NCBA & Policy News Archive Archive
Contact: Mike Miller 800-825-7525 mmiller@cattle-fax.org
Randy Blach 800-825-7525 randy@cattle-fax.org
Border issues, BSE, cattle inventory may affect market psychology,
but fundamental impact minimal
DENVER (August 4, 2005) - During the Cattle Industry Summer Conference held July 26-30, the status of live cattle trade with Canada continued to be a major topic of discussion. Following a ruling by the U.S. Court of Appeals for the Ninth Circuit, the border is now open to Canadian cattle less than 30 months of age. The ruling overturned a temporary injunction issued by a district court in Montana that extended a complete ban on live cattle imports from Canada, but the district court judge may still hear a motion calling for a permanent injunction.
While the uncertain status of the Canadian border creates some anxiety in the psychology of the U.S. cattle market, the real impact of reopening the border to live cattle should be very limited, according to Randy Blach, Cattle-Fax general manager.
“The important factor to remember is that the United States has been importing record-large amounts of Canadian boxed beef since March, so the border opening to live cattle is not as significant as some reports would have you believe,” Blach said.
Blach added that imports of Canadian boxed beef (also limited to beef from cattle less than 30 months of age) were already expected to be nearly 30 percent larger in 2005 than in 2004, so the net impact of lifting the live cattle ban should be minimal. He expects that once the psychological impact of the border issue subsides, U.S. feeder cattle and calf prices will be only slightly affected.
“Opening the border will allow the market to determine if it’s more efficient to bring beef products or cattle from Canada, so adding live cattle to the mix will not significantly change the net result,” Blach said. He added that several factors favor feeder cattle remaining in Canada, including increased packing capacity and abundant feed supplies north of the border, and a Canadian dollar that is at its strongest level against the U.S. dollar in recent years.
On a related issue, USDA announced on July 27 that a nondefinitive BSE test result had been taken on a sample from 12-year-old cow of U.S. origin. But final test results announced August 3 indicated the cow did not have BSE.
“The market didn’t really show much impact from USDA’s original announcement,” Blach said. “But the negative test result comes as a relief. It’s one less thing the market needs to deal with.”
Another topic of discussion at the Cattle Industry Summer Conference was the rising U.S. cattle inventory. According to USDA’s cattle inventory report released July 1, total U.S. cattle inventory has increased by about 1 percent, or 900,000 head, compared to a year ago. This marks the first year-over-year increase since the cattle cycle peak of 1996. Since that year, total cattle inventory had declined by about 8 million head.
While some cattle producers are concerned about downward pressure on prices, Mike Miller of Cattle-Fax says it is very important to look at the specific components of the inventory increase. Beef replacement heifers grew by 4 percent (about 200,000 head) compared to last year, with dairy replacement heifers also increasing slightly. So the fact that total inventory has increased will not necessarily translate into a corresponding increase in cattle for slaughter.
“The current trends in the female populations suggest that beef herd expansion is in full swing,” Miller said. “These trends are supported by smaller heifer feedlot placements, and by cow and heifer slaughter that remain well below last year’s levels.”