Thank you, Mr. Chairman and honourable members.
I will quickly introduce myself. I'm Brad Wildeman, the chair of Canada Beef Inc., which is the amalgamation of three prior organizations that you are probably aware of: Canada Beef Export Federation; the Beef Information Centre, which did domestic and U.S. marketing on behalf of beef; as well as the national check-off agency that's responsible for collecting the check-offs from cattle producers based on their sales. We've really taken three organizations and put them into one.
Personally, I'm a feedlot operator and cattle producer from central Saskatchewan.
I'll give you a quick overview of Canada Beef. It is a new organization, really, that has effectively been in full operation since January 1. We're still in our first year of operation, but there have been some changes. Canada Beef Inc. is focused solely on creating value for our stakeholders through marketing. We're not in the policy advocacy business. It is relatively rare for us to actually be making a presentation like this, but we feel it's very important. Japan is a key market for us.
We're funded solely by Canadian beef producers through the national check-off system. We're responsible for marketing both domestically and abroad. Our key focus is simply getting the greatest value for every cut, in whatever marketplace that will be, to bring back value to our key stakeholders, primarily beef producers but not exclusively beef producers.
Finally, our board is made up primarily of cattle producers from across Canada, from every province in Canada. We also have representation on our board from the key industries—the packers, exporters, further processors, food service industry, etc.—so we think we have a pretty well-rounded board.
In terms of Japan, obviously since BSE we were blocked from that market until 2005. They're now restricted to the under-21-month requirement, even though that is not a world standard. This is a standard that's been imposed upon us by the Japanese government. That has severely restricted our ability to trade there.
Canada is its third-largest agricultural trade partner, with over $2.9 billion in 2010. It's also the world's third-largest beef importing nation. Almost 60% of its beef consumption—58%—comes from imports from somewhere around the world, primarily from the U.S. and Australia.
In 2001 we actually reached the peak of our beef exports to that market, at almost 29,000 tonnes. In 2002 we were down to about 24,000 tonnes. In 2010, since we reopened in 2005, we shipped 15,500 metric tonnes, for a value of about $78 million.
We see that the consumer preference in that country is certainly moving towards a more western diet, more beef, and a developing taste for grain-fed, white-fat beef. We've been busy training food service people about the benefits of this marbling. We see this as the highest of the high-value markets around the world for our premium product.
There's also a developing preference for barley-fed beef as well, which is interesting because of its whiter and leaner fat content. We think that could be a key competitive factor versus the United States.
The importance of these FTAs cannot be understated. Just for comparison, as you are aware, Mexico and Japan have concluded a free trade agreement, although there are still tariffs in place. It concluded in 2005 with lower tariffs within specific volumes. In 2011 Mexico exported 27,500 tonnes of beef to Japan. In fact, they're the fourth-largest market share in Japan after Australia, the U.S., and New Zealand.
In 2012, 10,500 tonnes of beef from Mexico were subject to a lower tariff of 30.8% versus our 38.5%. You can see that even a small reduction in tariff has a huge impact on the ability of countries that we normally wouldn't think would be competitive to really gain a foothold. In fact, they're exporting nearly twice as much beef to Japan as Canada is today.
The Australia-Japan negotiations have been going on now for seven years, although they haven't been concluded. I've been reading some articles lately about the frustration that Australia is expressing on their inability to finish that deal. Australia has about a 60% share in that market. Because of its high-valued nature, we value Japan as one of our most important and priority markets for Canadian beef, next to our own domestic and U.S. markets.
It's projected that beef consumption in Japan will grow by about 63,000 tonnes over this next decade. Imports will increase to 103,000 tonnes, so their domestic production, particularly given some of the natural disasters they've experienced there, will not be able to keep pace with this growth in consumption. I think that's great news and a great opportunity for us.
If the Canada-Japan EPA were concluded favourably, we would stand to gain both greater imports and a greater market share.
If Japan accepted under-30-month boneless beef, with the removal of tariffs scaling back from 38.5%, the potential increase in beef exports to Japan would be about $47 million, for a total value of $125 million, or 20,000 tonnes in total over what we're doing today. They also have the ability to put a snap-back tariff in, up to 50% I think, if exports exceed 17% year over year, and we would have to deal with that.
Obviously, we have significant regulatory barriers that limit our ability. Under-21-month cattle does not allow us to market to this market with consistent supply for a full year. We normally have a deficit in cattle of that age from January until March. We can't supply enough cattle to those markets, and it doesn't allow us to be able to find strategic marketing partners over there who will put marketing dollars and effort into marketing our product year-round because they simply can't supply.
What we hear often is that it's a great product, and we can position it at the highest and most premium price, even at or above U.S. Choice, which is the gold standard worldwide, but the problem is what to do for those other three months when we have to go back to the U.S. to buy theirs, or go to Brazil, or other places. We simply haven't been able to really exploit that market. We think that once we can get to under 30 months, we can fully exploit that market and really gain value, but on a per tonne basis it is certainly one of the highest-valued markets that we deal with.
A move into bone-in access could increase exports to 25,000 tonnes and a value of $168 million. Obviously, we see this as a very positive outlook for this Canada-Japan EPA. It is certainly huge for us and certainly huge for agriculture, and, particularly coming from Saskatchewan, we see this as a huge potential.
We appreciate the fact that Minister Ritz and other ministers have travelled over to Japan and met with Japanese meat traders, etc. I'd just like to make it clear that we'll never be the mainstream supplier of beef over there, but certainly we believe we can have a very significant market share and certainly get the premium in. For Canada, given our relatively small herd size, compared to the U.S. particularly, it's not about volume; it's about creating value.
Projections in this marketplace are challenging for us, though, because we've been out of it for so long, and prior to BSE. Supplies are dwindling now, and it's going to limit our further growth.
Finally, I think we've all talked a lot about the potential, but I think we have to look at the other side and think about what happens if we fail to reach some sort of economic partnership and others reach it ahead of us. I've expressed what's happening in Korea. I was over there a little while ago. We can see again the U.S. course. It reduces their tariff by 2.7% a year over the next 15 years. Speaking to our key customers over there, we could take a year, maybe two years. Once we get over a 5%, 6%, or 7% difference in tariff, that's likely the end of that market for us.
When we tier our markets, and we think of Japan as our number one offshore market and Korea as likely number two for value, we look at our number one and two markets as being in significant jeopardy. So we urge the Government of Canada to be very aggressive in making sure they cannot only open that market, but maintain those markets for us.
Certainly, we could reallocate to other markets, and we continue to do that. We ship to over 60 countries in the world, but none of them have the kinds of values that Japan could offer us in this market.
Finally, it's a huge opportunity for Canada. As you know, we have a large land base. We certainly have the ability to grow our industry. Cattle populations are down. Why? Because we've lost a lot of money. There are profits back in our industry. We can open these markets and maintain these markets where we grow this industry, and we believe we can be back at the 3.5 million cows we used to have prior to BSE.
With that, thank you very much.
