Border Reopening Could Increase Cattle Prices

If the opening prompts resumption of beef trade with other countries, Montana State University economists say cattle prices would increase.

If live cattle trade is resumed across the U.S.-Canada border, as proposed by a USDA rule effective March 7, economists say U.S. cattle prices would decline. On the other hand, if that opening prompts resumption of beef trade with other countries, cattle prices would increase.

Montana State University economists studying the issue says a Canada-only cattle trade reopening would decrease feeder cattle prices by $2.11 per hundredweight and U.S. fed steers by $1.22 per hundredweight.

However, resumption of beef exports to other countries, especially Japan and South Korea, could more than offset these price declines, says MSU economist Gary Brester.

The U.S. border has been closed to Canadian live cattle trade since the discovery of bovine spongiform encephalopathy or mad cow disease in Alberta, Canada in May 2003. Japan and South Korea terminated imports of Canadian beef in May 2003. After the U.S. BSE discovery in December 2003, they also stopped importing U.S. beef, and have not yet allowed imports from either the United States or Canada.

"Reopening the U.S.-Canada border to live cattle trade would likely be a net reduction in the U.S. feeder cattle prices," says Brester. He based his comments on studies by himself, John Marsh and Vincent Smith, a team of MSU agricultural economists who have traced cattle and beef price impacts caused by the U.S.-Canada border closings.

"Some U.S. cattle and beef industry experts have suggested that restoring U.S. beef trade with Japan and South Korea hinges, in part, on restoring trade with Canada," says Brester. "So we also evaluated how prices would change if beef exports resumed with these two countries."

"If trade with Canada, Japan and South Korea is returned to pre-BSE levels, U.S. fed steer prices probably would increase in 2005 by $4.10 per hundredweight and feeder prices would increase by $7.05 per hundredweight," says Brester. "Re-opening all of these borders to trade would increase revenues in the U.S. fed and feeder cattle sectors by more than $2.9 billion over 2004 levels."

Details of the MSU economic analysis can be found by clicking on "The Impacts of North American BSE Discoveries on U.S. and Canadian Cattle Prices" or "The Impacts U.S. Cattle Prices of Re-Establishing Beef Trade Relations."

TAGS: USDA
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