CC ANADIAN CC ATTLEMEN MM ARKET DD EVELOPMENT CC OUNCIL ________________________________________ Results Report for 2006/07 7 7 0 0 / / 6 6 0 0 0 0 2 2 The Canadian Cattlemen Market Development Council (CCMDC) is a partnership of the Canadian beef cattle industry, the Government of Alberta, and Government of Canada to fund and oversee a 10-year global marketing plan to help the industry recover from BSE. The vision of the CCMDC is to recover and expand markets for beef and cattle genetics around the world assuring a profitable, sustainable Canadian industry that results in Canadian beef and cattle being recognized as the most outstanding by Canadian and world customers. Agriculture and Agriculture et Agri-Food Canada Agroalimentaire Canada 2006/07 RESULTS REPORT Contents Chairman’s Message 3 Canadian Beef and Cattle Market Development Fund – Profile 5 Executive Summary 7 2006/07 Market Context 16 Marketing Activities and Results INDUSTRY SUPPORT FOR THE VALUE PROPOSITION -The Overarching Performance Measure 32 GENETICS Market Situation and Indicators 36 Summary of 2006/07 Activities 39 Performance Measures 40 DOMESTIC (CANADA) Market Situation and Indicators 46 Summary of 2006/07 Activities 48 Performance Measures 50 COMMERCIAL BEEF Market Situation and Indicators 54 Summary of 2006/07 Activities 56 Performance Measures 57 UNITED STATES Market Situation and Indicators 62 Summary of 2006/07 Activities 65 Performance Measures 66 MEXICO Market Situation and Indicators 73 Summary of 2006/07 Activities 75 Performance Measures 75 CHINA including Hong Kong, Macau, Mainland China Market Situation and Indicators 80 Summary of 2006/07 Activities 81 Performance Measures 82 Contents 1 CANADIAN CATTLEMEN MARKET DEVELOPMENT COUNCIL 2006/07 RESULTS REPORT JAPAN Market Situation and Indicators 86 Summary of 2006/07 Activities 87 Performance Measures 87 TAIWAN Market Situation and Indicators 91 Summary of 2006/07 Activities 92 Performance Measures 92 SOUTH KOREA Market Situation and Indicators 96 Summary of 2006/07 Activities 97 Performance Measures 97 EXPORT PREPAREDNESS for Mexico, Asia and Emerging Markets Summary of 2006/07 Activities 102 Performance Measures 102 SUPPLEMENTARY ALBERTA INITIATIVES 104 Management’s Report 107 Canadian Beef and Cattle Market Development Fund Audited Financial Statements Canadian Cattlemen’s Association – Canadian Beef and Cattle Market Development Fund Division Financial Schedule of Operations and Net Assets Canadian Cattlemen’s Association Financial Statement of Operations Canadian Beef Cattle Research, Market Development, and Promotion Agency Financial Statement of Operations Contents 2 CANADIAN CATTLEMEN MARKET DEVELOPMENT COUNCIL 2006/07 RESULTS REPORT Chairman’s Message I am pleased as Chairman of the Canadian Cattlemen Market Development Council (CCMDC) to submit the first Results Report for the Canadian Beef and Cattle Market Development Fund. This report covers the first year of funding for July 1, 2006 to June 30, 2007. The funds from the Government of Canada ($50 million) and Government of Alberta ($30 million) were announced in March 2005 to “find more export markets and increase beef sales in existing ones” (as stated in the Alberta government announcement) and to “help launch an aggressive marketing campaign to reclaim and expand markets for Canadian beef” (as stated in the federal government announcement). These funds are entrusted to the Canadian Cattlemen’s Association (CCA) to administer on behalf of the industry. David Andrews CCMDC Chairman Canadian cattle producers through check-off contributions will provide over $90 million to more than match the government funds (commonly referred to as ‘legacy funds’). This total investment of over $170 million during the next 10 years is a cornerstone of the industry’s strategy to recover from BSE and be effectively positioned to compete in the global marketplace for the future. Producers and government partners in the use of these funds will demand results – and the CCMDC has been appointed by the CCA to accept this huge responsibility. Through this entity, industry and government are working together on enhanced marketing as a key element of the BSE recovery plan “to recover and expand markets for beef and cattle genetics around the world assuring a profitable, sustainable Canadian industry that results in Canadian beef and cattle being recognized as the most outstanding by Canadian and world consumers”. The recovery of markets closed by the incidence of BSE in Canada has been frustrating, slower than anticipated, and complicated by market restrictions. The Strategic Marketing Plan is intended to achieve the enhanced opportunities for access to high value markets over a 10-year period so it is early days as we report on the first