Sub-sector Profiles: Index
[ Introduction | Significance | Structure | Performance | Employment | Investment ]
[ Trade Performance | Challenges/Opportunities | Association | Statistics | Contact ]

The Canadian Poultry Meat Processing Industry

The poultry meat sub-sector consists of establishments engaged in slaughtering, dressing, packing or canning chickens, turkeys, ducks, geese and game birds. The sector produces a large variety of products ranging from fresh and frozen whole carcasses to parts (bone-in or boneless), breaded, battered, marinated items, controlled portions, wieners, sausages to prepared dinners and entrees.

Introduction

Changes in North American consumer diets over the last thirty-five years, have had significant impact on the demand for poultry products. Poultry meat consumption, particularly chicken, in both Canada and the United States has increased dramatically.

The growth in chicken meat consumption has been stronger than for red meat (pork and beef) products. Red meat consumption was at its peak in 1976 when it accounted for 80% share of all meat consumed, while poultry (chicken and turkey) accounted for only a 20% share. By 1995, red meat's share had fallen to 66.8% of all Canadian meat consumption while poultry's share had risen to 33.2%. During this period, beef appeared to have lost the biggest share of Canadian meat consumption falling from 51.2% to 34.2% while chicken's share almost doubled, going from 14.6% to 27.1%.

In relation to beef and pork, poultry has been able to capitalize on the increased demand by Canadian consumers for healthier and leaner meats. Additionally, creative product development has generated a wide range of value-added products such as chicken wieners and sausages which have been positioned to compete directly with red meat based products.

Significance

The poultry meat sector consists of firms that slaughter, eviscerate and process chickens, turkeys, ducks, geese and game birds into whole or cut-up products. Some meat firms process the meat into a broad range of formed poultry meat products such as nuggets, fingers and patties. Firms involved in the further processing of poultry into higher value products such as frozen TV dinners and Chicken Kiev, for example, represent an increasingly important manufacturing activity.

The processing industry increased output from $1.9 billion in 1988 to $3.0 billion in 1996, an increase of 63%. Of the $3.0 billion in total poultry shipments in 1996, an estimated $2.3 billion was attributed to chicken, $0.4 billion to turkey meat, and $0.3 billion for other species (ducks, geese, game birds). An estimated 60% of chicken meat on a volume basis is sold as parts, 10% is sold as whole carcasses or whole birds and 30% is used in further processing. Turkey meat is marketed primarily as a whole bird (66% by volume marketed as frozen product and 18% fresh) and a minor proportion as cut-up parts (7%) and processed product (7%).

Canadian production of further processed chicken and turkey products accounted for a large portion of the Canadian poultry meat market in 1996 -- products such as chicken wieners, boneless turkey roasts, breaded/seasoned fingers, nuggets, thighs, Chicken Dianne (boneless chicken stuffed with broccoli and cheese), chicken burritos, Turkey Wellington (boneless turkey breast stuffed with cranberry sauce and gravy inside a pastry), meal kits, pies, and frozen dinners.

In 1995, Statistics Canada's Census of Manufacturing reported there were over 100 primary and further processing plants employing over 14,000 people. The poultry processing industry is strongly domestically oriented but international trade is growing in importance. In 1996, exports were $77 million or about 2.5% of total production while imports were $222 million or about 8% by value of production (Figure 1).

Figure 1. Imports, Exports and Domestic Shipments, 1996

Structure

The four largest poultry processors operate two or more plants in two or more provinces and account for over 50% of the industry's production. Producer cooperatives have a prominent position in this industry. Two of the four largest processors are cooperatives.

The largest multi-plant firms have been re-organizing their internal operations by designating certain plants for primary chicken processing, others for turkey processing and still others for further processing. This move to plant specialization results in longer production runs and lower production costs. This specialization or product mandating process has been most predominant in the larger markets of central Canada while plants in the smaller provinces still tend to be multipurpose in nature. As this specialization grows and primary processors expand more and more into further processing activities, more pressure is placed on the non integrated further processor as the source of input products becomes more restricted.

Poultry processing occurs in all regions of Canada. Central Canada is the major producing region with Ontario and Quebec jointly accounting for 66% of all shipments and 61% of the plants. Ontario is the leading province with 41% of the shipments and 34% of the plants.

