By Keith Norbury

Canada is still in the process of recovering from a severe decline in its trade surplus of agri-food and seafood exports. The surplus of $13.1 billion enjoyed in 2008 nosedived to $8.45 billion in 2009, but has gradually been working its way back up to $11.8 billion in 2012. Exports of $47.7 billion are presently well in excess of 2008 levels of $42.8 billion, but 2012 imports of $35.9 billion were $6.15 billion in excess of 2008 levels of $29.7 billion.

It’s an over-simplification to say that Canada’s refrigerated cargo trade consists of beef, pork, chicken and seafood leaving the country and fresh fruits and vegetables coming in. The reality is more complicated. And, like any complex entity, it is difficult to unravel.

Take seafood, for example. Canada imported $2.5 billion of chilled and frozen seafood, compared with exports of $4.18 billion in 2012. Seafood imports were $2.45 billion in 2011 and $2.17 billion in 2010. The U.S. share of those imports was 37 per cent in 2012 compared with 16.7 per cent for Thailand at 15.2 per cent for China.

About two-thirds of Canada’s seafood exports in 2012, $2.82 billion, left from Atlantic Canada, the source of almost 92 per cent of the country’s $1.09 billion in 2012 lobster exports. But the region also received almost 90 per cent of Canada’s $238 million of lobster imports in 2012.

“Seafood and the fishing industries are a very important part of the reefer cargo business that we handle through this port,” said Patrick Bohan, Manager of Business Development at Halifax Port Authority. “Actually, because it’s such high-value cargo, it’s probably the premier refrigerated cargo moving through the port.”

Maritimes export most of Canada’s crabs as well as lobsters

The U.S. accounted for 60.8 per cent of Atlantic Canada seafood exports in 2012, down slightly from 70 per cent in 2010 but above the average for the last five years. China (10.9 per cent), Japan (5.3 per cent) and Hong Kong (2.9 per cent) were the next largest markets for Atlantic seafood in 2012.

About 80 per cent of lobster exports go to the U.S., with China, Japan, and Belgium each accounting for about three per cent. Atlantic Canada also boasts most of the country’s crab exports. In 2012, that was $597 million in crabs, 77 per cent of Canada’s total of $771 million.

Frozen crabs accounted for almost 97 per cent of the 2012 crab exports from Atlantic Canada (for Canada, it is 86 per cent). On the other hand, frozen crabs account for just 39 per cent of crab imported into Canada in 2012.

Demand for refrigerated food expected to soar

As the world population grows, the demand for food products from the Maritimes is only expected to increase. The refrigerated sector, though, does have challenges. One is its seasonal nature, which results in spikes in demand.

“In the early days of containerization, Nova Scotia shippers of apples and blueberries had difficulty accessing reefer containers, so they pooled their resources and purchased a fleet of containers which they turned over to three shipping lines to carry,” said a 2006 report prepared by MariNova Consulting Ltd. & Partners for Transport Canada. “When their product was not is season, the shipping lines leased the containers from the shippers for use in other markets.” Another issue is the nature of the temperature-controlled equipment itself. “Terminal operators have told me it’s about six times more complicated to handle one of these refrigerated containers versus a dry container,” Mr. Bohan said. “There’s more reward but there’s also more risk involved in the handling. If something goes wrong, it’s a lot more expensive.”

Spuds and blueberries also leave from Atlantic Canada

Fish and crustaceans are not the only temperature-controlled products entering and leaving ports in the Maritimes.

“We handle everything from frozen seafood to medical supplies to gel packs for customers, every aspect of frozen and refrigerated freight,” said Greg Sheaves, Manager and co-founder of Absolute International Logistics in Dartmouth, N.S.

Refrigerated cargo is “90 per cent of our business,” Mr. Sheaves said.

Another big export from Atlantic Canada is potatoes, Mr. Bohan noted. That includes raw spuds as well as french fries, notably from McCain Foods and Cavendish Farms.

Canada exported about $868 million worth of frozen potatoes in 2012, up from $838 million in 2011 but down from $966 million in 2009. The U.S. accounted for 82 per cent of frozen potato exports in 2012. About 37 per cent of Canada’s frozen potato exports in 2012 were from the Atlantic provinces, substantially less than the Maritimes’ 55 per cent share of the year before.

Canada also imported $95.8 million worth of frozen potatoes in 2012. Of that, 82.6 per cent was from the U.S. while almost all the rest was re-imports from Canada. In 2002, Canada only imported $41 million of frozen potatoes, 99 per cent from the U.S.

Mr. Sheaves also pointed out, “We do a lot of blueberries and cranberries,” which Mr. Bohan called “a real success story.”

However, Agriculture and Agri-Food Canada reported that in 2010, Nova Scotia exported $73 million worth of blueberries. That placed it second to B.C., which shipped out $107 million. Canada’s total blueberry exports in 2010 were $245 million, up from $236 million in 2009 but down from $328 million in 2007. The U.S., at $151 million, consumed 62 per cent of Canada’s blueberry exports in 2010. Japan, with $22 million, and Germany, with $21 million, had healthy appetites for Canadian blueberries as well.

