Transcript Slide 1

Current Trends in North
American Supply Chain
Management: Agriculture
The Case of Beef and Pork
Flynn Adcock
Center for North American Studies
Dept. of Agricultural Economics
Texas A&M University
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Prepared for the Conference North America Works
Kansas City, MO, October 13, 2005
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Overview
Trends in North American Agricultural
Trade
The Growing Integration of the North
American Beef and Pork Industries
Factors Impacting the North American Beef
and Pork Supply Chains
Summary and Implications
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Trends in North American
Agricultural Trade
Implementation of CUSTA (‘89) and NAFTA
(‘94) Decreased Border Restrictions and
Encouraged Integration
U.S.-Canada and U.S.-Mexico Trade Began to
Grow Significantly following CUSTA/NAFTA
Canada-Mexico Trade Growing but Restricted
by Geography and Large U.S. Market
30% of U.S. Ag Exports Now Go to N.A.
(12.5% in 1989)
35% of U.S. Ag Imports Now Come from N.A.
(24% in 1989)
U.S. Agricultural Exports
Billion Dollars
$70.0
$60.4
$56.2
$60.0
$59.5
$57.2
$51.8
$48.4
$46.1
$51.2
$61.3
$53.6 $53.1
$43.2 $43.0
$50.0
$40.0 $39.5 $39.4
$40.0
$30.0
$20.0
$10.0
$0.0
1989
1994
1999
ROW
NAFTA
Source: Foreign Agricultural Trade of the United States, Calendar Year, USDA/ERS
2004
U.S. Agricultural Imports
Billion Dollars
$60.0
$54.0
$47.3
$50.0
$41.9
$39.4
$37.7 $39.0
$36.9
$36.1
$40.0
$33.5
$30.2
$30.0
$21.9 $22.9 $22.9
$24.8 $25.2
$27.0
$20.0
$10.0
$0.0
1989
1994
1999
ROW
NAFTA
Source: Foreign Agricultural Trade of the United States, Calendar Year, USDA/ERS
2004
The Evolving North American Beef
and Pork Supply Chain
CUSTA and NAFTA Have Led to Greater N.A.
Trade in Beef, Pork and Live Animals
Greater Integration of Other Resources (Capital,
Technology, Grains) Has Also Occurred
A North American Beef and Pork Complex Has
Resulted
The BSE Outbreaks Changed the Nature of N.A.
Beef Supply Chain
N.A. Pork Supply Chain Has Stabilized
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U.S. Beef and Pork Exports, 1989 - 2004
1,000
1,000 Metric Tons
Beef +Pork
800
+
600
+
+
400
+
200
+
+
+
+
+
+
+
0
Source: PS&D Online, www.fas.usda.gov/psd
+
+
+
+
+
U.S. Beef Exports, 2003 & 2004
2003 Total: 820.6 TMT
Mexico
23.3%
Korea
25.1%
2004 Total: 135.6 TMT
Mexico
78.5%
Canada
7.7%
Other
7.8%
Japan
36.1%
Other Canada
12.9% 8.6%
Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade
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U.S. Pork Exports, 2003 & 2004
2004 Total: 651.1 TMT
2003 Total: 494.5 TMT
Japan
51.0%
Japan
45.3%
Mexico
24.1%
Mexico
17.7%
Canada
9.6% Korea
Taiwan Other
5.1% 4.0% 12.5%
Canada
9.2%
Other
6.5%
Taiwan Russia
4.9%
3.4%
Korea
China
3.2%
3.5%
Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade
U.S. Imports of Beef and Pork
1,200
1,000 Metric Tons
+Beef
1,104
Pork
1,000
800
600
734
729
699 710 + 719 715
+ + 642 641 +
639+ +
+ +
+
945
880 +
823 +
+
400
321
226234
200
987 987
+ +
325
367
+
898
+
401376
266
216
186
208
209
194
184
191
217
0
1989
1994
1999
Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade
2004
U.S. Beef Imports, 2002 & 2004
2004 Total: 1,104.2 TMT
2002 Total: 987.0 TMT
Canada
32.1%
Canada
38.7%
New Zeal
19.2%
New Zeal
20.3%
Other
0.4%
C. Amer
2.3%
Australia
38.3%
Uruguay
11.6%
Other
0.5%
C.l Amer
2.8%
Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade
Australia
33.7%
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U.S. Cattle Imports, 1989 - 2004
Thousand Head
2,000
1,500
1,000
500
0
1989
1994
1999
Canada
Mexico
Source: Foreign Agricultural Trade of the United States, Calendar Year, USDA/ERS
2004
Composition of U.S. Beef Imports
by Source, 2004
Thousand Metric Tons
400.0
Frozen Boneless, Note 3
Fresh/Chill Boneless, Note 3
Other Frozen Boneless
Other
347.1
350.0
298.0
300.0
250.0
206.4
200.0
150.0
99.0
100.0
50.0
24.2
32.6
24.1
0.1 1.1
0.7
5.6 0.0 0.5
14.6 5.4
9.2
21.8
7.9 0.0 0.1
0.0
Australia
Canada
New Zealand
Uruguay
C. Amer
Source: USDA/FAS. Note 3 refers to beef entering under the TRQ , Other Frozen Boneless
indidicates over-quota beef
Canadian Beef Exports
1,000 MT
247
454
189
296
292
400
300
489
329
401
500
445
485
600
200
100
0
1995
1996
1997
1998
1999
U.S.