Plant location is heavily influenced by the perishability of live birds which inhibits their transport over long distances. Processing plants involved in primary processing or slaughter operations are generally located in rural areas close to live bird production.

Canadian processors frequently have corporate links to other food businesses as well as to hatcheries, grow-out farms, feed mills and pet food businesses. In many cases, processing operations are divisions of large diversified agri-food businesses in Canada.

Supply Management

There are independently operated national supply management systems at the farm production level for chicken and turkey which are monitored by the National Farm Products Council. The national producer agency for turkey, in consultation with the processors at the national level, sets the total country's production requirements which are subsequently divided among provincial producer marketing boards taking into account criteria contained in the federal/provincial agreement. For chicken, the national production requirement is determined through a "bottoms-up" approach whereby provincial level market requirements are determined by each provincial commodity board through consultation with their processors. The national production allocation then becomes the sum of the provincial requests.

At the provincial level, the producer boards negotiate prices for live birds and allocate production quota to the producers under their jurisdiction. Supplies of live birds are controlled with penalties imposed for those who exceed their quota. The farm price, regulated by provincial boards, is negotiated with estimated costs of production and market conditions as influencing factors.

Various innovations have been introduced to maximize input from processors and further processors, foodservice and retailers on what is required to fill the market demand. The national agencies' boards of directors have been expanded to allow for voting representatives from the various sectors to provide a broader perspective on what market requirements are. At the provincial level, processors are encouraged to develop their needs in conjunction with further processors, food service and retailers so that no market requirement goes unfilled.

There is no supply management for ducks, geese, guinea fowl and game birds.

Food Safety and Labelling Requirements

Poultry meat inspection is carried out by provincial and federal officials, depending on the jurisdiction in which the processing plant is registered. Poultry meat moving interprovincially or sold in export markets is subject to federal inspection requirements. In federally regulated establishments (representing at least 95% of all slaughter), the federal government, through the Canadian Food Inspection Agency (CFIA), ensures inspection standards are maintained with the implementation of the Humane Slaughter of Food Animals Act, the Meat Inspection Act and the Canadian Agricultural Products Act.

The CFIA is responsible for the administration and policy issues regarding the Consumer Packaging and Labelling Act as it pertains to agri-food with the enforcement of proper labelling and food ingredients and the prevention of consumer fraud. As well, sections of the Food and Drugs Act dealing with product safety, consumer health, and freedom from adulteration are enforced by the CFIA.

Import Restrictions

In compliance with its GATT/World Trade Organization (WTO) commitments, Canada converted its agricultural import controls to a system of tariff rate quotas (TRQs). Under these TRQs, imports within the quota are subject to low rates of duty, while imports over quota are subject to significantly higher rates of duty. These high rates enable Canada to maintain its system of orderly marketing for poultry products.

The Department of Foreign Affairs and International Trade (DFAIT) is responsible for the administration of TRQs and the issuance of import permits for goods included on the Import Control List (ICL) under the authority of the Export and Import Permits Act (EIPA). Revenue Canada administers the TRQ system at the border. It also determines whether products are on or off the ICL, which is a tariff classification issue.

Within the move to TRQs and the consequential legal and regulatory changes have come new possibilities regarding the transferability of import allocations to individual companies. They may now be allowed to sell or rent their quota, subject to the approval of the Minister of Foreign Affairs (who is responsible for the EIPA).

Chicken products and turkey products were originally placed on the ICL in October 1979 and May 1974 respectively, and then removed and replaced as a series of tariff-based items on January 1, 1995.

Under the Canada-U.S. Free Trade Agreement (FTA), the import quota levels for chicken and turkey were established at 7.5% of the previous year's domestic production of chicken and 3.5% of the current year's domestic production of turkey, respectively. The increase in chicken and turkey imports which resulted of the FTA was partially allocated to processors of chicken and turkey products not on the Import Control List (ICL), in order to compete with comparable imported finished products for which tariff protection would be eliminated with the FTA by January 1, 1998. These provisions were incorporated into the North American Free Trade Agreement (NAFTA).

The TRQ level established under the WTO is 39,843,700 kg (eviscerated product basis) yearly for chicken for the period 1995-2000 and 4,467,000 kg (eviscerated product basis) in 1995, increasing to 5,588,000 kg by 2000, for turkey. The access level provided by Canada is the greater of its NAFTA and WTO commitments.

