The closed border between Canada and the United States, preventing the entry of live cattle into America, is a continuing lightning rod that threatens to devastate the free trade benefits both nations have enjoyed over time.
The May 2003 discovery of Canada’s first case of bovine spongiform encephalopathy (BSE) coupled with the first U.S. case in December that same year is re-shaping beef industry businesses on both sides of the fence.
BSE, as a disease, sprouted nearly 20 years ago in the United Kingdom (U.K.) with devastating results to its beef industry, marketing programs, and the health of hundreds of its citizens.
USDA classified BSE as a legally reported disease in 1986, followed in 1989 by an emergency ban on imported ruminants, bovine semen, embryos, and meat and bone meal from the U.K. The permanent ban came from FDA in 1997 against high-risk mammalian products from animal feed, given that experts generally blamed the source of BSE on contaminated feed. The Canadian government imposed the same ban that year.
To be sure, BSE is like no other animal disease in terms of its global impact on free trade since the North Atlantic Free Trade Agreement of the early’90s — none more serious than the effect on the relationship between Canada and the United States.
The trade embargo between the two nations languishes with no apparent relief in sight, as losses continue to pile up. Consider that a recent report commissioned by the Kansas Department of Agriculture estimates the economic impact on the U.S. beef industry as high as $4.7 billion in losses in 2004. Meanwhile, financial losses for the Canadian cattle industry reportedly exceed $7 billion in Canadian dollars.
Major U.S. beef processors are stepping up their presence in Canada through facilities that will allow them to offset production shortages in their American plants. They include Tyson Foods, which recently announced plans to increase its beef slaughter capacity from 3,800 cattle per day to 4,700 in mid-June at its Lakeside Packers facility in Brooks, Alberta Canada.
“Our investment in this project will help address the backlog of cattle caused by the continued closure of the U.S. border,” explains John Tyson, chairman and chief executive officer, who recently visited the Lakeside plant. “It also reflects our long-term commitment to the Alberta beef industry, which we fully expect to rebound from the market challenges of the past two years.”
Meanwhile, Cargill’s $32.5 million three-phase expansion in High River, Alberta Canada, is scheduled to be up and running by fall of this year. Moreover, an April 2005 agreement clears the way for Cargill Limited to acquire Better Beef Limited, one of the leading beef processing companies in Canada.
“As a company that has developed deep roots in Canada over the past eighty years, Cargill is committed to ongoing investment and a strengthening of the Canadian beef sector,” reports Bill Buckner, Cargill’s corporate vice president and president of Cargill Meat Solutions. “This new development illustrates our commitment to not only enhancing our operations, but also solidifies our vision for value-added creation for our customers and producers.”
The global impact on the United States in the wake of the discovery of BSE on its shores in 2004 hit immediately on the heels of 53 countries banning U.S. beef imports. Although exports to Canada and Mexico resumed in some measure later in 2004, it was of little impact since overall exports fell 82 percent below the 2003 levels.
Predictably, the reaction on all fronts has triggered charges, counter charges, and veiled threats from both opponents and proponents.
“The refusal to abide by clear scientific findings that Canadian beef is as safe as U.S. beef and reopen our borders is causing damage to the U.S. beef industry on the international stage,” asserts J. Patrick Boyle, American Meat Institute president and chief executive officer. “Countries like Mexico and Japan can’t understand why we refuse to import Canadian beef, calling it unsafe, when they employ the same BSE safety measure as we do. Either both are safe, or both are not. Which one is it?”
Noting that the boycott is changing the face of the entire industry from the producers’ perspective, Boyle adds, “We’re not only exporting packing jobs and economic growth to Canada, but also planting the seeds for the expansion of a Canadian cattle sector, which produces cheaper cattle and will be competing head-to-head with American cattlemen for expansion in a fairly static world market.”
Fighting the border reopening, leadership for R-Calf USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America), the key opponent, instigated a preliminary injunction that was granted by the federal court in Billings, MT, this year in March. The move was designed to block USDA’s plan to reopen the Canadian border that month through its Final Rule published three months earlier in January. The final hearing on the R-Calf measure is scheduled for July 27 in district court.
Meanwhile, USDA awaits word of its appeal of the case to the 9th U.S. Circuit Court of Appeals.
R-Calf’s 14,500 members consist primarily of cow/calf operators, cattle backgrounders, and feedlot owners across 46 states. The foundation of its opposition centers on BSE testing and at what age cattle should be excluded from testing. R-Calf charged Canada with lagging behind the United States in its BSE testing.
Until — and unless — Canada begins a statistically meaningful BSE surveillance program, every country will lack crucial scientific data needed to assess the risk of accepting beef and cattle from Canada, Bill Bullard, R-Calf chief executive, argues. Based on a disease risk-assessment analysis, a testing program’s detection sensitivity is driven by the number of cattle tested monthly, and not the size of the herd.
USDA disallows private testing for detecting BSE in cattle on grounds that using a rapid test as a surveillance tool by slaughter operations as a marketing tool would suggest a consumer safety aspect that is not scientifically justified. Creekstone Farms, Arkansas, KS, early on sought clearance to test its entire herd in an effort to regain its Japanese markets.
The Kansas Department of Agriculture analysis concerning the cost in 2004 of testing all cattle slaughtered in the United States totals approximately $640 million.
Findings in an April 29, 2005 report conducted by the USDA Animal and Plant Health Inspection Service (APHIS) of its epidemiological review of Canada’s BSE cases puts to rest questions of a scientific nature. “Our technical team has completed its review and found that Canada’s epidemiological efforts were not only appropriate but exceeded levels recommended by an international team of BSE experts,” reports John Clifford, APHIS deputy administrator for veterinary services. “Canada’s animal identification program allowed for a successful, comprehensive epidemiological investigations.” NP
Sources: AMI Fact Sheet (April 2005); “Canada’s new packing house map,” CATTLEMEN, January 2005; Cattlenetwork.com, April 22 and May 9, 2005; and “The Economic Impact of BSE on the US. Beef Industry: Product Value Losses, Regulatory Costs, and consumer Reactions,” Kansas State University for The Kansas Department of Agriculture.
Reported impact of Canadian border closing on major U.S. beef operations
ConAgra Foods: Closes Montgomery, AL, ground beef patty plant, 365 people jobless in 2005 report.
Tyson Foods: Temporarily suspends operations at four beef plants and the second shift at another affecting approximately 2,100 workers in 2005 report.
Excel Corporation, Cargill Inc. subsidiary: Layoffs announced at its Plainview and Friona beef processing plants affecting 220 people initially and ultimately a total of 600. Production lines slowed to reduce daily processing rate in 2004 report.
Swift & Company: Eliminated night shift and laid off more than 700 people in 2004 report.
National Beef Packing Company: Production cutback to reduce weekly slaughter at Liberal and Dodge City, KS, facilities in 2005 report.
Smithfield Foods: Closes one of its beef operations in Philadelphia leaving 185 jobless in 2004 report.
Iowa Quality Beef: Farmer-owned cooperative suspended operations and subsequently filed for bankruptcy protection laying off 540 workers in 2004.