Japan
Korea
2000
Source: Agriculture and Food Canada, USDA/FAS
Mexico
2001
2002
Others
2003
2004
Mexico Beef Imports
1,000 MT
225
220
180
250
110
150
200
150
30
60
100
50
240
300
205
280
350
0
1995
1996
1997
1998
U.S.
Source: FAS/USDA attache reports
1999
2000
Canada
2001
Others
2002
2003
2004
Monthly U.S. Corn Exports to Canada,
January 01 - July 05
Thousand Metric Tons
600.0
BSE in
CANADA
500.0
400.0
300.0
200.0
100.0
0.0
05
4
l0
n
Ja
Ju
04
3
l0
n
Ja
Ju
03
2
l0
n
Ja
Ju
02
01
1
l0
n
Ja
Ju
n
Ja
Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade
Integration in the North American Cattle and
Beef Industry, 1989
$377 Million, 584,732 Head of Beef Cattle
$185 Million, 87,106 Metric Tons of Beef
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 Metric Tons of Beef
$11 Million, 23,650 Head of Beef Cattle
$119 Million, 31,406 Metric Tons of Beef
$72 Million, 124,937 Head of Beef Cattle
$76 Million, 29,606 Metric Tons of Beef
$284 Million, 873,550 Head of Beef Cattle
$176,000, 70 Metric 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
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The North American Beef Supply
Chain: Comments
 BSE Reduced and Altered the N.A. Beef Industry
Integration, Especially Among Canada and the
U.S.
 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 – Maybe but
Doubtful
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Intra-NAFTA and ROW Pork Trade
Thousand Metric Tons
NAFTA
2,000.0
ROW
1,769.3
1,590.4
1,500.0
1,000.0
747.1
600.2
507.0
500.0
225.6
0.0
1993
Source: USDA/FAS and CanFax
2002
2004
U.S. Swine Imports from Canada
1989 - 2004
Million Head
Feeder Pigs
10.0
Slaughter Hogs
8.5
7.4
8.0
5.3
6.0
4.1
4.0
2.8
4.1
5.7
4.4
3.2
1.7
2.0
1.1
0.9
1.1
0.7
0.8
0.9
0.0
1989
1994
1999
Source: Foreign Agricultural Trade of the United States, Calendar Year, USDA/ERS
2004
U.S. Pork Imports, 2003 & 2004
2003 Total: 400.9 TMT
2004 Total: 376.3 TMT
Canada
87.2%
Denmark
11.4%
Other
1.4%
Canada
85.1%
Denmark
12.4%
Other
2.5%
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Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade
Canadian Pork Exports
1,000 MT
368
331
309
423
600
400
778
748
681
493
618
800
788
1000
200
0
1995
1996
1997
1998
1999
U.S.
Japan
Mexico
2000
Source: Agriculture and Food Canada, USDA/FAS
2001
Korea
2002
Other
2003
2004
Mexico Pork Imports
235
300
257
269
1,000 MT
166
181
250
114
200
91
150
63
54
49
100
50
0
1995
1996
1997
1998
U.S.
