BSE and the Alberta Beef Industry

1. BSE and the Alberta Beef Industry Presentation to Canada/US Transportation Border Working Group Calgary, Alberta October 20, 2004 Nithi Govindasamy, P.Ag. Policy Secretariat Alberta Agriculture, Food and Rural Development

2. Outline • Size and Economic Importance of Cattle and Beef Industries • Impacts of BSE and border closures • Contingency Planning • Policy Responses • The Future

3. Agri-Food Trade with the USC$ Millions

4. Beef Cows – USA and Canada

5. North American Cattle Numbers

6. CanadaWhat is the 2004 imbalance? • Supply • 3.6 million fed cattle • 820,000 non fed animals • 4.42 million total marketings • 2004 kill projections • 3.31 million fed cattle • 290,000 head carryover (8%) • 500,000 non-fed cattle • 320,000 head surplus (40%) • For cull animals, capacity has been reduced because of inability to kill OTM and UTM in the same plant. Has helped fed capacity.

7. SIZE OF INDUSTRY (2002) • Cattle and calves in Alberta: 5.2 million head (Canada: 13.4 million head) (39%). • Cattle slaughtered in Alberta: 2.34 million head. • Federally inspected: 2.34 million head. • In 2003 cattle slaughter in Alberta was about 2.08 million head – down 11% from 2002.

8. Size of Industry (cont’d) • Provincially inspected: 30,724 head (less than 1.5% of total). • Alberta feeds over 2.4 million cattle with total beef production of over 800,000 tonnes.

9. Size of Industry (cont’d) • Alberta’s beef production: • 13% sold in Alberta; • 15% to Quebec; • 30% to other Provinces; • 32% to US; • 9% to other countries. • 71% of all Canadian cattle fed • 68% of total Canadian slaughter

10. Size of Industry (cont’d) • Farm cash receipts (FCR) in Alberta: $8.23 billion (includes program payments). • Cattle and calves accounted for $3.89 billion or 47.3% of total FCR. Largest single agricultural sector. • Meat packing is Alberta’s second largest manufacturing industry.

11. Size of Industry (cont’d) • Value of Alberta’s cattle and beef exports to all countries: $2.27 billion. • Value of Alberta’s cattle and beef exports to US: $1.93 billion (85%). • Alberta shipped over half a million cattle to the US.

12. Canada/USC$ Millions

13. Alberta Trade in Cattle and BeefC$ Millions (Exports to the US)

14. US Beef Exports in 2002Top 5 Markets (C$ Millions)

15. Canada Beef Exports in 2002Top 5 Markets (C$ Million)

16. Economic Impacts • BSE incident reduced 2003 cattle and beef export revenue by about $1 billion for Alberta and $2 billion for Canada. • Declines in farm cash receipts estimated at $1.38 billion in Alberta ($2.1 billion for Canada). • Receipts for cattle alone declined by $1.32 billion in Alberta and $2.52 billion in Canada. • Average income loss estimated at $20,000 per farm family.

17. Economic Impacts (cont’d) • Estimated loss in equity to the cow calf sector: $3 billion • Estimated decline of $ 5.7 billion in total output for Canadian economy,$ 1 billion decline in labour income and loss of 75,000 jobs. • Normal 7 to 8 cent per lb. spread for fed cattle has averaged 34 cents per lb. under the US price since January, 2004

18. Source: Alberta Agriculture, Food and Rural Development, Strategic Information Services

20. Contingency and IndustryAdjustment Strategies (CCA) • Increased slaughter of Canadian cattle with a high priority to increase Canadian processing capacity. • Development of a delayed marketing strategy. • Alternative tax strategies. • Cash advances, loan guarantees and debt restructuring.

21. Contingency and Industry (cont’d) • Increased Canadian beef usage and export market diversification. • Increased surveillance and slaughter of cattle born prior to the 1997 feed ban. • Continued pursuit of all avenues to restore live cattle export trade.

22. Surveillance • 6,400 cattle tested up to early October, 2004 (all negative). • Target: 8,000 (2004) 30,000 (2005 and beyond)

23. Access to the US • August 8th, 2003 US – announcement of partial re-opening of border: boneless beef UTM; liver; tallow. • August 15th, 2003 – product list amended to include trimmings; plant segregations allowed (UTM/OTM). • Sept. 4th, 2003 – first shipments begin. • Nov 4th, 2003 – rulemaking process begins.

24. Access to the US (cont’d) • December 23rd, 2003 – discovery of US BSE. • Jan. 5th, 2004 – first comment period for Rule ends. • Jan. 5th to March 6th, 2004 – Rule making suspended. • March 7th, 2004 – comment period re-opened for one month. Includes consideration for OTM meat. • April 7th, 2004 – comment period ends.

25. Access to the US (cont’d) • April 19th, 2004 – USDA amends product entry list to include bone-in beef, ground beef, processed beef products. • April 21st, 2004 – RCALF court challenge. • May 6th, 2004 – injunction granted. Product list amended (August 15th list now in operation).

26. Canadian Policy Responses • Ruminant to ruminant feed ban in effect since 1997. • Removal of SRMs from food chain. • Enhanced surveillance. • Changes to feed ban (removal of SRMs from feed) -- scope and implementation to be determined.

27. Canadian Policy Responses (cont’d) • Measured, consistent with known available science. • Need to be in harmony with US policy changes. • Trade considerations have been the main driver. • Not necessarily irrational.

28. Canadian Policy Responses (cont’d) • Somewhat haphazard due to uncertainty of US actions. • Support programs exceed $1.5 billion. • Supplementary import permits restricted.

29. International Panel Recommendations to US • Recognized integrated nature of NA industry. • Case of BSE in US cannot be considered in isolation. • North American BSE Task Force – consistent and scientifically valid policy development and implementation.

30. International Panel (cont’d) • Limitations of NA cattle Identification System. • Recommended SRM removal from food and feed chain. • Significant enhancement of surveillance. • Testing of all cattle for human consumption unjustified in terms of protecting human and animal health.

31. International Panel (cont’d) • US should demonstrate leadership in trade matters by adopting trade policies in accordance with international standards and discontinuing irrational trade barriers.

32. Conclusions • One incident of BSE in Canada was sufficient to close all borders and create havoc in the industry. • Importance of maintaining and enhancing close relationship with the US highlighted. • Close integration and interdependence of NA cattle and beef industries.

33. Conclusions (cont’d) • Export dependency of Canadian industry. • Urgent need to review, revise OIE guidelines to make them more practical and take into account trade realities while adequately safeguarding human and animal health.

34. Conclusions (cont’d) • Guidelines need to become rules with compliance mechanisms. • NA harmonization of policies and regulations. • Strong public and government support for industry.

35. Conclusions (cont’d) • Canada and US should move quickly to complete and implement remaining policy measures necessary to eradicate disease and reassure consumers and trading partners. • Additional policy measures, however, must be guided by sound science and should not be an overreaction to closed markets.

36. Conclusions (cont’d) • Need for coherent, coordinated science-based policy undertakings. • Canada needs to continue applying pressure to re-open US market and other offshore markets. • To the extent possible, issue needs to be depoliticized.

37. Conclusions (cont’d) • Rational trade policies, based on science, not on politics or protectionism. • Need for multilaterally accepted international rules of management and trade so as to avert problems experienced with BSE.