Trade & Economic Impacts of Animal Disease Outbreaks Parr Rosson Professor & Director Center for North American Studies Texas A&M University

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1 Trade & Economic Impacts of Animal Disease Outbreaks Parr Rosson Professor & Director Center for North American Studies Texas A&M University C NAS

2 Animal Disease Implications Disruption of Trade Flows Impacts on Prices, Markets Impacts on Market Integration C NAS

3 Background Since Mid 1980s, Market Integration in North America Has Accelerated Exports/Imports Foreign Direct Investment Animals & Meat Trade Among Fastest Growing Components Discovery of BSE, FMD, Exotic Newcastle, Avian Flu Have All Disrupted Trade Market Integration Has Outpaced Regulatory Integration Regionalization Allows Trade to Resume C NAS

4 World Meat Trade 7 Million Metric Tons Broiler Meat Beef Pork Source: ERS/USDA 2004 (Jan-May) 2000

5 3,000 2,500 U.S. Meat Exports, 1970-May ,000 Metric Tons Broiler Meat ) Beef Pork Russian Ban BSE Boost 2,000 1,500 BSE Decline )) ) ) ) ) ) ) )) ) 1,000 ) ) ) 500 ) ) )))))))))))))))) )) ) Source: ERS/USDA (Jan-May)

6 U.S. Broiler Prices, 12 Market Avg Cents/Pound Asia/Canada High Path. Outbreaks (Jan-July)

7 U.S. Imports of Beef and Pork ,000 Metric Tons Beef Pork F

8 U.S. Cattle and Hog Imports from Canada Million Head Hogs Cattle No Cattle Imports in Source: USDA/FAS

9 U.S. Beef Exports, Markets, 90% Mexico 19.0% Korea 24.0% Canada 10.0% Other 10.0% Source: ERS/USDA Japan 37.0% C NAS

10 3 Markets, 84% U.S. Pork Exports, 2003 Japan 55.0% Other 9.0% Taiwan 2.0% Canada 13.0% Source: ERS/USDA Mexico 16.0% Korea 5.0% C NAS

11 U.S. Broiler Meat Exports, Markets, 58% Russia 27% Turkey 3% Mexico 8% Canada 11% China 5% Korea 3% Hong Kong 7% Source: ERS/USDA Cuba 3% Other 33% C NAS

12 Integration in the North American Cattle and Beef Industry, 2002 Integration in the North American Cattle and Beef Industry, 2003 $1.1 Billion, 1.7 Million Head of Beef Cattle $1.1 Billion, 392,000 Metric Tons of Beef $396 Million, 512,000 Head of Beef Cattle $850 Million, 256,000 Metric Tons of Beef $283 Million, 76,000 Metric Tons of Beef $70 Million, 20,000 Metric Tons of Beef $50 Million, 134,000 Head of Beef Cattle $218 Million, 67,000 Metric Tons of Beef $30 Million, 68,000 Head of Beef Cattle $321 Million, 81,000 Metric Tons of Beef $75 Million, 105,000 Head of Beef Cattle $592 Million, 206,000 Metric Tons of Beef $23 Million, 24,000 Head of Beef Cattle $606 Million, 193,000 Metric Tons of Beef $301 Million, 816,000 Head of Beef Cattle $23 Million, 6,000 Metric Tons of Beef $470 Million, 1.2 Million Head of Beef Cattle $34 Million, 6,700 Metric Tons of Beef C NAS

13 Source: Bureau of Economic Analysis, U.S. Department of Commerce U.S. Food Food and Kindred Industry Investment in Canada, Mexico, and World Total $7.0 $6.0 $5.0 $4.0 $3.0 Billion Dollars Total SIC Canada SIC Mexico SIC $15.6 $2.5 $21.1 $3.2 $24.9 $4.0 $2.7 $31.0 $4.3 $3.6 $35.3 $5.0 $4.7 $34.2 $5.8 $3.8 $35.9 $35.5 $5.5 $4.6 $4.4 $4.5 $40.0 $30.0 $20.0 $2.0 $1.0 $1.7 $9.3 $0.5 $1.4 $1.1 $10.0 $ $0.0

