as indicated earlier, our industry has been quite successful on the export markets, it will still require assistance to reach its overall objective of becoming the preferred supplier of high-quality pork. To achieve this, the industry will need to be capable of supplying a well-differentiated product and effectively position and merchandise it in the domestic and export marketplace. It is recognized that the quality advantage that Canadian pork once enjoyed over its competitors has narrowed and our traditional differentiation points no longer suffice. A science-based differentiation is now required to improve the competitiveness of Canadian pork.
Pork is the most versatile meat, but we have yet to exploit its full potential. More research and development is required to do so. Developing new products and successfully differentiating Canadian pork will not fully benefit the industry if it is not supported by effective merchandising. Better marketing tools need to be developed.
We still believe that Canada remains one of the best places, if not the best place, in the world to produce high-end quality pork. At this moment our industry not only needs some assistance in positioning and merchandising its product, but more coordinated and better focused research and development should be of great benefit as well.
Maintaining access to existing export markets and seeking access to new markets has been and still remains the top priority of our association. Over the years, we have established a strong working relationship with the Canadian government. This partnership has been successful so far, as demonstrated by the number of countries Canada has been able to export to. However, exporting to a country does not mean that one has full access to that market. In fact, there are several markets where we have a limited access and where we continue to seek full access with varying results.
Given the current economic and financial crisis, we are starting to see an increased tendency in some markets to use technical barriers as a means of limiting or prohibiting imports. In too many cases, import requirements are either not based on science or unjustifiably too restrictive, not taking into account actual trade and distribution conditions. Market access must remain a pillar of Growing Forward 2, as it is the key to export growth for a large number of Canadian agrifood sectors. The federal government must ensure that adequate resources are allocated to market access, as it should be remembered that only the federal government has the mandate to negotiate with its foreign counterparts, be it technical market access issues or bilateral and multilateral trade agreements.
Here is a short word on transportation. Although there is no longer a container shortage, as we experienced a couple of years ago, transportation is still an issue that the Canadian meat industry is concerned with. When dealing with the Canadian rail companies in particular, a large number of our members are finding it difficult to adapt to their demands and requirements. They are left with the impression that perishable products are considered a nuisance, and they are questioning the commitment of the railways to offer a quality service. It is hoped that this issue will be addressed in the framework of Growing Forward 2, as it also impacts several other sectors in Canada.
Briefly, in conclusion, we understand that the economy remains the government’s number one priority. We agree with the government that engagement and increased trade are important drivers of Canada’s long-term prosperity and growth. Growing Forward 2 could be a good framework in which to do it if it were adequately resourced. Our experience demonstrates that there could be a good return for all stakeholders, including the government. It should be looked at as an investment rather than as just another government expense.
Thank you very much.