050523 Canada Prepares For Possible US Boxed-Beef Ban

May 30, 2005

Winnipeg - The Canadian cattle industry has plans in place should the U.S. border to Canadian boxed beef exports be closed, according to industry sources. The Ranchers-Cattlemen Action Legal Fund, or R-CALF, has been after U.S. District Judge Richard F. Cebull of Montana to halt boxed-beef imports from Canada.

One analyst said that should a ban on boxed beef be implemented, prices for live cattle in Canada would plummet and likely would prompt calls for drastic action such as the immediate depopulation of the Canadian cattle herd - which is among four industry plans in place.

The R-CALF complaint alleges that the U.S. Department of Agriculture's decision to open the border to bone-in and other meats from Canada is "arbitrary (and) capricious" and "increases the risk of importing contaminated beef products from cattle infected with bovine spongiform encephalopathy (BSE) into the United States," which will cause "irreparable harm" to cow or calf operators.

R-CALF was already successful in preventing the reopening of the U.S. border to live cattle from Canada under the age of 30 months that was to have occurred in early March.

"Whether R-CALF will be successful boils down to the USDA's defense of their rule and its opposition to the closure of the border to boxed beef as well as to R-CALF's arguments for blocking the rule and its arguments in favor of stopping the flow of boxed beef," said Ted Haney, president of the Canadian Beef Export Federation.

The Canadian cattle industry can do little at this stage, he said. "Right now the chances of Judge Cebull siding with R-CALF are pretty good given his past record," said Herb Lock, a livestock analyst with Farm Sense Marketing.

Lock said should Cebull issue the ban on boxed beef, Canada will simply have more beef to dispose of. "The danger here is that if we can't move boxed beef into the U.S. market, there are no other markets willing to take that much beef," Lock said. "We will then move back into a scenario much like when Canada's cattle market came to a complete standstill immediately following the discovery of the first BSE infected animal in Alberta in May of 2003."

Haney pointed out that should Judge Cebull decide to include boxed beef from Canada in the ban, the USDA quickly would move to challenge the ruling in the Appeals Court of San Francisco.At that point, the Appeals Court has the responsibility of including in its consideration the impact of the decision on the trading relationship between Canada and the U.S., Haney said.

The Canadian cattle industry already has put in motion plans to deal with the worst-case scenario, which would be the U.S. border also closing to boxed-beef shipments from Canada.

If the border closes to boxed beef, Haney said, the Canadian cattle industry will seriously look at four options:- disposal of surplus cattle or depopulation. "Basically what would happen is the downsizing of the Canadian cow herd to match slaughter capacity that is available at present," he said. - increase slaughter and beef processing capacity even further.

Haney noted that pre-BSE slaughter capacity in Canada totaled roughly 70,000 head be per week. At present, slaughter capacity in Canada is roughly 88,000 head a week and was expected to hit 98,000 head per week by the end of 2005, which would be roughly self-sufficient levels.- implement a larger set-aside program, in which cattle temporarily are taken out of the marketplace, than that already exists.

Haney said depopulation would only be considered as a last resort as it would be opposed by the industry. He said it would also be considered only if all markets to Canadian beef would be closed.- implementation of BSE testing for each animal slaughtered to the food market.

"The thinking is that by testing every Canadian animal for BSE, it would be much more palatable for countries such as Japan, other Asian countries along with Russia and would go along way to opening those markets up to Canadian beef," Haney said.

He acknowledged that there would likely be resistance from the Canadian Meat Council and the major packers in Canada to testing every animal for BSE.

Haney said Japan imports roughly 800,000 metric tons of beef per year. South Korea imports about 400,000 tons of beef, Taiwan 150,000 tons and Russia 600,000 tons.

"By testing every animal for BSE, Canada would be able to gain access to those markets very easily," Haney said. "Canada would only need to capture less than a 10% share of each of those markets to accommodate a weekly slaughter kill of 98,000 head a week."

Of the 98,000-head-a-week cattle kill, the Canadian domestic market can absorb 54,000," he said. "While it would take time, Canada will be able to replace the lost boxed beef sales to the U.S.," Haney predicted.

In calendar year 2004, Canada exported 365,000 metric tons of beef to the US. Of that, 162,000 tons was redirected by U.S. outlets to Asia, Mexico, and other small markets, Haney said.


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