Within quota tariff rates will decline by 57% between 1995-2000 with the exception of products of U.S. origin where the within quota tariff rates were completely eliminated on January 1,1998 as governed by the NAFTA. The tariffs applicable to over access rate imports will decline by 15% between 1995-2000.

A new method of allocating the chicken TRQ to importers began on January 1, 1996 and is being phased in by January 1, 1999. At the end of this period, the chicken TRQ will be allocated to three groups in priority: firms importing chicken before the introduction of import controls in 1979, to the extent of their initial allocation as adjusted since (e.g., for under utilization); processors of chicken products not on the ICL (e.g., TV dinners), to the extent of their needs for such production and members of the foodservices sector which will be allocated 2.5 million kilograms on the basis of market share; the remainder of the TRQ will be split 70/30 between chicken processors (on the basis of their market share or minimum equal share of 60,686 kilograms) and chicken distributors (on the basis of equal shares). Over the four year phased-in period, the method of allocation will shift from a regime based primarily on historical importers, that is firms importing chicken before the introduction of controls in 1979, towards one based on an importer's role in the industry.

The turkey TRQ is allocated between two groups: traditional turkey importers (firms importing turkey prior to the imposition of import controls in 1974) received their initial allocation, as adjusted since (e.g., for under-utilization); processors of turkey products not on the ICL (e.g., TV dinners and similar products except for products made using turkey breeder meat) to the extent of their needs for such production. The remainder unallocated pool is used to meet supplementary needs, including imports to compete and imports for shortages. Any balance remaining at mid-year will be allocated to traditional allocation holders on a pro-rata basis.

Supplementary import permits for chicken and turkey may be issued to prevent shortages in the domestic market, to allow import for re-export, to permit test marketing of new products or processes, to permit further processors to compete with imports of non ICL products (such as TV dinners (in cases where they have not yet established a production record qualifying them for a quota share or where their allocations is insufficient for their growing import-competing needs).

Performance

In comparison with much of the food processing sector, the poultry meat sub-sector (particularly chicken) has performed exceptionally well since the late 1980's. Between 1988 and 1996, shipments and value-added demonstrated consistent growth, increasing by 45 and 63.8%, respectively (Figure 2). (In contrast, shipments and value added for the meat and meat products industries, excluding poultry, increased by only 9.5 and 6.6%, respectively despite very substantial increases in export volumes). The value of shipments adjusted for inflation increased 38% between 1988 and 1996 -- well above the food and beverage average increase of 6%.

This strong industry growth has been driven by the dramatic increase in value-added further processed products; an indication of how chicken is less seen as a "commodity." An increasingly innovative product mix such as the expansion of deboning and the development of numerous further processed branded items that take into account convenience, taste, nutrition, and low fat concerns of consumers are driving industry success. Besides capitalizing on the increased demand by Canadian consumers for healthier and leaner meats, creative product development has generated a wide range of value-added products such as chicken wieners, bologna, sausages and other deli products which have been positioned to compete directly with similar red meat based products.

Chicken meat production has grown at a faster rate than turkey products. Chicken demand has also been driven by fast food chains while turkey consumption has been fairly static despite the development of a range of value-added turkey products. In both Canada and the United States turkey demand continues to be strongly seasonal (Christmas and Thanksgiving).

Not all regions have similar production costs. The larger provinces, namely, Ontario, Quebec, British Columbia and Alberta are able to support larger more cost efficient plants. Since feed costs are a major factor in determining live bird costs, grain surplus regions (prairies, Ontario) tend to have lower live bird costs than grain deficit regions (Maritimes).

Over this decade, there has been a slow decline in the number of federally registered slaughter establishments, from 77 in 1988 to the 65 that exist currently. Over this same period, the decline in the number of plants has been accompanied by an increasing concentration of production in fewer hands. From 1988 to 1995, the proportion of shipments represented by the top four firms increased from 36% to slightly over 50%.

The larger processors tend to offer a wide range of primary cuts and further processed products. With plants in two or more provinces, the larger processors are increasingly able to improve their marketing reach across more of the country. For example, further processed or higher value-added products from one province can increasingly be found in the market of another province.

