Canada’s episode with bovine spongiform encephalopathy immediately halted the country’s beef exports, causing its beef and cattle prices to fall dramatically. Common estimates have pegged the impact at $20 million (U.S.) a day. But the economic impact to the North American meat industry has not been as negative.
As of mid-June, Canada’s BSE case remained limited to one cow, which kept consumer confidence in meat high. In fact, the BSE case has had little effect on Canadian beef demand.
“So far, Canadian consumers haven’t reacted to the BSE case at all,” says Glenn Grimes, University of Missouri agricultural economist. “I didn’t expect demand to change, but emotions are unpredictable.”
While there have been no domestic demand problems, the BSE case forced Canada to stop exporting live-cattle and beef, causing a backlog of supplies. Canada exports approximately 70 percent of its production, according to the Canadian Beef Export Federation, with more than 72 percent of those exports entering the United States.
Canadian packers and live-cattle exporters have been losing about $8 million (U.S.) a day in revenues, since the beef-export ban began in late May.
“If the BSE case doesn’t have an effect on Canadian beef demand, then it could have a negative impact on Canadian pork,” says Steve Meyer, Paragon Economics. “It could take a while to get through the beef supplies. This means beef prices will likely be low, which could cause some substitution from pork to beef.”
This is not necessarily good news for the U.S. pork industry, as substituting beef for pork in Canada could mean more of that pork will enter the United States, Canada’s No. 1 export market.
On the other hand, the Canadian beef embargo did boost U.S. beef and cattle prices. Grimes points out that Canada is now holding cows back from slaughter. When the embargo comes off, expect an influx of beef exports to the United States, which could then pressure U.S. beef and cattle prices lower.
“The current high beef prices are positive to pork,” says Grimes.
Due to the embargo and the increase in beef supplies, Canadian cattle prices fell by about 30 percent on average, with some feeder-cattle markets dropping 50 percent, says Jim Robb, director of the Livestock Marketing Information Center.
U.S. beef markets reacted minimally to the BSE case. “There was a quick reaction in the futures market as cattle contracts closed down the limit on the first day, also stocks of food outlets got hammered,” says Meyer. “But cattle futures have since recovered all losses. U.S. hog futures simply didn’t react.”
While beef demand in Canada held strong, that could change quickly if another case of BSE is found. The Canadian government and USDA worked diligently to test for and contain the disease, which added to consumer confidence.
If Canadian beef demand slips, they could turn to pork, that could be good for the U.S. pork industry, as less pork would move south into the United States, says Meyer.
As of mid-June, Canada had tested 17 herds for BSE. Close to 1,900 cattle in Alberta, Saskatchewan and British Columbia were quarantined for tests and scheduled for depopulation. As of this writing, results showed that all tested animals were BSE-free. Once the Canadian Food Inspection Agency is convinced there are no more cases, then USDA will do its own evaluation.
“Beef imports from Canada will likely return in steps, such as by regions, only shipping muscle cuts or meat from young animals,” says Robb. “The cull-cow market will be the last to return, and the United States takes a lot of Canada’s cull cows.”
The pork industry can consider itself lucky to not have a disease like BSE, but that doesn’t mean there aren’t lessons here about foreign animal diseases. While the United States’ safeguards are as sound as any in the world, it’s important to remember that a foreign animal disease can have far-reaching and devastating effects on a country’s meat industry (see sidebar).
Is the United States at Risk?
Canada’s bovine spongiform encephalopathy episode raises the question of how susceptible is the United States to BSE? The disease’s nature as well as a general lack of knowledge about BSE make it nearly impossible to guarantee immunity. Since 1997, the United States has banned meat and bone meal from cattle feed, but so had Canada.
Much like in Canada, the U.S. government, USDA and the U.S. beef industry officials have a rigorous series of safeguards to contain any possible outbreaks. Canada’s case shows that consumers can be forgiving of a single case, provided the meat doesn’t enter the food system, and as long as it is isolated and controlled quickly.
But it’s not just BSE, there are many foreign animal diseases like foot-and-mouth disease, that could be devastating. “Unlike BSE, FMD is very easily transferable, including across species,” says Glenn Grimes, agricultural economist, University of Missouri. “Economic impacts of an FMD outbreak would be very negative, it would immediately shut down all U.S. beef and pork exports.”
The best example of how devastating FMD can be to a meat industry is Taiwan. Prior to 1997, Taiwan was the world’s No. 2 pork exporter. Then FMD hit, and the country has been a net pork importer ever since. Taiwan’s hog herd is about 70 percent of what it was before FMD.
“Canada’s BSEcase will probably lead USDAand the U.S. meat industries to scrutinize their safeguards even more,” says Jim Robb, director of the Livestock Marketing Information Center. “It will make the country even better prepared if a disease hit here.”
Does BSE Lend Credibility to COOL?
While there’s never a good time for a case of bovine spongiform encephalopathy, Canada’s case comes at a bad time for U.S. country-of-origin labeling opponents.
“COOL proponents will try to use this as a validation of the benefits,” says Steve Meyer, Paragon Economics. “COOL doesn’t do that much to help a BSE case, because it doesn’t include traceability to determine what farm an affected animal came from, and what other animals it may have had contact with.”
Still, it’s hard to deny that, in this particular case, labeling meat from the United States versus Canada would not have had some value in the consumer’s mind. That doesn’t necessarily mean that COOL would increase food safety.
“Most beef imported into the United States goes into foodservice,” says Charlie Arnot, spokesperson for Premium Standard Farms. “If COOL is really a food-safety or consumer-right-to-know issue, why is foodservice excluded from the regulations?”