NCBA: Rule Expanding Trade Will Help Open Global Markets
WASHINGTON - 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 November 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 re-evaluate 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-$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 December 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.”