Investment

In response to the significant expansion in demand, there has been considerable investment in the industry. The largest processors are remodelling plants and installing new technologies such as automated eviscerators, cropping machines, gizzard peelers, automated transfer and weighing systems, deboning, sausage and packaging equipment, automated ovens, etc. Plant output has significantly increased as a result. The value of output per plant measured in terms of shipments in constant dollars has increased from $18.1 million per plant in 1988 to $30 million per plant in 1996.

Beginning in the mid-1980s, investment activity began to pick up as the larger firms invested in efficient high speed production line equipment to reduce costs. New capital investment in construction and new equipment for the years for the most recent years for which data is available (1986-1993) has averaged $40 million annually. The motivation for new investment is tied to the need to keep pace with the growth in output, to cut costs, and improve productivity. Productivity measured by sales per manufacturing employee adjusted for inflation declined between 1988 and 1990 ($180,000 to $170,000) but increased significantly to $198,000 by 1994 and declined to $192,000 in 1995 or up 7% from 1988. The increase for the food and beverage sector from 1988 to 1995 was only 3%.

There is little or no foreign investment in the Canadian poultry processing industry. These operations are Canadian owned and managed.

Employment

Poultry meat processing is still a fairly labour intensive operation in Canada. For its size, poultry processing has a significant labour requirement accounting for 8%-9% of all food and beverage sector employment but generating only 4% -5% of all food and beverage sector shipments (Figure 3).

Figure 3. Employment (in thousands), 1988-96

Primary processing employment has been declining with new eviscerating equipment and a new approach to inspection which is currently being implemented. Secondary or further processing is the least automated and consequently the most labour intensive and as this sector's output increases so does its employment requirements. In contrast with other sectors of the food and beverage industry where employment has been static to declining, this sector has seen overall sector employment increasing 17.5% between 1988 and 1995.

Growth in product demand, particularly for further processed chicken and turkey products, also contributed to increased employment. Recent developments in technology are lending themselves to the further processing sector as mechanical portion control is replacing manual portion control in many of the larger throughput facilities.

Trade

Exports

Traditionally, the poultry processing industry has been domestically oriented with little international trade occurring but this too is changing with significant growth in some areas. Since the late 1980's, poultry exports have increased fourfold. Prior to 1994, chicken exports represented less than one percent of domestic production while that for turkey tended to be slightly less than 10%. The growth in chicken exports in 1994 and 1995 can be traced back to the time of high production and inventory levels that were generated following the implementation of the "bottom up" quota allocation system.

Primary processed products make up 90% of exports with further processed products the remaining 10%. Dark chicken meat (legs, thighs), and chicken feet (which are in lower demand in the Canadian market), fowl and turkey parts, and further processed products such as mechanically separated meat (MSM), chicken burgers and chicken wieners, are strong components of the export mix.

Canada has become a net exporter of turkey products. Since the mid-1980s at the provincial level, turkey producers and processors, have worked together to develop business arrangements which would permit turkey to be grown and processed specifically for the export market. These co-operative arrangements in which the Canadian Turkey Marketing Agency has a co-ordinating role, have played an important part in the steady growth of export product sales and in sustaining production levels in a domestic market which have remained stagnant. Since the mid 1980s, exports of Canadian turkey (includes whole carcasses, parts, cooked products, etc.) have increased from 777,000 kilograms in 1984 to over 16.6 million kilograms or about 18% of Canadian production in 1997.

By the early 1990s, chicken producers and processors were also beginning to develop provincial export programs -- to the point where by 1996 these efforts were beginning to show positive results in the form of strong export growth. In March, 1997, Chicken Farmers of Canada implemented a national export policy framework within which provinces can manage effective programs for the export market.

In the case of both chicken and turkey, administrative arrangements for the establishment of export programs vary from one province to another. In all cases the objective is to facilitate exports in a manner that does not disrupt the domestic market and is consistent with Canada's international trade rights and obligations.

Much of the export activity undertaken by the Canadian poultry processors and brokers has been in an effort to find a market for products which are not in high demand on the domestic market. The North American poultry market is predominately a white meat market. As a result, export programs frequently operate in a fashion that allows a certain percentage of the quantity of the product to be exported to be credited and re-allocated by provincial boards in such a manner that the domestic supply ratio of white-to-dark meat is congruent with domestic demand.

