2005 CCC Archive
Cattlemen's Capitol Concerns
March 31, 2005
Cattlemen’s Capitol Concerns (CCC) is a weekly report from Washington D.C. giving an up-to-date summary of top policy initiatives concerning the cattle industry; direct from the National Cattlemen’s Beef Association (NCBA).
Canadian Live Cattle and Higher Prices: The timing for re-opening of the U.S. borders to Canadian cattle continues to be a major debate amongst cattle producers. Many have assumed the higher prices the industry is enjoying are due to the Canadian border closure. This simplistic concept actually masks several significant developments in market fundamentals that have occurred over several months. Here are the facts:
(1) Based on historical (2002) imports, live fed cattle from Canada are $2-3/cwt negative influence on the U.S. cattle market.
(2) Despite the closure of the Canadian border to live cattle, net beef supplies (that’s domestic production, plus imports, and minus exports) in 2004 were the second largest in history, at 27.7 billion pounds. That’s actually up one billion pounds from 2003. This is only 100 million pounds less than the record in 2002, yet wholesale beef prices increased by one-third from 2003 to 2004. In other words, preventing live cattle imports from Canada did not reduce U.S. beef supplies.
(3) With so much supply, why have cattle prices risen? Because demand is UP! Consumer expenditures for beef were at an all time high of $70 billion in 2004. In fact, the increase in net beef supplies included a 105 million pound (carcass weight equivalent) year-on-year INCREASE in combined fed cattle and beef imports from Canada.
(4) On a per capita basis, beef supplies have been stuck between 65-67 lbs/person for 15 years, yet we’ve been able to increase beef demand almost constantly since 1998 via improvement in the average per pound value of beef sold in the U.S. This was up by an exceptional one-third in the last year.
(5) Net beef imports into the U.S. in 2004 were the highest ever, at 3.2 billion pounds. Even with the closure of our own export markets, we saw a larger percentage of this supply coming from outside the U.S. to satisfy such historic demand levels. Said another way, U.S. beef producers are providing the smallest percentage ever of total U.S. beef demand. This means we’ve lost market share in our own domestic market, although most of this in 2004 was due to a 15 percent decrease in non-fed (cow & bull) slaughter.
(6) Canada will have enough packing capacity in 2005 to prevent any significant backlog in fed cattle slaughter. Translation: keeping the border closed means that Canadian product will cross the border in boxes versus on the hoof. It will not stem the flow. This will result in structural changes in where cattle are fed and processed in the U.S. Increased slaughter capacity in Canada will improve the financial position of the Canadian cattle feeding industry.
In the long-run, the result will be that these Canadian feedlots will become the primary supplier of fed cattle to processors in the region. With a loss in regional packing capacity in the U.S., U.S. feeder and fed cattle supplies will become the residual supply to the Canadian cattle feeding and processing sector. Also keep in mind that Canada does not have a Packers and Stockyard Act.
(6) Finally, regarding increased prices for feeder cattle… recall that a $1 per bushel decrease in the price of corn translates into a $7.50/cwt increase in the price of a 750 lbs feeder steer. Omaha corn was $2.88 per bushel a year ago versus $1.82 per bushel last Friday, thus this market fundamental alone can be used to explain about one-half of the current difference in feeder cattle prices versus year-ago levels.
Export Market Update: According to U.S. Meat Export Federation, the United States has partially re-established beef exports with countries that, in 2003, accounted for $1.33 billion or 35 percent of the record $3.86 billion in beef and beef variety meat exports in 2003. Of the 112 countries that purchased beef and beef products in 2003, 75 are open (representing 40 percent of the 2003 volume and 35 percent of the 2003 value), while 37 remain closed. It is important to note that the 40 percent represents these countries' full access in 2003 versus current limited (mostly boneless > 30 months) access since their re-opening. It is not correct to say that we have 40 percent of our 2003 markets back; Mexico for example is only allowing an estimated 70 percent of the 2003 products. This does not include Taiwan or Lebanon.
More on Canada: This week, officials from Canada, the U.S. and Mexico are said to have come to an agreement regarding North American import standards and BSE which reflects World Organization for Animal Health (OIE) guidelines. In addition, as of today March 31, thirty-nine states in the U.S. can now ship feeder cattle to Canada without restriction. Canadian Agriculture Minister Andy Mitchell has said that will take effect tomorrow. Other new regulations came out from Canada today as well, regarding U.S. bulls which can now move into semen collection units, goats/sheep, etc. Key point here is that it’s Canada's intent to normalize regulations related to trade in beef and cattle, but any proposed regulation still must be vetted and approved by the U.S. government.
