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050443 Watchdog Finds No Collusion During Mad Cow Crisis

April 29, 2005

Ottawa - Consumer demand for Canadian beef has kept prices stable even though cattle prices have dropped since the mad cow crisis hit the industry, the federal Competition Bureau has concluded. The bureau began its examination in February 2004 to determine if there was collusion among beef packers to lower prices paid to cattle producers or among grocers to raise or maintain retail prices for beef.

The bureau also examined whether pricing patterns were the result of one or more dominant firms engaging in a practice of anti-competitive acts that restricted competition.

"We found no evidence of collusion or abuse of dominance by beef packers or grocers," Richard Taylor, the bureau's deputy commissioner, said in a statement Friday.

"The bureau will continue to examine complaints of alleged anti-competitive activity in these industries, especially within the context of the U.S. border being closed to Canadian cattle."

The bureau found that:

-Beef prices are set on a North American basis because of the reopening of the U.S. border to boneless beef exports from cattle under 30 months of age.

-Cattle prices dropped because farmers are limited to selling their animals to Canadian slaughterhouses, resulting in a massive oversupply that far exceeded Canadian slaughter capacity.

-Cattle prices tend to be volatile since they are normally set in auction markets.

-Lower cattle prices do not necessarily lead to lower consumer prices for beef; and the final consumer price of beef includes a number of fixed costs, such as transportation and labour, in addition to the price of cattle.

As part of its review, the bureau contacted and analysed information from farmers and their associations, beef packers and other players in the beef and cattle industries. The bureau also retained an industry expert to write a comprehensive report, and commissioned economic reports.

After the discovery of a case of bovine spongiform encephalopathy (BSE) in Canada in May 2003, the U.S. and 33 other countries banned all imports of Canadian cattle and beef.

Since then, the U.S. border reopened in September 2003 to boneless beef from cattle aged less than 30 months, but the border has remained closed to Canadian exports of live cattle and certain beef products.

The economic effects have been devastating to the Canadian cattle industry.


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