Imports

Imports are principally chicken meat from the United States and have increased as a result of greater access granted with the signing of the Canada /US Free Trade Agreement in 1989 in tandem with increased domestic production as access is tied to domestic production levels. In 1996, imports represented $222 million, with $134 million in meat (primarily chicken parts) and $88 million in further processed product. For most years, imports represent the level of TRQ's established under Canada's international trading obligations.

The bulk ( ie. 70%) of poultry meat imports are on the Import Control List. However, imports of further processed products are experiencing the greatest growth reaching $88 million in 1996 compared to $30 million in 1988 and offer some potential for import replacement provided manufacturers have access to low cost inputs. About 70% or $62 million of total further processed product imports (including chicken dinners, frozen entrees or fully prepared meals) are not subject to TRQ's and are often very competitively priced due to large scale processing operations in the US. These products are subject only to the regular tariffs, and in the case of product from the US, these tariffs have been eliminated as of January 1, 1998. As such, Canadian manufacturers of these non ICL products require a source of input supplies at similar prices as their US competitors. This need has been accommodated through the allocation of TRQ's to the manufacturers of these products.

Since the mid-1980s, static domestic demand for turkey has limited import requirements although imports of turkey into Canada, did increase from 2.3 million kilograms to 4.9 million kilograms.

Profit

In general the market for chicken meat has been fairly buoyant relative to other meats and protein alternatives. Industry profits tend to be cyclical, depending on inventory pressures from competing meats and the cost of live birds which make up 80% of total processing costs. In 1996, high feed costs in North America raised the cost of live birds in both Canada and the United States, squeezing profits.

The industry has aggressively worked at increasing new investment and in the modification of inspection systems in order to increase production line speeds. Benchmarking of primary processing costs suggests the industry has made some progress in improving the efficiency of its kill and eviscerating operations which should enhance the competitiveness of further processing activities.

Some individual processors have been very actively pursuing the development of new processing technologies which would reduce the labour required for health and safety inspections while maintaining Canadian high standards. The adoption of new evisceration equipment which will process product more quickly, laser processors for portion control, and the pursuit of a completely automated inspection system are all progressive steps being developed by the industry to increase throughput and maintain health and safety without increasing labour costs.

Research and development

Given the Canadian processing industry's relatively small size, most research and development of interest to processors occurs elsewhere in countries such as Holland and the US and such innovations in processing equipment or packaging are readily available through these suppliers. The Canadian industry does keep relatively current in automation, waste water treatment and live bird handling systems; however, if it were operating at a higher scale of production, it would be able to better realize some of the advantages from new technologies.

At the producer level, Canada has been a leader in the utilization of improved genetic stock which result in better feed conversion, viability and disease resistance. The industry has adopted automated devices such as self-feeding and watering, waste disposal and product harvesting, as well as energy saving techniques.

Issues, Challenges and Opportunities - Toward the Next Century

Opportunities in the domestic market

The domestic market is the industry's major market and will continue to be in the future.

There is a strong consumer preference for chicken particularly "white meat" and this preference shows no sign of weakening. Creative product development has created a wide range of value-added products such as chicken wieners and sausages which have become highly differentiated to the point where brand recognition is moving demand beyond price.

Some of the best opportunities in the domestic market lie with the foodservice and hotel, restaurant and institutional level which has stimulated and maintained the consumption of poultry products. This trend continues as new restaurants come on stream utilizing poultry products and existing large chains introduce new menu items utilizing poultry.

The fast food industry, a major purchaser of chicken products, is concerned about the price of chicken and availability in Canada. Chicken prices compared to competitor meats in Canada has been relatively good. Consumer Price Index (CPI) for chicken and turkey have retained a competitive position in the marketplace. Using 1986 as a base year for CPI at 100 has seen increases to 1995 for chicken 118.9; turkey to 107.9; beef to 123.6 pork to 115.6 and all food items to 126.3. Since 1995 the chicken CPI has experienced some significant increases compared to the beef and pork indexes while the turkey CPI has held fairly steady. Continued competitive pricing and maintaining a consistent supply of fresh parts will be critical in maintaining domestic market growth.

