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Canadian cattle won't flood U.S. market

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Feb 10, 2005
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nw manitoba
Canadian cattle won't flood U.S. market: analyst
this document web posted: Wednesday, February 9, 2005 20050210p81

By Barbara Duckworth
Calgary bureau

SAN ANTONIO, Texas - Allowing Canadian cattle back into the United States this March is not expected to disrupt beef prices or supplies.

"The psychological effect may be worse than the actual opening," said Randy Blach, executive vice-president of the market analysis firm Cattlefax.

If Canada exported 700,000 fat cattle over a 12 month period, that would add 560 million pounds of beef to the American domestic supply of about 25 billion lb.

The impact of renewing trade with Canada was discussed during a seminar at the U.S. National Cattlemen's Beef Association annual meeting in San Antonio Feb. 2.

The extra Canadian beef might result in a $2-$3 per hundredweight drop in the American price for finished cattle, while feeders might drop $2-$4 rather than the $15 decline some fear.

The American market has a 1.3 million head deficit in feeders, so imports from Canada and Mexico are needed for feedlots to run at capacity.

Cattlefax suggests heavyweight yearlings from Canada are the most likely prospects to enter when the border opens in March.

Canada fills about three percent of American beef needs. And although it shipped near record amounts of beef to the U.S. in 2004, it did not disrupt the market, said Cattlefax analysts.

"Canada has reached near record (levels) but it is not considerably higher than what they were sending us in the last four or five years," said Mike Miller.

Beef exports fell sharply in 2003 after BSE closed borders, but Canada recovered to 2002 levels by selling high quality, boxed beef from animals younger than 30 months. Last year the U.S. accepted 1.1 billion lb. and that could increase to 1.3 billion this year.

Since 1998 Canada exported on average 725,000 slaughter steers and heifers to plants in the Pacific Northwest, northern plains and northeast. These plants are dependent on those cattle and could face closure if Canada becomes self-sufficient with new slaughter facilities.

In pre-BSE days, Canada killed about 65,000 head per week. That has increased to 80,000, with another increase expected next year as new plants open.

"Somebody is going to process more animals. It means somebody will have to feed fewer animals," said Blach.

Canada has some advantages in its feed grain costs, resulting in a lower cost of gain than the U.S.

The Americans are also concerned about the plan to accept beef from cattle older than 30 months, but not older cattle, as set out in the U.S. Department of Agriculture rule released in December.

Before May 2003, Canada exported about one third of its cull cows and bulls to the U.S. for slaughter.

"It caught us off guard," said Blach, who suggested this provision might be dropped as the rule is examined.

Rejecting Canada's mature animals will put American packers at a disadvantage.

If the Americans accept beef from older animals, Canada may export more fed cattle and process more mature animals domestically.

The U.S. could use the older animals to keep some plants operating and fill its deficits in ground beef

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