Is the Cattle Industry Ready for Restructuring?

Johanns: Keeping the border closed to Canadian cattle sets up for the continued shifting of U.S. processors north.

The Senate Ag Committee held a hearing Thursday to examine the rule establishing Canada as a minimal risk region. Through congressional action, the Senate has the power to prevent the rule from going into effect March 7, 2005.

Secretary of Agriculture Mike Johanns made it very clear that pulling back the whole rule would cause him a "great deal of concern." Canada has already begun expanding processing facilities and U.S. processors are feeling the squeeze. Slaughtering jobs have been slashed in Ohio, Iowa, Nebraska, Missouri and Idaho.

This week Tyson announced temporary suspensions at its operations would continue longer than expected. "Raising cattle and processing go hand-in-hand. Without one the industry as a whole can expect to experience very serious consequences," Johanns testified. "In the short-term it may seem like we're helping the producers. But in the long-term we may really be hurting them."

Canadian feedlot inventories are actually down 12-18% while Canadian slaughter capacity has increased from 72,000 head per week in May 2003 to currently 84,000 head per week. USDA Chief Economist Keith Collins says the border reopening may lower cattle prices from $85 to $82, and even less if there are fewer animals eligible to export as many anticipate.

Access to Japanese Market to Come, but When?

Many are advocating the Canada border not be reopened until Asian markets are restored. Johanns warned against this method. U.S. is the leading agricultural exporter in the world. If we believe what we are doing is based on sound-science when Canada has identical measures, "we send a signal to the international marketplace that we're playing by different rules than we're articulating," he told senators.

Johanns adds that if the issue is not addressed properly, it has the "potential to bog things down" whether it's trading beef, chicken, or any agriculture product.

During this week's National Cattlemen's Beef Association (NCBA) Cattle Industry Conference in San Antonio, the talk has centered around trade and market access. With the beef industry suffering a $3.1 billion swing from exports to lost market in the past year, producers are wary of opening doors to Canada before export markets for the United States are restored. NCBA members will vote this weekend on their position regarding the border.

But when would Japan be ready to open its doors? Phil Seng, US Meat Export Federation president and CEO, says the market will reopen to U.S. beef that's submitted under the Beef Export Verification (BEV) program. "The Japanese will only take beef that's marketed under that program and the rule-making is almost complete for that," he says. Seng says a more realistic timeframe is June or July.

 

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