14 Mad Cows & Other Monsters!!

15 Financial Times, 1/15 and 1/ European Commission Estimates of BSE Impacts on Beef Use & Prices Percent Change, Oct. 1-Dec. 31, % 0% -20% -40% -60% -37% -35% -50% -50% -36% -25% -27% -40% -50% -80% -80% -100% France Italy Greece Germany UK EU Consumption Beef Prices

16 Canadian Beef/Cattle Trade Situation 60-65% of Beef Production Exported 90-95% of Beef Exports to U.S. Market Nearly All Cattle Exports to U.S. Market Highly Export Dependent, Extremely Dependent on United States BSE Having Major Impacts on Canadian Beef/Cattle Industry C NAS

17 $110 CN$/CWT $113.0 $106.0 Alberta Direct Sale Steer Prices $115.0 $107.0 BSE (5/20/2003) $90 $88.3 $84.0 $70 $75.0 $70.8 $77.4 $50 $30 Mid-month Average Prices $41.5 $36.2 Source: Alberta Agriculture, Food and Rural Development,

18 Canadian Beef Exports to US Market, Jan-Apr Actual Trend ,000 Tons

19 Canadian Beef Exports to US Market 140 1,000 Tons (January-April) 120 Boneless Bone In

20 16 Canadian Cattle Inventory Million Head, January USDA, ERS, PSD

21 $120 $100 CN$/CWT Alberta Direct Sale Steer Prices & & & & & BSE & & & & & & & $80 $60 $40 & $20 Source: Alberta Agriculture, Food and Rural Development, prices are monthly averages, source CANFAX calculated by LMIC.

22 U.S. Trade Situation Meat Trade Fairly Concentrated-Top 3-4 Markets Represent Large Share of Trade < 10% of Beef, Pork Exported 17% of Poultry Meat Exported Cattle Trade Limited to North America U.S. Imports Feeder Calves from Mexico and Fed Steers from Canada U.S. Exports Feeder Calves to Canada For Each 1% Decline in Beef Supply, U.S. Cattle Prices Rise 1.6% C NAS

23 US Feeder Cattle Futures, Nov 03-Jan 04 BSE 12/23/03

24 US Fed Cattle Futures, Nov 03-Jan 04 BSE 12/23/03

25 Source: USDA/FAS, LMIC 28.0 U.S. Beef Production & Demand Index Billion Pounds Million Head/Index # # # # # # # # # # # Beef Production Cattle Inventory # Retail Choice Beef Demand Index # # # # # # # # # # # #

26 $ $100 $90 $80 Omaha Choice Steer Prices $/100 Pounds Trend $10 Above Trend $17 Above Average $85.59 $70 $60 $50

27 $120 Monthly Omaha Choice Steer Prices $/100 Pounds $ $ $91.95? $80 $ $76.73 $ $72.24 $40 $20 $0 J F M A M J J A S O N D

28 US Cattle Imports from Mexico ,000 Head 1, ,360 F Annual Avg. 800,000 Head is CNAS forecast F

29 US Feeder Cattle Futures, May-Jul 04 Chicago Mercantile Exchange

30 US Fed Cattle Futures, May-Jul 04 Cull Cows at Record Prices $55.64/cwt Chicago Mercantile Exchange

31 Summary U.S. Meat Exports Concentrated Strong U.S. Demand, Low Domestic Production, Limited Imports of Canadian Cattle Record High U.S. Cattle Prices U.S. Pork Exports Have Gained As Beef & Poultry Exports Have Declined C NAS

32 Implications Degree of Trade Dependence Determines Potential Severity of Animal Disease Impacts Maintaining Consumer Confidence Important Strong U.S. Demand, Low Domestic Production, Limited Imports of Canadian Cattle Record High U.S. Cattle Prices U.S. Pork Exports Have Gained As Beef & Poultry Exports Have Declined C NAS

33 Center for North American Studies C NAS Informed Decisions for Global Parr Rosson Ph: Change prosson@tamu.edu