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Cattle are seen at a farm in Athens, Ontario.

Dave Chan/The Globe and Mail

Canada's $6-billion beef industry is in a state of chronic decline that could soon see the country become a net importer for the first time in at least a generation, a new report says.

Canada is increasingly shipping live cattle and low-value meat cuts to its main foreign customer – the United States – while importing higher value beef, according to the report by the Canadian Agri-Food Policy Institute, an independent think tank set up by Ottawa in 2004.

The result is a rapidly dwindling trade surplus with the United States – the destination for 85 per cent of Canadian exports. Canada's beef trade balance with the U.S. has fallen to $42-million in 2011, down from $1.4-billion in 2002.

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"The sector is forgoing economic opportunities and its competitive position is falling behind," concludes the report, to be released Monday.

In some cases, Canadians are buying beef at the grocery store that comes from cattle raised in Canada but is shipped south and processed in the United States.

That is opening a growing balance in the value of trade. The average price of the meat products Canada ships to the U.S. is now $3.74 per kilogram, compared to $6.55 per kilogram for U.S. imports, and the gap has been steadily growing.

"Canada is diverting significant economic activity to the United States for American processors," the report said.

"This has important implications for Canada's domestic value-added processing sector. Canada needs to decide whether this is an important policy issue."

Canada has successfully recovered most of the sales it lost in the wake of the mad-cow disease problems of the early 2000s.

But in the interim, other major beef exporting countries, including the United States and Australia, have been doing a much better job of penetrating fast-growing offshore markets. Since 2005, the United States has boosted its exports to countries other than Canada by 280 per cent; Canada's offshore exports are up 45 per cent over the same period.

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The size of the Canadian beef herd is also in decline, dropping by a million head, or 20 per cent, since 2005.

The report identifies several causes for the industry's reversal of fortunes, including more aggressive competition from foreign suppliers; the high value of the Canadian dollar; a surge in corn-feed prices due to drought and ethanol production; stricter regulations; higher costs; U.S. country-of-origin labelling rules; and declining beef consumption.

What Canada needs is "a robust, long-term strategy and a sustained commitment to execute the strategy," CAPI said.

The strategy should include more collaboration between ranchers, producers and governments, clear leadership, better use of market information and promotion of industry "champions" in the supply chain.

"Continued indecision will rob us of very real opportunities," the report said.

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