031108 Mad Cow Crisis A Boon to U.S. Beef

Ottawa - (CanWest News Service) - The United States capitalized on Canada's mad cow crisis last summer, increasing its international beef exports, according to a new report.

It did so by taking aim at markets where it had previously gone head-to-head with Canada but which this country lost because of bans on its beef.

"U.S. beef exports to the world jumped by 17 per cent after the ban on Canadian beef exports," said the report released Wednesday by Statistics Canada.

"This increase more than filled the gap on world markets resulting from this ban.

"Most of this increase," the report went on to say, "went to countries where Canadian and U.S. beef exporters traditionally compete: Mexico, Japan and South Korea."

The report, entitled Mad Cow Disease and Beef Trade, looked at Canada's beef industry before and immediately after the announcement May 20 that a cow from a northern Alberta farm had tested positive for bovine spongiform encephalopathy.

It found this country exported about $4.1 billion worth of beef -- 612,000 tonnes of meat -- in 2002. About 90 per cent of beef and 96 per cent of live cattle went to the U.S.

A year earlier, Canada controlled about 15 per cent of the world beef market, the report said, a figure that placed this country behind only the U.S., with 16 per cent, and Australia, with 23 per cent, as an international industry leader.

All that influence vanished overnight, as more than 30 countries, frightened by the potentially deadly mad cow disease, banned Canadian beef.

Of all provinces, Alberta felt BSE's impact the most, the report said.

Before beef exports ended during the summer, Alberta had made about $160 million per month in export sales in the first four months of 2003. Ontario had followed with $62 million per month, Saskatchewan with $23 million and Quebec with $11 million.

Meat packing, food processing and transportation industries were among other areas of the economy that suffered while BSE kept foreign markets closed.

And while no meat could leave the country, Canada was obliged under international trade agreements to continue to import meat and livestock.

"This meant that Canada was unable to introduce an import ban policy on these products to help address the domestic oversupply," the report said.

Two months into the mad cow crisis, duty-free imports of beef not covered by the North American Free Trade Agreement "had already exceeded the annual quota by almost 30 per cent," the report added.

At the end of July, Ottawa announced it would not authorize further duty-free imports, largely prime cuts of boneless beef and veal or products for the hotel and restaurant industries.

As Canada's beef export market disappeared, U.S. beef exports took off, especially to markets such as Mexico, where Canada and the U.S. had previously been competitors.

Not only did the U.S. try to fill the void left by Canada, but it also drove up beef prices under the new conditions.

"In some cases some products doubled in price within a week of our ban," Ted Haney, president of the Canada Beef Export Federation said Wednesday, describing U.S. beef trade with Mexico, at the height of the BSE scare.

Asked the reason for the hike, Haney said: "A combination of reduced supply and many of our international customers believe that a certain degree of opportunity was seized to increase prices by the U.S."

Rising beef exports -- and revenues -- weren't the only way the U.S. beef industry benefited from Canada's woes.

Strong consumer demand, a declining U.S. dollar and the tail end of seven years of herd liquidation sent cattle prices in the U.S. to record heights, the report said.

But the American takeover of Canadian beef markets won't last, now that the U.S. and Mexico have restarted a limited beef trade with Canada, industry and government leaders said.

"Obviously when you're not in a market for a while, you know that you're going to have to work to get it back," said federal Agriculture Minister Lyle Vanclief.

"We've worked to gain those markets in the past and I'm confident that we'll get them back. It may take a little time but we'll get them back."

The U.S. government indicated last week it wants to reopen the border with Canada to live cattle and could do so early in 2004.

Already, Canada has recouped 80 per cent of its Mexican market, Vanclief said.

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