Halifax also handles imported refrigerated cargo for shipment by rail to intermodal terminals elsewhere in Canada, Mr. Bohan pointed out. “Usually it’s products like grapes and clementine oranges, especially in the pre-Christmas run up, where a lot of that stuff is in the grocery stores for a month or two,” Mr. Bohan said.

Seafood even arrives in the Maritimes

Strange as it might seem, $461 million worth of seafood was imported into Atlantic Canada in 2012. That was up from $442 million in 2011 and $342 million in 2009. The U.S. was the source of 68.5 per cent of those imports in 2012, up from 59 per cent in 2009. China, at 18 per cent, was the second largest source of seafood imports to the Atlantic provinces in 2012. Chile, the world’s second largest producer of farmed salmon, accounted for 3.6 per cent of Atlantic Canada’s seafood imports in 2011 but only 0.7 per cent in 2012.

Mr. Sheaves says Absolute brings in fish from Uruguay, as well as squid for bait from Peru. Other companies are also importing tilapia from China. “And, of course, Highliner here imports a lot of that product,” he said.

Meat volumes nudge up, while produce imports shrink in Vancouver

On the west coast, Port Metro Vancouver does not post statistics on refrigerated cargo. However, it does have a category titled “Meat, Fish & Poultry” in the container sector under both inbound and outbound cargoes. And the port also keeps stats on dairy products, produce and beverages, which tend to be shipped in temperature-controlled containers.

Figures for 2012 were not available at press time. However, in 2011, 637,639 tonnes of meat, fish and poultry left Vancouver. That was a 4-per-cent increase over 2010’s total of 610,829, but less than the 652,089 outbound total in 2009. Inbound volumes of meat, fish and poultry meanwhile increased 1 per cent to 193,478 tonnes, compared with 191,953 in 2010, which was also slightly higher than the 187,616 tonnes in 2009. In all cases, meat, fish and poultry account for a tiny fraction, about 4 per cent, of containerized cargo that goes through Vancouver.

Where’s the beef going?

In the past decade, seaborne meat trades have grown so quickly that they now exceed trade in bananas,” says a brochure from Ocean Shipping Consultants promoting its Refrigerated Trades & Outlook to 2015 report. “The growth has occurred everywhere but is strongest in east Asia and the transitional economies.” That sounds promising for Canada, which is one of the leading exporters of pork and beef.

Canada’s beef industry, which was bruised by the mad cow disease scare in 2003, received a boost in January when South Korea agreed to relax an eight-year ban. South Korea is the last major Asian market to resume Canadian beef exports. Ron Davidson, Government and Media Relations Director with the Canadian Meat Council, said the discovery of a case of BSE (or more popularly “mad cow disease”) “took us out of a lot of markets.” “And with the government very active in negotiations, the Canadian industry has been regaining access to these markets, one by one” Mr. Davidson added.

Canada exported beef and veal to 67 countries in 2012. A significant achievement so far in 2013 was the reopening by Japan of its market to beef and veal from animals up to 30 months old. The total value of Canadian beef and veal exports has dropped, however, in the last years, from $1.42 billion in 2010 to $1.21 billion in 2012, according to Statistics Canada figures crunched by the Canadian Meat Council.

The U.S. accounts for the lion’s share of beef exports – $875.6 million in 2012. That is down substantially from $956.7 million in 2011. “So what you’re seeing there is a real reversal in the trend of Canada exporting more to the U.S.,” Mr. Davidson.

Volumes to Canada’s second largest beef export market, Mexico, have also dropped, from $162.7 million in 2010 to $111 million in 2012.

The two biggest overseas buyers of Canadian beef and veal are Hong Kong and Japan, with $78.2 million and $74.7 million respectively in 2012. “We are exporting a lot of chilled product to Japan so that gives you an indication of the way the technology has evolved in the last 20 years to enable us to do that,” Mr. Davidson said.

The value of Canadian beef exports – including edible offal, tongues and livers – was $1.34 billion in 2011, according to a Trade Data Online search. That was down from $1.43 billion in 2010, and far below the $2.23 billion in 2002, before the BSE scare. The U.S. accounted for 85 per cent of Canada’s beef exports in 2011 but only 33.7 per cent in 2004. In the last five years, the U.S. has accounted for 70 to 80 per cent of Canada’s beef exports.

Meanwhile, Canada imported $1.37 billion worth of beef and veal in 2012, a tad above the $1.2 billion in 2010, but nearly triple the imports of $364 million 2004, in the wake of the BSE scare.

Before that, Korea imported $60 million in Canadian beef annually, making it this country’s fourth largest beef export market. “That’s why opening up of Korea is a significant announcement because it had been a very robust market,” said Darryl Anderson, Managing Director of Wave Point Consulting, a transportation consultant in Victoria, B.C.

