Transcript Slide 1

Of Border Closings and BSE:
North American Beef/Cattle Market
Integration
Presentation for the
SAEA Organized Symposium:
The Impacts of Globalization
on Southern Agriculture
Darren Hudson, Parr Rosson, and Flynn Adcock,
Mississippi State University and
Texas A&M University
Prepared for the SAEA Annual Meetings
Mobile, AL February 5, 2007
Overview
The Growing Integration of the North
American Beef and Cattle
BSE – Canada and the United States
Summary and Implications
Market Integration
 Harmonization of Border Regulations &
Stability of Investment Rules
 Increased Trade
 Increased Investment
 Leads to Price Convergence (NAFTA)
– Hogs/Pork, .86
– Beef/Cattle, .60
– Chicken, .26
 Regulatory Integration (including SPS)
Facilitates Market Integration
ERS, USDA
The Evolving North American Beef
Supply Chain
 CUSTA and NAFTA Have Led to Greater N.A.
Trade in Beef and Cattle
 Mexico Supplier of Feeders to U.S., U.S.
Returns Beef
 Canada Supplier of Cattle and Beef to U.S. –
“No Difference in U.S. or Canadian Steer”
 Greater Integration of Other Resources
(Capital, Technology, Grains) Has Also
Occurred
 A North American Beef Complex Resulted
Integration in the North American Cattle and
Beef Industry, 2002
$1.1 Billion, 1.7 Million Head of Beef Cattle
$1.1 Billion, 392,000 Metric Tons of Beef
$283 Million, 76,000 Met. Tons of Beef
$50 Million, 134,000 Head of Beef Cattle
$218 Million, 67,000 Metric Tons of Beef
$75 Million, 105,000 Head of Beef Cattle
$592 Million, 206,000 Metric Tons of Beef
$301 Million, 816,000 Head of Beef Cattle
$23 Million, 6,000 Metric Tons of Beef
BSE and the North American Beef
Supply Chain
 BSE Discovered in Canada in June 2003 and in
the United States in December 2003
 Canada’s Industry Highly Export Dependent and
Severely Hurt when U.S. Closed Border
 U.S. Industry Less Export Dependent and
Suffered Brief Downward Price Impact
 2 Year Prohibition of Canadian Live Cattle
Shipments Led to Upward Price Pressure in U.S.
 Mexico Speedy Resumption of Beef Imports from
U.S. and Increase in Feeder Exports to U.S.
The North American Beef Supply
Chain: Comments
 BSE Reduced and Altered N.A. Beef Industry
Integration, Especially Among Canada and the
U.S., Temporarily
 While Unable to Export Fed Steers to the U.S.,
Canada Increased Feeding, Slaughter Capacity,
and Beef Exports to U.S.
 U.S. Firms (Tyson/IBP, Cargill) Have Increased
Investment in Canadian Processing Plants
 Will Resumption of Canadian Cattle Exports to
U.S. Spark Return to 2002 Scenario – Getting
Close
Integration in the North American Cattle and
Beef Industry, 2004
$0, 0 Head of Beef Cattle
$1.2 Billion, 355,000 Metric Tons of Beef
$230 Million, 87,700 Metric Tons of Beef
$2.5 Million, 14,000 Head of Beef Cattle
$56 Million, 11,800 Metric Tons of Beef
$670,000, 1,400 Head of Beef Cattle
$600 Million, 106,500 Metric Tons of Beef
$543 Million, 1,370,000 Head of Beef Cattle
$33 Million, 5,900 Metric Tons of Beef
Canadian and U.S. Steer Monthly Prices
2003 - 2005
US$/CWT
$120
$100
$80
$60
$40
$20
05
5
05
05
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04
4
04
04
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03
3
03
03
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Source: Alberta Agriculture, Food and Rural Development, www.agric.gov.ab.ca
Canadian to U.S. Monthly Steer Price Ratios
2003 - 2005
CN P/US P
1.0
0.8
0.6
0.4
0.2
05
5
05
05
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Ja
04
4
04
04
l0
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A
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Ja
03
3
03
03
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Ja
Source: Alberta Agriculture, Food and Rural Development, www.agric.gov.ab.ca and USDA
U.S. Imports of Live Cattle from
Canada and Mexico, 1989 - 2006
Canada
2000.0
Mexico
1500.0
1000.0
500.0
0.0
1989
1994
Source: U.S. Trade Intenet System, www.fas.usda.gov/ustrade
2000
2005
Potential Disruptions to N.A.
Beef Supply Chain
 Diseases Such as BSE and FMD Could Again
Disrupt Trade
 Domestic Legislation, such as MCOOL and the
Bioterrorism Act, Have Potential to Cause
Disruptions
 Anti-Dumping/Countervailing Duty Cases Filed by
All Three N.A. Countries Against Each Other
Strain Relations and Could Disrupt Trade Flows
 Fluctuations in Exchange Rates Often Result in
Temporary Changes in Advantages for Either U.S.
or Canada/Mexico – and This Will Continue
Summary
North American Beef Is Almost One
Supply Chain
Markets React Immediately to ‘News,’ But
U.S. Recovered Quickly While Pain
Lingered in Canada
U.S. Increased Cattle Imports from
Mexico and Beef Imports from Canada
and Uruguay to Help Meet Demand
Implications
Disruptions will Continue to Occur, But
N.A. Supply Chain Is Resilient
NAFTA Appears to Facilitate Return to
Integrated Markets
Adherence to International Standards
Important, But Difficult Due to Political
Influence
Canadian Beef Exports
1,000 MT, Retail Weight
Others
445
296
247
292
400
329
401
500
487
Korea
454
Japan
485
Mexico
489
U.S.
600
189
300
200
100
0
1995
1997
1999
Source: Agriculture and Food Canada, USDA/FAS
2001
2003
2005
Mexico Beef Imports
1,000 MT
U.S.
Canada
Others
205
180
250
225
220
240
300
210
280
350
110
150
200
150
30
60
100
50
0
1995
1997
1999
2001
2003
2005
Source: FAS/USDA attache reports, U.S. Trade Internet System, and Agrculture and Food Canada
U.S. Beef Exports, 1995 - 2006
1,000 MT (Retail Weight)
801
756
Taiwan
Others
821
Korea
582
598
676
800
Japan
698
785
1000
Canada
813
Mexico
348
600
135
202
400
200
0
1995
1996
1997
1998
1999
2000
2001
Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade
2002
2003
2004
2005
2006
U.S. Beef Imports, 1995 - 2006
1,000 MT (Retail Weight)
Canada
Australia
New Zealand
Uruguay
Others
800
830
898
987
945
881
823
733
641
642
1,000
987
1,200
1,072
1,104
1,400
600
400
200
0
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade, 2006 through November
2006