Daily News Update, Sept. 14, 2007
USDA harmonizes cattle trade with Canada
As expected, USDA has finalized its rule that will open trade with
Canada to cattle born after March 1, 1999, and to beef from cattle of
any age. USDA estimates the rule will go into effect on Nov. 19, 2007,
or 60 days from its upcoming publication in the Federal Register.
"Once this rule enters into effect, the primary result is expected to be
additional imports of Canadian non-fed beef—rather than live
cattle—which will replace lean beef imports from other countries such as
New Zealand and Australia," said Gregg Doud, chief economist for the
National Cattlemen's Beef Association (NCBA).
USDA has adjusted its annual estimate of older live cattle imports
pertaining to this rule from 657,000 head to only 75,000 beginning in
2008. Doud and other industry economists also do not expect this rule
to vastly impact the U.S. cattle market, for several reasons:
The age requirement in this
rule will disqualify many older Canadian beef cows from importation for
lack of proper age documentation.
Transport expenses, the
strength of the Canadian dollar, and surplus of packing capacity in
Canada are disincentives to live cattle imports.
This additional Canadian
packing capacity boosted Canadian cull cow and bull slaughter by 50
percent between 2004 and 2006, and has greatly reduced any backlog of
cull cows in Canada.
Although the price of
cull cows in Canada is currently about 20 percent less than it is in the
United States, annual Canadian cull cow slaughter is only 13 percent of
that in the United States. As a result, it is widely expected that
Canadian cull cow prices will appreciate to U.S. levels almost
immediately after this rule goes into effect.
In the short term,
analysts expect U.S. cull cow prices to dip but still stay above 2006
levels. Over the course of the next year, it is expected that this rule
could potentially result in a net U.S. cull cow price reduction of
approximately $1/cwt.
In its written comments on this rule filed in March 2007, NCBA made
several requests of the USDA to improve the rule.
"We asked USDA to ensure these cattle are permanently identified from
Canada, which this rule requires. This was important to NCBA members,"
said John Queen, a cattleman from Waynesville, N.C., and 2007 president
of NCBA. "We also asked that this rule be implemented in a way that
would minimize market disruptions, and both the 60-day period and the
age verification requirement are expected to ease this transition."
NCBA also requested USDA reevaluate the date set as to when Canada's
feed ban was deemed effective, because Canada has identified a BSE case
born as recently as 2002. After reviewing the science, USDA did not
change the March 1999 date.
"That said, this date does
not impact herd health, food safety or trade, as witnessed by continued
trade following discoveries of BSE," said Doud.
"It may be popular to bash this rule, but cattlemen win in the global
marketplace when trade is based on internationally accepted guidelines,"
added Queen.
NCBA also expects this rule to enable the United States to regain its
feeder cattle and breeding stock trade with Mexico and Canada. These
significant export markets were worth $125 million to $260 million in
recent years prior to the discovery of BSE.
"U.S. beef is highly valued
all over the world," said Queen. "Prior to Dec. 23, 2003, the United
States was a net exporter of beef in terms of dollars. The future for
all segments of our industry – its growth and profitability for the next
generation of cattle raisers – depends on our ability to sell all U.S.
beef and beef products, including breeding stock, to customers around
the world."
Click
here for more information about the rule.
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