Source: FAS/USDA attache reports
1999
2000
Canada
2001
Other
2002
2003
2004
Integration in the North American Swine and
Pork Industry, 1989
$101 Million, 1.1 Million Head of Swine
$310 Million, 186,000 Metric Tons of Pork
Integration in the North American Swine and
Pork Industry, 2004
$530 Million, 8.5 Million Head of Swine
$761 Million, 320,300 Metric Tons of Pork
$57 Million, 60,300 Metric Tons of Pork
$101,000, 285 Head of Swine
$8.4 Million, 2,610 Metric Tons of Pork
$7.9 Million, 78,112 Head of Swine
$48.4 Million, 19,275 Metric Tons of Pork
$1.06 Million, 5,900 Head of Swine
$182 Million, 60,200 Metric Tons of Pork
$25 Million, 138,800 Head of Swine
$302.6 Million, 156,900 Metric Tons of Pork
The North American Pork Supply
Chain: Comments
 Decrease in Canadian Grain Transportation Subsidies
Helped to Spur Local Animal Feeding
 Canadian Hog Slaughter Capacity Has Decreased, and
While U.S. Capacity Has Decreased, U.S. Hog
Production Has Decreased Even More
 U.S. Hog Producers Have Gone from Many Small,
Farrow to Finish Operators to Fewer, More Specialized
Operators
 Canadian Pig Production More Efficient than U.S.,
and Exchange Rate Favored Importing Canadian Hogs
from ’96 – ‘02
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Potential Disruptions to N.A. Beef and
Pork Supply Chain
 Diseases Such as BSE, FMD Have Already Caused
Disruptions
 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
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Integration in the North American Cattle and
Beef Industry, 2003
$396 Million, 512,000 Head of Beef Cattle
$850 Million, 256,000 Metric Tons of Beef
$70 Million, 20,000 Metric Tons of Beef
$30 Million, 68,000 Head of Beef Cattle
$321 Million, 81,000 Metric Tons of Beef
$23 Million, 24,000 Head of Beef Cattle
$606 Million, 193,000 Metric Tons of Beef
$470 Million, 1.2 Million Head of Beef Cattle
$34 Million, 6,700 Metric Tons of Beef
Integration in the North American Cattle and
Beef Industry, 2004
$55,000, 135 Head of Beef Cattle
$1.2 Billion, 354,000 Metric Tons of Beef
$213 Million, 87,700 Metric Tons of Beef
$2.4 Million, 14,000 Head of Beef Cattle
$12 Million, 56,000 Metric Tons of Beef
$671,000, 1,400 Head of Beef Cattle
$371,000, 106,500 Metric Tons of Beef
$543 Million, 1.4 Million Head of Beef Cattle
$33 Million, 5,900 Metric Tons of Beef
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Alberta Direct Sale Steer Prices,
Weekly Average, Jan 01 - Sep 05
CN$/CWT
$120
$100
$80
$60
$40
Fe
M
2003
2004
M
2002
A
2001
2005
$20
ec
D
ov
N
p
ct
O
Se
l
n
ug
A
Ju
Ju
ay
pr
ar
b
n
Ja
Source: Alberta Agriculture, Food and Rural Development, www.agric.gov.ab.ca
2001 are monthly averages, source CANFAX, calculated by LMIC
Summary
North American Beef and Pork Industries
are Integrated - Almost One Supply Chain
Markets React Immediately to ‘News,’ But
in U.S. has Recovered Quickly While Pain
Lingered in Canada
Unique Market Conditions Likely to Change
U.S. Increased Cattle Imports from Mexico
and Beef Imports from Canada (and
Uruguay) to Help Meet Demand
U.S. Pork Exports Have Gained As Beef &
Poultry Exports Have Declined
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Implications
 Degree
of Trade Dependence Likely Continue
Though Product Mix May Change
 Disruptions will Continue to Occur, But N.A.
Supply Chain Too Entrenched to Change Much
 Maintaining Consumer Confidence is Crucial on
Animal Health/Food Safety Issues
 Protectionist Response to Increase Trade to
Continue
 Support for VCOOL Growing & Animal
Identification May Be Necessary to Export
 Canada & Mexico May Seek Marketing
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Alternatives
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Primary References
 Haley, Mildred. “U.S.-Canadian Hog Trade: Market
Integration at Work.” Amber Waves. Economic Research
Service, USDA, Volume 3, Issue 1, February 2005.
 Rosson, C. Parr, III and Flynn J. Adcock. “Food Chain
Disruptions and Trade: The Importance of North American
Market Integration.” Choices. 2nd Quarter, 2005, 20|2. On-line
journal of the American Agricultural Economics Association,
available at http://www.choicesmagazine.org, July 2005.
 U.S. Trade Internet System and Attache Reports, Foreign
Agricultural Service, USDA, www.fas.usda.gov.
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Center for North American Studies
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“Informed Decisions for Global
Change”
Flynn Adcock or Parr Rosson
Ph: 979-845-8694 or 845-3070
E-mail: [email protected] or [email protected]