Cattlemen Could Suffer from West Coast Labor Issues

The labor dispute that shut down all West Coast docks was a major contributing factor to lower prices the week of Sept. 30. During 2001, 55.7 percent of the tonnage and 63 percent of the value of beef and beef variety meat exports totaling more than $2.4 billion were sold in Asian markets.   

Fed cattle prices moved lower last week with the weekly average price for market steers at $63.93/cwt on a live weight basis — approximately $2/cwt lower than the average price for the prior week.  A $2/cwt decrease in price for market cattle directly reduces incomes of cattlemen by $17.5 million per week and will be passed back as lower prices for calves and feeder cattle.

The number of cattle processed on Saturday, Oct. 5,  more than a week after the labor lockout began, was almost half the prior week’s production. One small pork processing facility reduced two-thirds of its production last week and laid off its entire labor force Oct. 3.  Other processors report having at least 20 million pounds of meat products stranded at West Coast ports awaiting shipment.  Many processors have stopped fabricating product to Asian specifications and will divert additional product to the domestic market or to other export markets.

Failure to quickly resolve this labor situation could back up beef production at a time when the industry appeared to have worked through some of its supply issues.  This in turn would have a negative effect on live cattle prices. 

Last year, the U.S. exported 12 percent of its beef production. If this trade dispute is not settled soon, a lot of beef and other meats that were planned for export will get dumped back on the U.S. market, contributing to additional price pressure.

The timing of this labor stoppage is critical for U.S. beef producers.  Beef demand in Japan declined as much as 60 percent after cases of BSE were identified in the Japanese herd during 2001.  The U.S. government and industry jointly invested more than $9 million to restore confidence about the safety of U.S. beef among Japanese consumers.  Exports of U.S. beef recently recovered to 90 percent of historical levels, only to be disrupted by this labor action.

Over the last 25 years, the United States has worked to establish a reputation as a reliable supplier to international markets but this reputation is now in jeopardy. Chilled U.S. beef and pork now make up more than half of U.S. exports to Asia, and our customers in Japan — our No. 1 export market — South Korea, China and other Pacific countries will be forced to look for alternative chilled supplies very quickly since the dispute has cut the U.S. industry off from its best export markets.  The Australian beef industry has already stated its intent to increase sales to Asian markets to replace U.S. product. 

In 2001, the United States exported 1,026,695 metric tons of beef and pork — 1,140 containers per week — valued at more than $3.3 billion to Japan, South Korea, China, Hong Kong and the Association of South-East Asian Nations (ASEAN). The dispute will therefore cost the American industry as much as $9 million per day and will affect cattle and hog prices all the way down the chain to the American producer.