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Integration of North American Beef and Cattle Market: Impacts and Implications

This presentation discusses the growing integration of the North American beef and cattle market, focusing on the impact of border regulations, increased trade and investment, and the role of regulatory integration. It also explores the effects of BSE on the supply chain and potential disruptions to the market. The presentation concludes by highlighting the resilience of the North American supply chain and the importance of adhering to international standards despite political challenges.

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Integration of North American Beef and Cattle Market: Impacts and Implications

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  1. Of Border Closings and BSE:North American Beef/Cattle Market IntegrationPresentation for theSAEA Organized Symposium:The Impacts of Globalizationon Southern Agriculture Darren Hudson, Parr Rosson, and Flynn Adcock, Mississippi State University and Texas A&M University Prepared for the SAEA Annual Meetings Mobile, AL February 5, 2007

  2. Overview • The Growing Integration of the North American Beef and Cattle • BSE – Canada and the United States • Summary and Implications

  3. Market Integration • Harmonization of Border Regulations & Stability of Investment Rules • Increased Trade • Increased Investment • Leads to Price Convergence (NAFTA) • Hogs/Pork, .86 • Beef/Cattle, .60 • Chicken, .26 • Regulatory Integration (including SPS)FacilitatesMarket Integration ERS, USDA

  4. 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

  5. Integration in the North American Cattle and Beef Industry, 2002 $1.1 Billion, 1.7 Million Head of Beef Cattle $1.1 Billion, 392,000 Metric Tons of Beef $283 Million, 76,000 Met. Tons of Beef $50 Million, 134,000 Head of Beef Cattle $218 Million, 67,000 Metric Tons of Beef $75 Million, 105,000 Head of Beef Cattle $592 Million, 206,000 Metric Tons of Beef $301 Million, 816,000 Head of Beef Cattle $23 Million, 6,000 Metric Tons of Beef

  6. 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.

  7. 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

  8. Integration in the North American Cattle and Beef Industry, 2004 $0, 0 Head of Beef Cattle $1.2 Billion, 355,000 Metric Tons of Beef $230 Million, 87,700 Metric Tons of Beef $2.5 Million, 14,000 Head of Beef Cattle $56 Million, 11,800 Metric Tons of Beef $670,000, 1,400 Head of Beef Cattle $600 Million, 106,500 Metric Tons of Beef $543 Million, 1,370,000 Head of Beef Cattle $33 Million, 5,900 Metric Tons of Beef

  9. 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

  10. 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

  11. 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

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