The Issue Facing the Canadian Chicken Industry

The Issue

Each year since 1999, at about this time of the year, the minister of International Trade has to make a decision on how to allocate next year’s chicken import quota. Since chicken imports make up at least 7.5% of the chicken purchased each year by consumers, the Minister’s decisions have consequences for the chicken market, investments and jobs.

As a result of the trade agreement reached with the EU, the federal government has stated assistance may be available should additional cheese imports cause economic damage to Canadian cheese interests. A similar economic damage control program was put in place in 1989 when the Canada/US Trade Agreement was signed to keep Canadian further processors competitive and to maintain Canadian jobs. Action was necessary because tariffs on the import of chicken dinners (and similar products) were to be eliminated over a 10-year period and the price of chicken was higher in Canada than in the USA as a result of ensuring chicken growers received a fair return for their labour and investment. Giving further processors access to imported chicken worked and has allowed manufacturing of products not on the import control list (non-ICL) to expand. Facilities were expanded, new ones built, and jobs were created. The policy continues to achieve its objectives.

It is now 25 years later. Demand by consumers for convenient frozen chicken dinners and snacks continues to grow as does the consumer demand for fresh chicken. The chicken import quota of about 80 kt (7.5% of total chicken production) cannot supply the specialty items of wings, tenders and sized boneless breast as well as the needs of the non-ICL products manufactured in Canada. The George Morris Centre report (here) warns that shifting chicken TRQ used for the fresh and food service markets entirely to non-ICL use will require the entire chicken industry to re-balance. Issuing more chicken TRQ can be a solution but industry estimates suggest the entire available chicken TRQ could be taken up with only growing non-ICL demand if a recent innovation catching on with retailers and consumers.

The Solutions

The Canadian Association of Regulated Importers (CARI) has written Minister Fast several letters containing solutions to ensure the stability of the chicken industry is maintained and job creation in both fresh and processed sectors of the industry continue.

The solutions are the following.

  1. CARI has asked the Minister to take the lead with his colleagues and persuade the government to take action at the border to eliminate the entry of chicken products to which a separate sauce packet has been added. Demand for this new product has grown from almost zero to an estimated 6 kt to 10 kt this year. Similar growth is projected for next year and the category (frozen chicken products) could be mostly converted to include sauce packets accounting for about 100 kt or the entire TRQ. (This issue is identical to last year’s pizza kit issue which the government acted upon to correct so that import controls measures would not be circumvented.)
  2. It is proposed that the growing demand for diced young chicken can best be addressed by the issuance of import-to-compete TRQ. A considerable portion of the growth for this product is a conversion to young chicken meat from diced fowl meat. Canadian manufacturing of diced chicken meat is seriously deficient and the use of supplementary import quota can stimulate domestic production.
  3. With the two key drivers of non-ICL demand addressed (see Table 2.1 of the George Morris Centre report dated September 2014), and the core non-ICL demand being stable, CARI encourages the Minister to take the opportunity this year to take the current allocation methodology and put it into an allocation method order. This way, much needed stability is provided for the import sector and the overall chicken market. (A copy of the proposed allocation method order in the form of a Notice to Importers has been provided to the Minister and can be accessed here.)
  4. Encourage Chicken Farmers of Canada to expand the existing dark meat domestic supply program to include white meat. A proposed solution has been developed by CARI and can be viewed here.

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