North American beef prices also dropped recently, resulting in reductions in Canadian cattle herd, said Mr. Davidson. “So therefore the supply went down. And now, because the prices have increased of late, people are in the process of rebuilding the herds,” he said.

When the government opens up a market for product like beef, it might sound like a boring announcement, added Mr. Anderson, “but actually it sends a really huge important signal to the producers of these frozen and chilled commodities.”

Canada’s pork exports hold steady in 2012

Pork is a much bigger export market for Canada than beef. In 2012, Canada exported 1.2 million tonnes of pork with a value of $3.2 billion. Those were only a fraction less than the figures for 2011, which were about five per cent higher than in 2010. Less than a third of pork exports went to the U.S. in 2012.

“About 75 per cent of Canada’s overall exports go the U.S.,” said Martin Charron, Vice-President for Trade Promotion and Market Development with Canada Pork International. “For us, about 30.6 per cent of our exports go to the U.S.”

At $877.6 million, Japan was the second largest export market for Canadian pork in 2012. Much of that is fresh pork as opposed to frozen pork. “We’ve been working for 40 years with Japan and they’ve developed a high level of confidence in the Canadian product,” Mr. Martin said. “If you go in a supermarket in Japan it will be identified in the supermarket [as] Canadian pork. It will be written on the package because it’s a symbol of quality.”

Russia has been a growing market in the last four years, going from $102 million in 2009 to $491 million in 2012. Mr. Martin is optimistic that Canada will soon be able to export fresh pork to Russia, as well as more pork to Europe, both frozen and fresh.

At present, Europe is not a big market for Canadian pork. But Gary Stordy, Public Relations Manager of the Canadian Pork Council, sees a lot of untapped potential there if Canada can swing a trade deal with the European Union. “It is an exciting market because in the European community they enjoy pork products,” he said. “They are quite popular around Christmas and Easter and if we can export more of those large pieces of meat, fantastic. It’ll help with the cross-border exchange of containers going back and forth if we can fill them with pork.”

Despite the strong dollar, Canada has a dominant market share in South Korea for pork. But given that the U.S. has a free-trade agreement with South Korea, and Canada does not, it will be hard to maintain that position, he said.

Finance Minister Jim Flaherty said in late March that Canada is close to a free-trade deal with South Korea, the Globe and Mail reported in late March. However, the paper also quoted skeptical trade experts who pointed out that reaching a deal on automobiles might prove insurmountable, thus diminishing the prospect of a trade deal.

Turkeys gobble up bigger share of export trade

Canada also has a significant trade in poultry, said Mr. Davidson, who is also Government and Media Relations Director with the Canadian Poultry and Egg Processors Council and the Further Poultry Processors Association of Canada.

Canada’s chicken exports, excluding mature chicken, totalled 135 million kilograms in 2012, a 2.8 per cent drop from the 138.9 million kilograms in 2011. Mature chicken exports, meanwhile, were 18.3 million kilograms in 2012 compared with 19.8 million in 2010, a decline of 7.5 per cent. Exports of turkey totalled 19.5 million kilograms in 2012, down 6.4 per cent from the 20.8 million kilograms in 2010.

Chicken imports, excluding mature chicken, reached 161.4 million kilograms in 2012, a 2.5 per cent increase over 2010. Mature chicken imports were 76.3 million kilograms in 2012, 19.4 per cent higher than in 2011. Turkey imports were 9.8 million kilograms in 2012, up 20.5 per cent from 8.2 million kilograms in 2011.

Even though Canada has supply management of poultry, products are imported for which there is insufficient supply, Mr. Davidson said. “Or it’s coming in and being processed into some other type of further processed product and re-exported,” he said.

Canadians also have a higher demand for certain parts of the animals than for others. “Canadians don’t eat a lot of chicken feet. And in the case of chicken, the demand traditionally for white meat has been much higher than for dark meat,” Mr. Davidson said.

The outlook for cool cargoes

In a 2010 report on cool cargo for Transport Canada, consultants Darryl Anderson and Joseph Monterio concluded with a warning about current shipping laws, food and drug regulations, environmental regulations, customs and security regulations and tariff and quotas. They are increasing costs, including transportation costs, which is leading to “a fall in quantity traded in world markets.”

Three years later, encouraged by South Korea opening up its market to Canadian beef, Mr. Anderson is optimistic that regulatory changes will keep evolving (Canada’s beef exports to South Korea increased from zero in 2009 to $10 million in 2012). “But the issue of food security in the supply chain, and the trend of being able to follow product right through the supply chain, they’re not going away.”

Absolute International Logistic’s Greg Sheaves envisions aquaculture products becoming a thriving part of the seafood supply in the Maritimes. “The program that Canada has in place is a good program,” he said. “They’ve worked together with the fishermen and processors. You can’t please all the people all the time. But the ones that are here are surviving.”