The Farm Level Economic Impacts for Western Canadian Cow-Calf Producers Accessing the EU Market

Abstract

The Canadian beef industry applauded the recent signing of the Comprehensive Economic and Trade Agreement, which will enable greater to access the valuable EU beef market. Despite the enthusiasm surrounding this trade opportunity, the commercial viability of producing for the EU market is still unknown for the cow-calf sector. Thus, the objective of this research is to estimate the premium required by cow-calf producers so that the benefit of enrolling in the EU program for certifying growth enhancing product free beef would outweigh the additional production costs.

To address this objective, a break-even (BE) price is simulated under various production scenarios before and after the necessary adjustments are made to become EU compliant. The difference between these simulated break even prices represents an estimate of the required premium. Producers must be offered at least this premium to overcome the additional production costs imposed for compliance. The resulting estimates suggest that the BE difference ranges from $2.13 to $34.78 per calf, depending on the practices already in place prior to enrolling. Given the market conditions over the past decade, premiums as high as $60.12 per head would be required for some producers to maintain their profitability.

Besides quantifying costs for EU certification, this research speaks to a greater narrative on the economic considerations of accessing new markets that require certain production attributes. Although these markets may offer higher values, it is important to balance potentially larger revenues with additional costs. Thus, this research offers a framework by which the impact of changing production regimes on profit may be simulated.