NFU Doubts Cattle Import Basis


by Chris Clayton, DTN Ag Policy Editor

OMAHA (DTN) — Canadian and Mexican cattle were not discriminated against because of country-of-origin labels, according to a new study contracted by the National Farmers Union looking at USDA mandatory price reporting data for cattle.

National Farmers Union is one of the biggest defenders of mandatory country-of-origin labeling for meat. The group argues USDA should continue to pursue a rewrite of the rules that would allow COOL to remain in effect.

The U.S. faces potential retaliatory actions from Canada and Mexico after the two countries have won multiple rulings from the World Trade Organization. A WTO panel ruled last October that changes made to COOL in 2013 by USDA actually made livestock trade between Canada, the U.S. and Mexico more difficult. The panel argued the U.S. still discriminates against foreign livestock.

The study contracted by National Farmers Union highlights arguments showing the economic downturn in 2008-09 had a great deal to do with reducing demand for meat products. Data from mandatory price reports that meatpackers must submit to USDA shows little difference between domestic and imported livestock prices, the study stated.

“This is not a surprise to me at all or people in the industry,” said Roger Johnson president of the National Farmers Union. “COOL had virtually zero impact on all of this.”

Robert Taylor, an agricultural economist at Auburn University who conducted the study, said the argument made by a Canadian study was largely based on statements from packers and Canadian industry officials who lamented the costs of segregating cattle.

The economic argument made by Canadians and Mexicans was that the basis widened because of segregation costs for cattle. Taylor said numbers don't bear that out. The basis has largely narrowed for most classes of cattle and grades, according to USDA's data.

“Their own data goes against the argument that there are high segregation costs, and that has a big impact on the Canadian cattle industry,” Taylor said. “That holds for every class and grade of cattle as well as purchase arrangements.

“The data packers submitted for mandatory price reporting contradicts the argument that COOL widened the basis,” Taylor said. “There is just no compelling argument or evidence that Canada has been negatively impacted by COOL,” he said.

The study looked only at cattle and did not analyze the pricing of imported hogs.

Johnson said Taylor's study looks at several variables that another study from Canada did not examine. Also, Johnson questioned the quality of the Canadian study on COOL because it used proprietary data that isn't publicly available. “That ought to make it extraordinarily suspect right out of the gate,” Johnson said. “Nobody else can go out and independently get those numbers. The fact that Dr. Taylor used publicly-reported numbers makes this study really credible.”

Johnson said he thinks contracted marketing arrangements between feeders and packers have more influence on price than COOL. “The marketing arrangements probably had a much larger impact on this than anything else,” Johnson said.

Even if the WTO were to arrive at the same conclusion that U.S. buyers and segregation rules discriminated against Canadian and Mexican cattle, the study could help minimize what the WTO allows as possible sanctions. Johnson and Taylor plan to take the study to the U.S. Trade Representative's office and talk with staff there about it.

“They are relying on information the Canadians gave them,” Johnson said.

Johnson said he thinks the study might be helpful on several fronts as the U.S. tries to push Canada to offer more open access to various markets in the Trans-Pacific Partnership.

“With respect to the COOL appeal, we think this data would be very helpful,” Johnson said.

Canada exported nearly 1.2 million cattle to the U.S. in 2014, compared to slightly more than 1 million head in 2013. In 2012, Canada exported 805,000 cattle to the U.S. In 2009 when COOL was implemented, the U.S. imported 996,000 Canadian cattle and in 2010 imported 1 million cattle from Canada.

Mexico exported slightly more than 1 million feeder and slaughter cattle to the U.S. in 2014, up from 974,600 in 2013. In 2009, the first full year of COOL, Mexico exported 933,000 cattle to the U.S., a figure that increased to 1.2 million head in 2010.

Taylor's study concludes COOL did not alter the ratio of imported slaughter cattle compared to domestic slaughter numbers. The ratio of imported slaughter cattle, though, has shifted from 2.4{18648621dc58566f60964eb5074c58f5f97501fe95033d5d25ee4862e704a74a} to 1.7{18648621dc58566f60964eb5074c58f5f97501fe95033d5d25ee4862e704a74a}. Taylor said that shift was triggered more by uncertain demand and a weakening of both the Canadian dollar and peso to the U.S. dollar as financial markets collapsed.

John Masswohl, director of government and international relations for the Canadian Cattlemen's Association, largely dismissed the NFU study. Though Masswohl hadn't seen the study, he noted the arguments over basis, prices and imports had all been made before.

“All of those arguments have been made by USTR and USDA at the WTO with more complete and more fulsome information I suppose than what they are presenting now,” Masswohl said.

The main Canadian study in 2012 on COOL's impacts showed a $639-million-per-year market impact for Canadian cattle producers and a $500-million impact for pork producers. (The dollar figures are in U.S., but the exchange rate in 2012 was nearly par.)

That Canadian Cattlemen's Association report concluded there was “significant evidence that Canadian cattle producers faced a widening of the price basis and a decline in the ratio of imports to total domestic use for both fed and feeder cattle.”

Taylor concluded the price basis between U.S. and Canadian cattle is actually narrower in the six years since COOL than the four years before COOL went into effect. Yet, Taylor's study does show the average domestic price for slaughter steers and heifers widened compared to imported cattle throughout 2014. Taylor said that had more do to with purchasing arrangements for domestic cattle versus imported slaughter cattle buys.

Masswohl argues there hasn't been a study since USDA changed the rule for COOL and, in the view of Canadians, made the segregation costs even worse for their producers.

“That data doesn't show that the basis has narrowed,” Masswohl said. “The real data shows the basis has widened. The cost discrepancy between U.S. and Canadian cattle has gotten wider.”

USTR made the argument before the World Trade Organization that the 2008-09 economic downturn had a bigger impact on imported livestock and meat than COOL.

“That argument could not explain why the price impact on Canadian and Mexican cattle was more severe than the price impact on U.S. cattle,” Masswohl said. “The major difference was COOL, the price of segregation.”

Masswohl also said the National Farmers Union study would have little impact on the appeal because the WTO appeals panel won't be accepting new studies or evidence during the Feb. 16-17 appeals hearing. The hearing is more about procedures than argument over new facts.

CLICK HERE to read the NFU study



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Posted by Jami Howell

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