The demand for turkey meat has lagged compared with chicken. From 1986 to 1995, Canadian chicken consumption expanded by 42.3% (25.2% on a per capita basis), while that for turkey increased by 26.4% (5.2% on a per capita basis).

Turkey processors in Canada and the U.S. have not had the same success with the fast food industry or in developing markets for further processed turkey products that has been the case with chicken. Turkey continues to carry the image of a holiday meat with peak demand in the fall for Thanksgiving and Christmas. The need to position turkey as a year round product is essential to domestic market growth. The Canadian Turkey Marketing Agency and the Canadian Poultry and Egg Processors Council are reviewing the possibility of a generic advertising campaign promoting Canadian turkey. This generic campaign would run in conjunction with an individual promotion campaign by individual processing companies.

Opportunities in international markets

World trade in poultry meat has been particularly buoyant, with total exports doubling between 1990 and 1995. It is anticipated that this growth will continue; however, it will be a relatively competitive world market as major players, such as China, Brazil and the US expand their export activity and in the longer run if Russia (currently a principal net importer) recovers its domestic capacity and begins displacing imports. The primary competitors on the export market are the US (1997 exports projected at 2.3 million tonnes); European Union, which utilizes some export subsidy assistance, (1.6 million tonnes); Asia, primarily China, whose domestic production is growing strongly, (1.3 million tonnes); and Brazil (0.6 million tonnes). Canada's 32,000 tonnes represent less than 0.5% of total 1997 world trade of 5.9 million tonnes.

There is the potential for both chicken and turkey producers and processors to benefit if they can capture a greater share of the export market. Since the mid-1980s producers and turkey processors have worked together to facilitate the production of live turkeys which could be processed specifically for export. Success has been achieved in developing a sustained export market for primary and further processed turkey products. For turkey producers and processors a viable export program has been valuable in expanding production in what has proven to be a static domestic market.

In the case of chicken, the development of procedures for growing chicken to be processed specifically for export is more recent. Export growth since 1995 has become more significant and future years should see continued growth.

There have been some linkages developed between the various production and processing sectors which are designed to stimulate export activity. Hatching egg producers, hatcheries, broiler growers and processors have developed mechanisms to share the risk involved in producing product for exports. The world price is usually lower than the domestic price but if each segment of the industry shares in the risk product can be moved onto the world market.

Challenges

Global structural changes

On a global basis, poultry meat has experienced a very significant growth in demand, due to the overall global increase in meat consumption and also because poultry has been able to encroach on the market share of other meats. Poultry seems to fit well into the cultures of many countries. Modern poultry production seems to be well adapted to countries with subtropical and tropical climates with the result that many developing countries in Latin America and Southeast Asia (such as Brazil and Thailand) have sophisticated and highly industrialized poultry industries with low production costs.

Some major poultry producing countries like the U.S. have a poultry meat industry that is almost totally integrated, such that the poultry producer is effectively a "wage earner" and is not a "profit centre" rewarded for risk and management as in Canada or in western Europe. (Vertical integration represents about 25 to 30% of Canadian production). Vertical integration of poultry production operations from the breeding stock through to further processing, which includes support services such as feed milling, allows for the optimum capacity utilization all the way up the production chain. Vertical integration in poultry not only makes poultry meat extremely competitive with other meats in the U.S., it also helps the industry's competitive position in poultry meat export markets. U.S. industry export efforts are also supported by an aggressive promotion program sponsored by the U.S. Poultry and Egg Export Council.

Canada has some potential to continue the expansion of domestic poultry consumption and to participate modestly in export markets. Unlike some countries which must rely on imported feed ingredients, Canada has an abundance of inexpensive feed which is a major input cost in poultry production. Canadians have strong skills in nutrition, bird genetics, disease control, and skilled management at the farm and processing levels, a reputation for high quality products and a rigorous poultry inspection system.

On the other hand, there are other factors that create competitive disadvantages for Canada such as a lack of economies of scale as Canadian poultry processing plants tend to be smaller than their U.S. counterparts and have higher wage rates. Also with a colder climate, Canadian energy and housing costs for live birds are higher than in some countries. Canada will have to be strategic in its approach to growth looking for export markets for products such as dark meat, offal, mechanically separated meat (MSM) based products and value-added exports where possible.

