darren hudson, parr rosson, and flynn adcock, mississippi state university and
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Of Border Closings and BSE:North American Beef/Cattle Market
Integration
Presentation for theSAEA Organized Symposium:The Impacts of Globalization
on Southern Agriculture
Darren Hudson, Parr Rosson, and Flynn Adcock, Mississippi State University and
Texas A&M University
Prepared for the SAEA Annual MeetingsMobile, AL February 5, 2007
Overview
The Growing Integration of the North American Beef and Cattle
BSE – Canada and the United States
Summary and Implications
Market Integration
Harmonization of Border Regulations & Stability of Investment Rules
Increased TradeIncreased InvestmentLeads to Price Convergence (NAFTA)
– Hogs/Pork, .86– Beef/Cattle, .60– Chicken, .26
Regulatory Integration (including SPS) Facilitates Market Integration
ERS, USDA
The Evolving North American Beef Supply Chain
CUSTA and NAFTA Have Led to Greater N.A. Trade in Beef and Cattle
Mexico Supplier of Feeders to U.S., U.S. Returns Beef
Canada Supplier of Cattle and Beef to U.S. – “No Difference in U.S. or Canadian Steer”
Greater Integration of Other Resources (Capital, Technology, Grains) Has Also Occurred
A North American Beef Complex Resulted
Integration in the North American Cattle and Beef Industry, 2002
$301 Million, 816,000 Head of Beef Cattle
$23 Million, 6,000 Metric Tons of Beef
$283 Million, 76,000 Met. Tons of Beef
$75 Million, 105,000 Head of Beef Cattle$592 Million, 206,000 Metric Tons of Beef
$50 Million, 134,000 Head of Beef Cattle$218 Million, 67,000 Metric Tons of Beef
$1.1 Billion, 1.7 Million Head of Beef Cattle$1.1 Billion, 392,000 Metric Tons of Beef
BSE and the North American Beef Supply Chain
BSE Discovered in Canada in June 2003 and in the United States in December 2003
Canada’s Industry Highly Export Dependent and Severely Hurt when U.S. Closed Border
U.S. Industry Less Export Dependent and Suffered Brief Downward Price Impact
2 Year Prohibition of Canadian Live Cattle Shipments Led to Upward Price Pressure in U.S.
Mexico Speedy Resumption of Beef Imports from U.S. and Increase in Feeder Exports to U.S.
The North American Beef Supply Chain: Comments
BSE Reduced and Altered N.A. Beef Industry Integration, Especially Among Canada and the U.S., Temporarily
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 – Getting Close
Integration in the North American Cattle and Beef Industry, 2004
$543 Million, 1,370,000 Head of Beef Cattle
$33 Million, 5,900 Metric Tons of Beef
$230 Million, 87,700 Metric Tons of Beef
$670,000, 1,400 Head of Beef Cattle$600 Million, 106,500 Metric Tons of Beef
$2.5 Million, 14,000 Head of Beef Cattle$56 Million, 11,800 Metric Tons of Beef
$0, 0 Head of Beef Cattle$1.2 Billion, 355,000 Metric Tons of Beef
Canadian and U.S. Steer Monthly Prices2003 - 2005
Source: Alberta Agriculture, Food and Rural Development, www.agric.gov.ab.ca
$20
$40
$60
$80
$100
$120US$/CWT
Canadian to U.S. Monthly Steer Price Ratios2003 - 2005
Source: Alberta Agriculture, Food and Rural Development, www.agric.gov.ab.ca and USDA
Jan 03
Apr 03
Jul 03
Oct 03
Jan 04
Apr 04
Jul 04
Oct 04
Jan 05
Apr 05
Jul 05
Oct 05
0.2
0.4
0.6
0.8
1.0CN P/US P
U.S. Imports of Live Cattle fromCanada and Mexico, 1989 - 2006
Source: U.S. Trade Intenet System, www.fas.usda.gov/ustrade
1989 1994 2000 20050.0
500.0
1000.0
1500.0
2000.0 Canada Mexico
Potential Disruptions to N.A.Beef Supply Chain
Diseases Such as BSE and FMD Could Again Disrupt Trade
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
Summary
North American Beef Is Almost One Supply Chain
Markets React Immediately to ‘News,’ But U.S. Recovered Quickly While Pain Lingered in Canada
U.S. Increased Cattle Imports from Mexico and Beef Imports from Canada and Uruguay to Help Meet Demand
Implications
Disruptions will Continue to Occur, But N.A. Supply Chain Is Resilient
NAFTA Appears to Facilitate Return to Integrated Markets
Adherence to International Standards Important, But Difficult Due to Political Influence
Canadian Beef Exports
Source: Agriculture and Food Canada, USDA/FAS
1 89
2 47
2 92 3 2
9
4 01
4 85
4 45
4 89
2 96
4 54 4 8
7
1995 1997 1999 2001 2003 20050
100
200
300
400
500
600
1,000 MT, Retail Weight
U.S. Mexico Japan Korea Others
Mexico Beef Imports
Source: FAS/USDA attache reports, U.S. Trade Internet System, and Agrculture and Food Canada
30
60
110
150
180
220 24
0
280
225
205
210
1995 1997 1999 2001 2003 20050
50
100
150
200
250
300
350
1,000 MT
U.S. Canada Others
U.S. Beef Exports, 1995 - 2006
5 82
5 98
6 76 6 98
7 85 8 1
3
7 56 8 0
1
8 21
1 35 2 0
2
3 48
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 20060
200
400
600
800
1000
1,000 MT (Retail Weight)
Mexico Canada Japan Korea Taiwan Others
Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade
U.S. Beef Imports, 1995 - 2006
Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade, 2006 through November
6 42
6 41 7 3
3 8 23 8 8
1 9 45 9 8
7
9 87
8 98
1 ,10
4
1 ,07
2
8 30
1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 20060
200
400
600
800
1,000
1,200
1,400
1,000 MT (Retail Weight)
Canada Australia New Zealand Uruguay Others
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