Ontario's Agri-Food Export Dream Turns Into a SM Mirage

Ontario is trying to enhance its agri-food exports to help our limping and damaged economy.  Will their plan work?

Better Farming reported that Ontario's Premier Kathleen Wynne has hired an Agri-food Trade Advisor to start June 1, 2015 to enhance agri-food exports from Ontario to China.  This is supposed to help Ontario double its agri-food exports by 2020.

Figure 1:   Historical foreign exchange rate between Canadian $ and Chinese Yuan (Renminbi).
Canadian goods are now 34.8% cheaper than 10 years ago for Chinese consumers to buy.
Too bad that can't help Canada's Supply Management commodities of dairy, chicken, & turkey.

Using Bank of Canada data for the last 10 years, the foreign currency exchange rate between the Canadian $ and the Chinese Yuan (Renminbi) has dropped by 34.8% from April 2005 to today, making Canadian goods cheaper for Chinese consumers (momentary spikes were as high as 63.3%).  See Figure 1.

That would seem like an ideal reason for Ontario to hire an Agri-Food Trade Advisor in Beijing China.

Beef, other non-Supply Management commodities, Canadian technology and manufacturing seem like natural winners.

But what about Canada's Supply Management commodities of chicken, turkeys, eggs, and dairy?

Oops! Sorry, those are commodities with artificially high prices and whopping import tariffs of around 285% that Canadians are forced to pay.  Under World Trade Organization treaties that Canada signed, exporting those Canadian SM commodities would be subject to illegal dumping charges if they are sold in export markets at prices lower than the prices paid by Canadian.  That will likely lead to trade sanctions against Canada.

The Chinese aren't so stupid as to pay what Canadians are forced to pay every day; 50% to 300% higher prices for SM goods than what the rest of the world pays.

Since the foreign exchange improvements are only 34.8% in 10 years, that is equivalent to a 3.03% per year decrease on average over the last 10 years.

At that rate, it would take another 25.1 years to eliminate Canada's 285% import duty on SM products (ie. 1.0303^(25.1+10)= 2.85).

Perhaps Premier Kathleen Wynne should schedule a ribbon cutting ceremony with her Agri-Food Trade Advisor in Beijing China for a May 2040 launch of Ontario's SM products for China.

It's always good to plan ahead.  You know how quickly everybody's schedule fills up.

Until then, too bad for Canada and its dysfunctional Supply Management systems.  They hold all of us back from prosperity and Canadian jobs working in the export industry.

COOL Blowback

COOL (Country Of Origination Labeling) has been a hot issue for Canadian pork being exported to the US.  What about chicken?

Consumers, both in US and Canada (and I assume the rest of the world), would like to know where their food comes from.  With the 100 mile diet, eat local, buy local, and xenophobia, there is considerable pressure to buy from local producers.  That is why Canadian pork producers object to having "Raised in Canada" being put on Canadian pork that is sold in US grocery stores.  Everybody realizes that would be the kiss of death for sales.  The meat will rot on grocery store shelves, rejected by US consumers.  Alternatively, US grocery stores would have to sell Canadian pork at deep discount pricing, so low it would drive Canadian pork exporters into bankruptcy.

Is this issue isolated to just Canadian pork?

No.  It also applies to both Canadian and US chicken.

China has been frozen out of many industries, but they want greater access to US markets for all of their products, including food.

US Food and Drug Administration ("FDA") has their hands full with lousy chicken quality produced by US growers, US abattoirs, and US processors.  They don't need the added risk and headaches from sketchy Chinese poultry producers.  If Chinese dairy producers were willing to adulterate milk and baby formula with toxic melamine, or thousands of dead pigs purposefully dumped into Chinese rivers, what would you expect to occur if they could export Chinese chicken to the US?

But the Chinese kept pushing their agenda.

Finally a compromise was reached. IN Sept. 2013, Economy In Crisis Blog reported with outrage that Chinese abattoirs would be allowed to buy US grown chickens, eviscerate them, cook the meat, package it, and export it back to the US for sale in US grocery stores.  The package would say "Made In USA", likely due to COOL regulations.  That would allow retailers to hock this US chicken processed in China as 100% bona fide Star Spangled Banner home grown chicken to an unsuspecting public.

US farmers were likely in favor as it gave them additional production, and the Chinese buyers would likely pay a premium to get the necessary chicken supply.

As an interesting sidebar, FDA only has sufficient resources to inspect 2% of the imported chicken.  In the US, 60% of imported food comes from developing nations.  It isn't just snooty and fancy mustards from France that are being imported into the US.  Just like in Canada, when half century old canning factories in Canada are shut down so that we can buy pickles imported from India.

USDA inspectors regularly come to Canada to make sure Canadian foot exporters and CFIA are both doing their job of ensuring safe food is being exported to the US.

However, there are no plans for USDA inspectors to ensure the quality or safety of this chicken processed in China.

Should Canadians jump on this opportunity, saying "Americans are spooked by Chinese chicken.  We believe American would be much more comfortable with US chickens processed in Canada then re-exported back to the US.  Canadians will build the extra slaughter capacity that's necessary to meet this marketing and exporting opportunity.

Would Canadians be ready to unknowingly accept Canadian chicken that was processed in China, but the retail meat counter label on the packages hides that fact?

For all we know, CFIA may have already cut that deal with China and its exporting allies.

Where does this place Small Flockers within this boiling kettle of politics and chicken broth?

How is it cheaper and better to ship chicken all the way around the globe before humans eat it?

Obviously this well traveled chicken will only occur if someone is making more money doing things the crazy way.

Can we not find a solution that will allow the underutilized Small Flockers to spread their wings and fly?