Good morning and thank you for the invitation to speak to you today.
My name is Ryan Beierbach. I ranch near Whitewood with my wife and three children, and I'm chair of the Saskatchewan Cattlemen's Association. With me today is Brady Stadnicki. He's with the Canadian Cattlemen's Association here in Ottawa.
In 2015, the beef cattle industry generated $10.5 billion in farm cash receipts, up 7% from 2014, and it contributed $20 billion to Canadian GDP. If you do some quick math and add on what Portia just presented, that's 20% of what agriculture does in Canada.
Our industry is one of the positive stories in our national economy and it has the potential to continue growing. Global demand for high-quality beef is increasing as economies grow around the world, and we produce the best beef in the world right here in Canada.
Our industry is also an engine for job creation within Canada. In 2011, the beef sector employed 228,811 full-time equivalent jobs, either directly or indirectly. Every job in the beef sector yields another 3.56 jobs elsewhere in the economy. For every $1 of income received by workers and farm owners, another $2.08 is created elsewhere.
I am happy to be here today to discuss some of the business realities in the Canadian beef cattle industry and provide some insight on how we believe cattle producers can be increasingly viable in the future.
Ranching is a capital-intensive business and cattle producers are faced with high start-up costs when entering the industry. These costs include the purchase of land for grazing and growing feed for cattle. Infrastructure is another cost. It can include anything from cattle handling systems, corrals, fencing material and buildings, other equipment needed to harvest feed and grow the feed, as well as the livestock. As a result, debt financing is a business reality in the beef industry.
Investment in the cattle industry is long term. It's a small-margin business with long-term profitability near break-even, which you'll find in just about all the commodity businesses. The Canadian Roundtable for Sustainable Beef in its two-year national beef sustainability assessment found over the past decade the average margins for a 200-head cow/calf herd was $17,559. As a result, many operations have diversified their income, including a high level of off-farm income. The national beef sustainability assessment found that between 74% and 85% of the cow/calf sector relies on off-farm income. A case study on young Saskatchewan ranchers from the Western Beef Development Centre also found that off-farm employment is prevalent among young producers.
This off-farm income plays a supplemental role in bolstering overall income and helps ranchers, especially in the early stages, partake in capital investments while avoiding excessive amounts of debt. It can also serve as a risk management strategy when the cattle market experiences a significant shock, such as a disease outbreak.
As we operate in a small-margin business, it emphasizes the need to remain competitive against the global marketplace if we want to continue to contribute meaningfully to the Canada's economy. In my view, enhancing our competitiveness will also increase cattle producers' ability to be profitable and less reliant on off-farm income when entering the industry and expanding their operations.
While I don't believe the government owes us the right to make a living in agriculture, there is a critical function that government must perform to ensure that producers operate in a very competitive business environment.
We are an industry that depends on trade. Almost half of our production is exported. The ability to sell beef and beef by-products into global markets is crucial to maximizing the value of each animal produced. We estimate that almost $500 per head additional value is generated by selling beef and beef by-products to other markets, where they're valued higher than in Canada.
Having competitive market access into major beef importing countries in the world is key for bolstering profitability. The beef industry is encouraged to hear that policy-makers in Ottawa want to grow Canada's agrifood exports over the next decade.
In order to be competitive in the long term, the cattle industry in Canada must also have access to cutting-edge technology. Productivity will be key as we compete with other high-quality beef exporters. This is where investment in research and innovation is critical. It helps us to lower our cost of production and become leaders in environmental sustainability. To this end, I strongly recommend that the beef science cluster continue to be funded and expanded.
Cattle producers face price and weather risks, as well as the risk of interest rate increases, and must therefore plan carefully to avoid a disaster. Young producers in the start-up phase of their operations are vulnerable, especially when they're leveraged with debt. Having access to tools like the western livestock price insurance, hay and pasture insurance, AgriStability, and the entire suite of business risk management programs is critical to help manage the risk. These tools are also helpful for young producers to secure financing to start up or expand their operations. I purchased my farm 15 years ago, and the next year we had the first case of BSE in Canada. I'm very aware of what risk does when you're highly leveraged. It's a difficult hole to dig out of.
Our regulatory environment plays a huge role in determining our global competitiveness, and ultimately our profitability. Government regulations must not unnecessarily burden producers, but rather be based on appropriate management of real risks and accurate analysis of the costs and benefits of these regulations.
If there's a shortage of people working in the agrifood processing industry, those losses from not processing trickle down to the cow/calf producer at the bottom. We need to make sure that those workers are in place to keep the system efficient.
As an industry, we have been working to increase knowledge transfer between experienced and young cattle producers through the cattlemen's young leaders program and the Young Cattlemen's Council. I have participated in both of these programs and see the value in helping to develop young leaders and mentoring producers in the industry, so that they have a better understanding as they get in.
In closing, I would like to acknowledge that there are many challenges that ranchers and young producers face when entering the industry, such as high capital costs in the form of land and infrastructure, and, in many cases, the reliance on off-farm income.
From my experience, debt isn't really the issue, as long as income levels let producers service that debt and remain profitable. To me, the key things are increasing competitiveness and reducing risk to increase competitiveness. We can reduce the cost through less regulation and the right regulations, increase price by having all the export markets open and the labour to do further processing, and reduce risk with price insurance and adoption of best management practices. Research is kind of the overarching thing that ties all this together and gives us the ability to operate in the best environment possible.
Thank you.