Japan Update:
The push for the re-opening of the Japanese border to U.S. beef continues this week. NCBA’s CEO Terry Stokes and NCBA producer leaders were in Washington D.C. and met with USDA Secretary Mike Johanns to discuss the re-opening of major export markets and other top-line beef related issues. In addition, USDA officials reportedly hosted more meetings with Japanese officials. The Office of the United States Trade Representative today released its annual report regarding foreign trade and investment barriers, and listed the reopening of Japan’s market to U.S. beef and beef products as a top priority.
In related news, Japan's Food Safety Commission has approved an easing of Japan’s current 100 percent BSE testing requirements to exclude cattle younger than 21 months. NCBA strongly supports this decision, which represents another step toward re-opening the Japanese export market for U.S. beef. Beginning in 2001, the Japanese government implemented a blanket policy of testing all cattle headed for slaughter for BSE. This was in response to Japan's first confirmed domestic case of the disease. But after a lengthy study, the FSC now considers cattle 20 months of age and younger to be at extremely low risk for BSE, and is lifting the testing requirement for animals in this age category.
Texas cattle producer and NCBA President Jim McAdams said the regulatory change is a movement toward a more science-based approach to BSE testing, which addresses consumer safety concerns without putting an unnecessary stranglehold on beef production or international trade. "All that cattlemen have ever asked for is that trade and testing policies to be based on sound science," McAdams said. "We feel that 20 months is still an overly cautious threshold for BSE testing, but we are extremely pleased to see movement in the right direction."
NCBA Sends Letter to Congress on CAFTA: NCBA sent a letter today to Members of the U.S. Congress, calling for Congressional Support of the U.S. - Central American – Dominican Republic Free Trade Agreement. This agreement is a "win-win" deal for cattle producers. In the letter, NCBA President McAdams told Congress: "currently, we face trade prohibitive tariffs as high as 40 percent for our beef exports to this region. This agreement will provide immediate duty-free, quota-free access for high-quality U.S. beef destined for the hotel and restaurant industry. All tariffs are eliminated by the end of the 15-year implementation period, which is a strong precedent to set in a trade agreement."
CAFTA-DR includes the United States, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua, and the Dominican Republic. Debate over its final passage is expected to be one of the largest trade policy discussions on Capitol Hill this year. After the discovery of bovine spongiform encephalopathy (BSE) in December 2003 and the subsequent closure of our export markets, our industry welcomes any opportunity to expand the export of our products. The CAFTA-DR markets have now all reopened to U.S. products, and this agreement will provide immediate expanded access for U.S. exports on day one of implementation.
Vote Against Myers is "political maneuvering at its worst": NCBA and the Public Lands Council are actively communicating with Congress and urging livestock producers across the country to weigh in as the Senate prepares to vote on the nomination of William Myers to be U.S. Circuit Judge for the Ninth Circuit Court of Appeals. Myers worked for NCBA and the Public Lands Council in the 1990’s. President Bush nominated him to the federal bench last year, but Senate Democrats filibustered and blocked his vote in July 2003. There is concern that the same will happen when the Senate tries to approve Myers again during this session.
"This could be one of the most critical votes of this Congressional session, and one that we’re watching closely," says NCBA Vice President of Government Affairs Jay Truitt. "A vote or any action against Mr. Myers is clearly a vote for special interest and an example of political maneuvering at its worst." The Senate vote could come as early as next week when Congress returns to Washington following Easter recess. Myers’ nomination was approved by the Senate Judiciary Committee March 17 in a 10-8 party line vote, but approval by the full Senate won’t be easy.
Mr. Myers’ nomination is being opposed by urban-based special interest groups and a core group of Senate Democrats who have no understanding whatsoever of Western issues. Truitt says NCBA and the PLC are "outraged" at how Myers has been treated during this process. Myer’s’ work as Interior Solicitor and his vast experience in protecting natural resources and preserving federal lands qualifies him for this post. If confirmed, Myers’ jurisdiction would be the largest in the country, including the states of Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington, representing over 485 million acres of federal lands.
