The U.S. mandatory country-of-origin labeling law has been in place for less than four months, and some impact on the U.S. market is evident. Of course, Canada and Mexico filing a complaint with the World Trade Organization is an entirely different kind of impact that has yet to play out.
According to John Lawrence, Iowa State University agricultural economist, the number of Canadian slaughter hogs entering the United States during the first 50 weeks of 2008 was down 39 percent compared with the same period in 2007. More specific to COOL, the Sept. 1-Dec. 15 period, marked a 70 percent decline from 2007 levels. Reflecting a possible trend as COOL settled in further, the November/December combined numbers show a 78 percent drop from 2007.
"Part of that reflects Canada's herd liquidation, and higher grain and energy prices kept more Canadian hogs at home," Lawrence said. "COOL may have had some impact; there were definitely fewer Canadian market hogs coming to U.S. plants after COOL."
As for Canadian weaned and feeder pigs, 2008 showed slower growth in exports to the United States. For the first 50 weeks of the year, numbers were up 5 percent compared with 2007. Again, the trend appears to change as COOL implementation materializes. The Sept. 1-to-Dec. 15 period shows an 11 percent decline, while the November/December level was down 18 percent from 2007's level.
"We've seen some anecdotal evidence that there are some problems with contracts and packers only wanting U.S. pigs," Lawrence said. "We're not sure how this (COOL) is going to play out with packers, retail and consumers."
Among the unknowns that still need to be worked out is whether and to what degree packers are discounting Canadian market hogs. "USDA's price report does not differentiate Canadian versus U.S. hogs. All are in the price mix, so we can't determine the impact on the spot market," Lawrence said. His point is if that's the case, the discounted prices are mixed in with the prices that set the course for formula pricing contracts and other payment mechanisms.
"So if there are a lot of discounted Canadian hogs on the market one day it effects many things — we need to understand what's going on, and right now we're not getting that," he said.