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Non-Tech : Farming -- Ignore unavailable to you. Want to Upgrade?

To: Jon Koplik who wrote (161)	6/27/2003 8:57:03 AM
From: johnlw	Read Replies (1) \| Respond to of 4451

ugly....... agsolutions.ca Mad Cow: From Crisis to Catastrophe? The Canadian cattle industry is stumbling down a cliff edge. The U.S. border must open soon or a crisis will become a catastrophe. It’s hoped that Alberta Premier Ralph Klein’s high-level visit to Washington this week will yield results. But his appeal to U.S. Vice President Dick Cheney to have a ban on Canadian beef lifted immediately is not likely to result in a sudden or complete opening of the border. The U.S. ban on Canadian ruminant imports was imposed following a May 20 announcement that a single cow in Alberta had tested positive for BSE, commonly called mad cow disease. The Canadian Food Inspection Agency (CFIA) has completed a full investigation and found no additional animals with BSE. A panel of international experts has given the CFIA high marks for its work. However, the American government has refused to re-open the border to Canadian imports, choosing to err on the side of caution. Rather than opening the floodgates to Canadian beef, the U.S. is likely to ease the door open gradually. The Deputy Administrator for the USDA's Veterinary Services, Dr. Ron DeHaven, says that when it has determined it’s safe to import Canadian ruminant products, it will likely be through a “case-by-case permit process.” "There would be a gradual opening of the border, where we would take into account the science and impose appropriate certification or risk mitigation measures that would allow certain products or animals to enter the U.S.," said Dr. DeHaven at a recent meeting. He did not speculate on when the border may re-open, adding that the U.S. has not made its determination yet. He did say that once the permit process goes into effect, U.S. importers would probably need to apply to the USDA. Dr. DeHaven added that if everything was in order, “[The USDA] would issue a permit, which is going to typically require some endorsement, certification or assurance that the (BSE) mitigation factors are met, and then that permit would need to accompany the shipment at the border." It would probably take three to five days to issue the permit after the USDA receives the request, Dr. DeHaven estimated. Some Americans are now more sympathetic to Canada’s case than they were previously. That’s because the American industry is finding itself in the same boat as Canada. Big beef importers including Japan and South Korea, along with several smaller importers, have demanded that any U.S. meat coming their way must be certified free of Canadian beef, starting July 1. But the Americans don’t have the trace-back systems or segregation to provide such certification. Their best method of keeping their exports flowing may be to do all that’s possible to convince the offshore buyers that both U.S. and Canadian beef is safe. Meanwhile, the financial losses in Canada that are occurring as a direct result of the border closure are staggering. Prices for fed cattle are plummeting. The spotlight remains on the Alberta beef industry, as the biggest beef producing province and home to the infamous single “mad cow” but the industry across Canada has been deeply wounded. In Ontario, the price for direct-to-packer rail grade steers has plunged to about $100/cwt, down about 46 percent from $185 before the issue hit the news. Live cattle prices are down by about a third, and would be lower if not for the fact that producers are holding back market-ready cattle in what could prove to be a futile effort to ride out the void of demand caused by the lack of American buying. According to the Canadian Cattle Buyer, published by the Guelph-based George Morris Centre and written by Kevin Grier, feedlot operators who had to market cattle the past several weeks saw losses mount from $200 per head in late May to $350 per head in early June. Grier says some fed cattle in Alberta have traded for just $55/cwt and feedlot losses for those cattle would be in the area of $600 per head. Banks are said to be standing behind the big feedlot operations, but how long will their support last? There’s talk in the trade that the financial institutions are becoming concerned about the risks they’re assuming. Questions are arising as to whether a joint federal/provincial aid package will offset the losses. The fact is, it will offer partial recompense but it won’t fully compensate. Details have not been circulated to all producers yet but the basic framework of the program is for support on a sliding scale when the Canadian price falls below a U.S. reference price. The U.S. reference price will be the USDA’s five-area daily weighted average direct slaughter cattle report. That price will be converted by the exchange rate and $5 will be subtracted for the Canadian basis. Based on a general review of the information, trade sources say the program would pay approximately 90 percent of the difference between the U.S. reference price and comparable Canadian prices when the Canadian price falls up to 20 percent below the U.S. price. But the program will pay smaller and smaller percentages of the difference as the Canadian price falls. A reasonable program, some say, but again, it will not provide full coverage for losses. Precisely when this money will flow into producers’ hands is questionable and the compensation capabilities of the program are limited. The money won’t offset the extra cost of feeding the cattle. It won’t help ancillary industries. It won’t compensate exporters of various products that have run into snags because of the mad cow issue. (Even truckloads of ingredients such as grain screenings are being detained for several hours and closely inspected by U.S. customs officials, who are also seizing any packed lunches or food products containing beef such as canned stew and pet food.) And to make matters worse, the U.S. reference price is falling. From about US$81/cwt for U.S. top steers before the mad cow incident hit the news to $75 late last week, and some say they’re heading for just $72 this week. Kevin Grier says that even if the U.S. border were to open at the end of June, the backlog of Canadian cattle would swamp markets for at least another eight weeks. “This would pressure prices lower through that timeframe,” he says. Grier says that the industry in Canada normally moves 75,000 to 80,000 head per week, and without cattle or beef exports the sales have collapsed to less than 30,000 head. These cattle have to come out at some point and when they do it’s anyone’s guess as to what they’ll be worth. How they might be disposed of is not yet known. The closed border has bearish ramifications for crop prices. Barley growers in Western Canada are worried about the demand base for their crop. How many feedlot operators will be left standing six months from now when the crop is off and looking for a home? Barley futures are spiraling downwards; they hit new contract lows again on Monday. In summary, it’s quite clear that the ability to ship cattle and beef to the U.S. is absolutely vital. We need the border open, pronto. This is the biggest, most critical issue facing Canadian agriculture.