Trade Promotion Authority: On Wednesday, March 30 the Bush Administration requested an extension of Trade Promotion Authority (TPA), which was enacted as part of the Trade Act of 2002. TPA gives the Administration the authority to negotiate trade deals that Congress would have 90 days to approve or reject, but not amend. NCBA members and staff were very involved in the advancement of this legislation. Members of the NCBA staff attended the signing of the bill at the White House. Since TPA was signed into law, the Administration has finalized trade agreements that were in the making for a decade or more, such as Chile, as well as initiate an aggressive campaign of new bilateral agreements. TPA currently applies to trade agreements signed before July 1, 2005. The Administration’s request will extend that deadline to July 1, 2007 unless either House disapproves by July 1, 2005.
NCBA Spring Conference Update: Hundreds of cattle producers are making their plans to attend this important cattle industry conference in Washington, D.C. NCBA’s 2005 Spring Conference is April 13-16. Attendees will hear directly from top policymakers, meet face-to-face with key Congressional offices, government agency influencers and have the opportunity to articulate policy priorities for today’s cattle industry. More information is posted on our website at http://hill.beef.org/spring, or contact Erica Spiegle espiegle@beef.org in NCBA’s Washington office. See below for some of our Spring Conference program highlights!
-Secretary Johanns to Address NCBA Spring Conference: U.S. Secretary of Agriculture Mike Johanns has been confirmed to speak to NCBA member-producers at our 2005 Spring Conference session on Friday morning, April 15. Don’t miss this opportunity to hear first-hand the Ag Secretary’s thoughts on BSE, trade, and our growing cattle industry.
-Senate Ag Committee Chairman Saxby Chambliss (R-GA) to Speak April 14: In addition to hearing from Ag Secretary Mike Johanns, Spring Conference attendees will be briefed by Senate Ag Committee Chairman Saxby Chambliss (R-GA). Just prior to our Capitol Hill visits, Senator Chambliss will tell conference attendees about hot issues in Congress and how to communicate the cattlemen’s position to your members of Congress. Senator Chambliss is scheduled to address Thursday morning’s Legislative Issues Briefing.
Wye River Ranch Tour: NCBA staff will be hosting congressional staff on a visit to the Wye River Plantation April 1. Affiliated with the University of Maryland’s College of Agriculture and Natural Resources, Wye Plantation is home to the Wye Angus herd. The group will get a feel for how a cattle operation is run, and will glimpse visual examples of how cattle coexist within the unique ecosystem of Maryland’s Chesapeake Bay.
Beef Caucus Update: NCBA’s legislative affairs staff is busy recruiting members of congress for the House Beef Caucus. The Beef Caucuses organize senators and representatives who recognize the challenges being faced by cattle producers, support the U.S. beef industry, and want to work to help ranchers in both houses of Congress. Members of the caucuses will speak as a collective voice on cattle and beef issues, and utilize opportunities in Congress to help our ranchers succeed and improve the U.S. beef industry. The House Beef Caucus is chaired by Reps. Bob Beaprez (R-CO) and Dennis Cardoza (D-CA). NCBA member-producers should contact their Representatives and urge them to participate in the House Beef Caucus!
EU Meetings: Virginie Jorissen, Head of European Union office, French Ministry of Agriculture, Fisheries, and Rural Affairs visited NCBA’s Washington office on March 29. She met with NCBA staff Jay Truitt, Bryan Dierlam, and Gregg Doud to gain a better understanding on U.S. farm/ranch issues. Specifically, she is interested in trade, the Farm Bill, park management, and trends in ranching practices.
Congressional Schedule: Congress is out of session this week for Easter recess. They are scheduled to reconvene April 4.
USDA Surveillance for BSE: USDA continues its enhanced BSE surveillance program which began June 1, 2004. To date, 294,593 tests have been conducted with no positive cases reported. APHIS’s goal is to test as many cattle from the high-risk population as possible in a 12- to 18-month period. Testing 268,500 animals detects BSE at a rate of 1 in 10 million adult cattle at a 99 percent confidence level. Although the program has now passed its 268,500 targeted number, APHIS says it will continue the enhanced surveillance program for the remainder of the 12-18 month time period.
Media Contact:
Tanya Augustson or Karen Batra at 202-347-0228; taugustson@beef.org or kbatra@beef.org
This publication is funded by cattle producers and other industry supporters through their voluntary membership contributions to NCBA. To join the tens of thousands of cattle producers from across the U.S. in working to preserve our legacy, contact NCBA Member Services at 1-866-BEEF-USA or Membership@beef.org.
For more information, please visit our web site at hill.beef.org.
Please feel free to reprint in full.