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U.S. Meatpackers Feel Ban's Effect While Canadian Operators

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Feb 10, 2005
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U.S. Meatpackers Feel Ban's Effect While Canadian Operators thrive

Omaha World-Herald, Neb., March 12, 2005

by Mark Kawar

Mar. 12--As the ban on Canadian cattle imports drags on, Canadian meatpackers are expanding while American operations slow.

The trend is worrisome news for the U.S. packing industry, which has seen financial losses, production slowdowns, layoffs and even a packing plant physically moved to Canada.

"It's not hard to imagine a future where we're sending our cattle to Canada for slaughter," said Ted Schroeder, a professor of livestock marketing at Kansas State University.

The United States bans Canadian cattle because of fears of mad cow disease but has allowed Canadian beef imports for a year and a half. Thus, Canadian beef exports to the United States have risen more than 10 percent, along with the Canadian packing expansion.

"We have encouraged the creation of an international competitor that has a profound impact on our processors and our producers," Agriculture Secretary Mike Johanns said in Kearney, Neb., last week.

Johanns pointed out the expansion of Canadian meatpacking while making his case for reopening the border to cattle.

In the past, most Canadian cattle were sent south for slaughter after being fattened in Canadian feedlots. The discovery of mad cow disease in Canada in 2003 halted that trade and created a glut of cattle there, because the country did not have enough packing plants to process its own animals.

U.S. packing plants, on the other hand, have encountered a cattle shortage and resulting high cattle prices -- helping cattlemen but squeezing packers.

If the border closure continues much longer -- a federal judge extended it last week -- industry experts worry that the trend of expanding Canadian packing plants at American packers' expense will pass the point of no return.

"Once you have a new plant up and running (in Canada), you're going to want to keep it running," said Mark Dopp, senior vice president for regulatory affairs at the American Meat Institute, which represents meatpackers.

According to Agriculture Canada, Canadian slaughter capacity has increased from 77,000 head per week in 2003 to 86,000 last year.

At the same time, beef exports to the United States have increased from 268,000 to 361,000 metric tons. This week the Canadian agriculture minister announced a new program to further encourage beef exports, including $42 million in government funding for export marketing.

The National Cattlemen's Beef Association has catalogued in a report about two dozen Canadian packing plants that have been built, expanded or targeted for expansions since the border closed. This week, two more plants, in Alberta and Quebec, announced expansion plans.

The most expensive new plant described in the report will cost $100 million and will be able to slaughter 1,500 cattle per day, according to the report. It is being built in Lethbridge, Alberta, just north of the Montana border -- an area that has traditionally sent its cattle to slaughter in the United States.

America's two largest packers, Tyson Foods Inc. and Cargill Inc., both own plants in Canada, which they have expanded in the past two years. Both companies' financial statements have mentioned their Canadian operations as the bright spots amid otherwise poor financial performance since the border closed.

According to Statistics Canada, Canada has about 3 million steers and heifers intended for market -- 40 percent more than it did a year ago.

Steve Kay, publisher of Cattle Buyers Weekly, an industry newsletter, estimated that U.S. packing plants were running at 74 percent of capacity in 2004, down from 84 percent in 2003. Canadian plants, he said, are probably close to 95 percent of capacity.

On this side of the border, Dopp pointed to three U.S. plants that have shut down because of the border closure, including Iowa Quality Beef in Tama, which employed 540 and closed in August.

Over the past three months, the four largest beef packers have all announced either job cuts or production decreases tied to the tight cattle supply. Tyson, the largest packer, furloughed 1,450 Midlands workers in January for a month.

And on Thursday, the National Meat Association, which represents small meat packers, appealed the federal judge's injunction against resuming Canadian cattle imports, warning of dire consequences if trade does not resume. The association said that small packers that have historically imported cattle from Canada face "imminent economic collapse."

In 2002, Nebraska imported about 125,000 Canadian cattle, or 1.5 percent of the total killed in the state.

Schroeder, the Kansas State professor, noted that while Canada is building new, modern packing plants, many U.S. plants are several decades old. Canada also has a mandatory animal identification system. Both of these factors could make the beef produced in Canada more attractive to both U.S. and foreign customers, he said.

A group of Canadian ranchers plans to dismantle the Ferry Brothers Inc. plant in Washington state this year, truck it north of the border and reopen it as the Ranchers Choice Co-op in Dauphin, Manitoba.

Opponents of opening the border to cattle have a simple answer to those who worry about packers moving north: Don't allow Canada to send its beef here either.

The Ranchers-Cattlemen Action Legal Fund United Stockgrowers of America (R-CALF), which has sued the Agriculture Department to block cattle and beef imports, won an injunction earlier this month, preventing the U.S. Department of Agriculture from going ahead with its plan to allow cattle imports.

"The only significant export market Canada has is the United States. No one else is taking Canadian beef," said Bill Bullard, R-CALF's CEO.

Bullard argued that American packers were already building plants in other countries before the Canadian border closed, in an effort to cut costs.

"This began before the border closure, and it will continue if we don't do something to stop it."

Staff writer Chris Clayton contributed to this report.


To see more of the Omaha World-Herald, or to subscribe to the newspaper, go to http://www.omaha.com
:) These articles that talk of Canadian expansion floor me. The only expansion of any size to date in Canada has been the American mutinaltional plants. What a joke. Rcalf is feeding the Mutinational giants while proud of their BS tactics. Open the bloody border and let's get on with it. The only way for any producer group to gain any ground is to move into the packing industry themselves, the rest of these petty games are accomplishing diddly squat.

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