Regulatory and technology challenges

The challenge within the supply management policy framework is developing the relationship between producers, processors, and further processors in order to ensure the interests of producers are protected and the potential for growth in domestic and export markets is maximized. Supply management combined with import protection can create challenges in meeting the perceived raw material needs of firms who are attempting to fulfill the requirements of the food service and retail sectors.

The Canadian industry has used supply management regimes to develop the domestic market and has foregone the option of aggressive export activity in favour of protecting its production and processing sector. The domestic protection afforded by TRQs has shielded the Canadian poultry industry from the competitive pressures resulting from the more open market conditions created by international trade agreements which other parts of the Canadian processing industry have had to deal with in the last several years.

Technical innovations have played a role in the progress that has been made in reducing costs and increasing productivity in Canada at both farm level and the processing plant level. At the farm level, automation and improved genetics in which Canada is an established leader have helped to reduce labour requirements and bring birds to market more quickly. At the processing level there has been rationalization of the industry with fewer firms operating fewer but larger plants in order to reduce costs. Advances in product development, production technology, and in packaging and environmental fields continue to provide new investment challenges in maintaining their competitive edge.

As a food safety initiative, poultry producers, processors and CFIA are also collaborating in the implementation of Hazard Analysis and Critical Point programs (HACCP). Closely associated with this effort, the processing industry and poultry inspection authorities have been working towards streamlining the inspection system in order to facilitate the dramatic increases in production line speeds that are now beginning to occur in Canadian and U.S. plants.

Conclusion

With the current import restrictions in the form of TRQs, the Canadian poultry meat processing industry controls roughly 90% of the domestic market. The industry has grown rapidly and has demonstrated its capability in serving the major components (retail and food service) of its domestic market. The industry's products are of comparable quality to those found world wide.

Processors have been successful with new product innovations to supply consumers with more choices in an attempt to increase profits and build market share in the Canadian market in competition with other meats. The least efficient plants have been closing, accompanied by new investment in the remaining ones in order to capture productivity gains. However, due to the production and processing capacity being spread out across the country, the Canadian industry lacks economies of scale.

Implementation of the NAFTA and WTO negotiations has not had a significant impact on supply management regimes or on the poultry processing industry, nor is it likely to in this decade. In the longer run, the establishment of TRQs has likely put in place a basis for freer trade in the future. To assure continued growth in output the producers and processors will need to be careful to serve the various components of its domestic market (retail food service and further processors).

Agriculture and Agri-Food Canada Contact

The Following Analysis Reports are Available from the Food Bureau:

Food & Beverage Processing Sector Analysis

• The Canadian Food and Beverage processing Sector - An Overview of Opportunities and Challenges at the Turn of the Century
• Historical Perspective of the Canadian Food and Beverage Processing Sector
• Analysis of the structure of the Canadian Agri-food Industry

Sub-Sector Profiles

• The Canadian Bread and Bakery Industry
• The Canadian Confectionery Industry
• The Canadian Wine Industry
• The Canadian Distillery Industry
• The Canadian Dairy Processing Industry
• The Canadian Red Meat Processing Industry
• The Canadian Feed Industry
• The Canadian Poultry Processing Industry
• The Canadian Snack Food Industry
• The Canadian Fruit and Vegetable Processing Industry
• The Canadian Cane and Beet Sugar Industry
• The Canadian Flour and Related Products Industry
• The Canadian Soft Drink Industry
• The Canadian Bottled Water Industry
• The Canadian Tea and Coffee Industry *
• The Canadian Pasta Industry *
• The Canadian Brewing Industry *
• The Canadian Miscellaneous Foods Industry *

* Titles marked with an asterisk are not complete at time of publication. Published profiles are available on the internet at http://www.agr.gc.ca

Regional Profiles

• Atlantic Provinces 
• Ontario 
• Saskatchewan 
• British Columbia
• Quebec 
• Manitoba 
• Alberta

Readers can obtain data updates by accessing the electronic version of these reports on ACEIS at http://www.agr.gc.ca

We would be pleased to receive your views, and any comments or suggestions that would improve the substance of these reports. For additional information and/or to provide your comments, please contact:

Food Bureau
Room 501
Sir John Carling Building
Ottawa, Ontario
K1A 0C5
(613) 759-7556.

Les documents sont disponibles en français.

Date Modified: 2004-06-02		Important Notices
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