year of funding. The focus of the global marketing strategy is a value proposition intended to clearly differentiate Canadian beef and cattle genetics products. The Canadian Cattlemen Market Development Council has determined through significant consultation with industry and government that the basis for the value proposition will be leadership in animal health and beef safety. The Canadian beef industry has some valuable advantages in taking this position such as climate, clean environment, our mandatory cattle identification system, and a worldwide perception of Canadians as being trustworthy. We believe we can make our claim of providing unique and significant quality benefits to our customers and consumers by building our reputation for leadership in animal health and beef safety. The acceptance of the value proposition will clearly require commitment from the entire industry if we are to develop credibility in our claims on animal health and beef safety. The commitment of the industry to the enhanced feed ban in the face of increased costs and lost revenue is a great example! Chairman’s Message 3 CANADIAN CATTLEMEN MARKET DEVELOPMENT COUNCIL 2006/07 RESULTS REPORT We will also see increasing opportunities to grow the Canadian Cattle Identification Agency’s ability to provide source verification and quality assurance compliance as we progress. There will also be requirements for research and development to enhance and expand on our existing advantages. I am compelled to say that increased marketing of Canadian beef and cattle to new or recovered markets is only one component to solving the competitive issues that challenge our industry today. The recovery of the Canadian dollar relative to the United States has highlighted the growing competitive disadvantage between Canada and the rest of the world on issues like feed costs, energy costs and labour costs. Increased value for Canadian beef and cattle is critical to recovery of our competitive advantage but the industry needs to understand there are other competitive components that must be addressed as well. The CCMDC used a broad cross-section of industry and government representatives to develop a Strategic Marketing Plan. Through the activities of the Beef Information Centre, Canadian Beef Breeds Council, Canada Beef Export Federation and supplementary initiatives fundable from the Alberta funding – we hope to achieve our goals on a long-term and sustainable basis. The results addressed in this report are for the 2006/07 Marketing Implementation Plan which was developed by the Global Marketing Advisory Committee of the CCA, the federal Beef Value Chain Roundtable, and constituents of the recipient marketing groups. The Canadian Cattlemen’s Association is ultimately accountable for the use of these funds and has approved the Marketing Implementation Plan as well. The activities and results of the first year of funding for 2006/07 are detailed in this report with an emphasis on performance measures. David Andrews, Chairman Canadian Cattle Market Development Council Chairman’s Message 4 CANADIAN CATTLEMEN MARKET DEVELOPMENT COUNCIL 2006/07 RESULTS REPORT Canadian Beef and Cattle Market Development Fund - Profile In mid-March 2005, the Government of Build on Canada’s comparative advantage to Alberta announced that their Treasury Board implement innovative market strategies had approved an allocation of $30 million Increase sales in existing markets (domestic, from the 2004/05 fiscal year for the creation U.S., and Mexico) of an Alberta International Beef Market Secure markets for beef from animals over-30- Development Fund. The Government of months Canada also announced a contribution of $50 Intensify programs to be ready for re-entry into million dollars to be used towards a long-term markets such as Japan and South Korea market development fund, referred to as the Develop new markets such as Russia, EU, ‘Legacy Fund’. The combined contributions Philippines, Indonesia and Singapore comprise the Canadian Beef and Cattle Market Development Fund. To ensure efficient and effective control of decision-making processes, the CCA These funds are entrusted to the Canadian Executive has reprised the successful model Cattlemen’s Association (CCA) to administer of the Beef Industry Development Fund the government contributions combined with (1994-1999) to guide the establishment of a industry funds in a strategic manner. The governance and advisory process. The CCA Canadian Cattlemen Market Development Executive, in consultation with appropriate Council (CCMDC), reporting to the CCA provincial organizations, appoints producer Executive and Board, is an industry-based representatives and external marketing governance structure that oversees the expertise as required