031121 U.S. Capitalized on BSE Turmoil

For the beef industry in the United States, the months since Canada's beef sector crisis began in May have been good ones.

As Canada's export-dependent beef industry faced a crisis of low income and market glut, American cattle producers saw stronger markets and soaring prices.

A Statistics Canada analysis of the impact of the May 20 announcement of one case of bovine spongiform encephalopathy that shut Canadian beef out of export markets says that tighter supplies in the U.S. have meant record retail beef prices.

Meanwhile, American beef continued to pour into Canada unrestricted because of North American Free Trade Agreement rules. "Canada was unable to introduce an import ban policy on these products to help increase the domestic oversupply," the report said.

And American exporters were able to take advantage of the ban on Canadian beef in third markets. In the months following the BSE announcement, the value of American beef exports increased by $80 million US per month.

"U.S. beef exports to the world jumped by 17 percent after the ban on Canadian beef exports," said Statistics Canada analysts. "Most of this increase went to countries where Canadian and U.S. beef exporters traditionally compete: Mexico, Japan and South Korea."

Several months ago, the U.S. opened its market to muscle cuts from younger animals.

The American government now is proposing to allow imports of Canadian live cattle younger than 30 months beginning early next year. During a 60-day comment period, it will be hearing from American interests hurt by the ban on Canadian cattle and beef and those who have benefited.

In Canada, the impact of the beef export ban was immediate and devastating, according to the federal study. In April, exports were worth $288 million Cdn. In June, they were worth zero.

Alberta was the province hardest hit, losing export income that had been averaging $160 million monthly. Ontario, Saskatchewan and Quebec followed in losses caused by the export ban.

Domestically, the situation was made worse by a flood of offshore beef that supplemented a surplus of domestic animals that could not be sold, as well as unrestricted imports from NAFTA countries including the U.S., Mexico and Chile.

Under World Trade Organization rules, Canada must allow offshore imports of 76,409 tonnes of fresh, chilled and frozen beef. Importers can exceed that limit with a government-granted supplementary import permit.

By the end of July, imports were close to 100,000 tonnes - 30 percent above what is supposed to be the annual limit. Complaints from the cattle industry convinced Ottawa to suspend issuance of supplementary import permits in July.

Statistics Canada said high American retail beef prices were a factor even before the border closed May 20, the result of reduced marketing because U.S. cattle producers are rebuilding herds after seven years of depletion. By August, retail prices were at a record average of $3.74 per pound US.

Supplies became even tighter after May because Canadian product was not available, U.S. exports increased to fill traditional Canadian markets and American imports of beef declined sharply compared to 2002 levels.

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