Back at the ranch, more risk for Alberta’s economy

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As if Alberta didn't have enough to fret about.

Just as the province deals with a new oil bust, with all of its spreading economic damage, an old problem rears its head.

It was 2003 when mad cow disease first did its worst on Alberta's largest non-hydrocarbon exporting sector, generating fears about public health and prompting more than three dozen countries to slam their doors on Canadian beef.

For the industry to fully recover, it took hundreds of millions of dollars of federal and provincial aid and years of proving to the world that the system was not susceptible to mass outbreaks.

Last week, the problem returned with the first discovery of an animal stricken with bovine spongiform encephalopathy, or BSE, in four years. The federal government's now-familiar mad cow emergency procedures of inspection, testing and disclosure kicked into gear, and the case has caused nowhere near the hysteria of the crisis a dozen years ago.

Ottawa said it does not expect falling-dominoes rejections of Canadian beef in export markets this time, as screening and regulation have improved. However, much depends on the results of an investigation into the latest case by the Canadian Food Inspection Agency.

In the meantime, the farm remains under quarantine.

So far, one country, South Korea, has closed its borders to Canadian beef in response to the latest case, according to a Reuters report from Seoul. It is not one of Canada's top five markets. The largest is the United States, the destination of 71 per cent of exports, according to industry figures.

Still, it shows another vulnerability in Alberta's commodity-dependent economic miracle at pretty much the worst possible time.

If more countries get jitters about the safety of Canadian cattle and beef, it would be during a period of record-high prices that have allowed producers to reap sizable financial gains following some lean years.

In 2013, the latest full year for which federal statistics are available, farm cash receipts for cattle in Alberta topped $3.25-billion, nearly half of Canada's total. That compares with $2.5-billion in 2003. (The BSE crisis began in May of that year.) In 2002, the figure was $3.8-billion.

Add one more risk to a sackful for Alberta Premier Jim Prentice and his Progressive Conservatives as they devise targets for an overall 9-per-cent cut to public spending, while looking for ways to boost revenue. It's a tough task trying to plug an estimated $7-billion budget hole caused by crude prices that are half of what they were in the middle of 2014.

There was more fallout from that on Tuesday, when Trinidad Drilling Ltd. said it was handing pink slips to a fifth of its salaried staff, and many more rig hands, in the latest round of oil industry layoffs that have piled up into the thousands. The remaining staff are taking an average pay cut of 7 per cent, all to deal with a big slowdown in field activity.

Then, Canadian Imperial Bank of Commerce weighed in with a report that laid out the risks for a recession in Alberta with oil sector capital spending getting crimped.

The bank said the Alberta government's numbers suggest a $5-billion deficit in the coming year. There is "still room for further disappointment" in provincial gross domestic product, which the province last projected at a 0.9-per-cent growth rate, down from its original outlook of 4.7 per cent, it said.

But, CIBC said, Albertans can take some solace in the benefits enjoyed by non-energy-sector exporters, including the fall in the Canadian dollar in relation to the U.S. currency.

The biggest such industry, cattle and other agriculture, now faces the potential for some hurdles of its own as producers and major customers await results of the probe into the new BSE case.

Despite diversification of its economy over the past decade, Alberta's still known for its oil and cattle. On at least one of those two fronts, it could stand to catch a break.