Canadian frustration over the failure to reopen the US border to Canadian beef imports has fuelled demands to accelerate the expansion of its own meat processing capacity, writes Anthony Fletcher.
Demands this week from the Canadian Cattlemen's Association (CCA) to increase domestic production have highlighted the frustration felt within Canada's beef sector as successive efforts to re-open the border have failed.
Such a strategy would also be bad news for meat processors in the US, many of whom are desperate to increase supply and have urged for the border to be reopened.
Prior to the border closure, a significant percentage of Canadian beef was slaughtered and processed in the States. But this could now change. John Masswohl, director of international relations for the CCA, which represents 90,000 beef producers, told the FT that his members had "had enough" of waiting for the issue to be resolved.
Canada now needed to press ahead with building its own slaughtering capacity, he said. Canadian slaughter capacity had already risen to 86,300 cattle by the end of last year, from 72,000 in May 2003, shortly before the US-Canadian border was closed.
The US border was closed to live Canadian cattle in May 2003 after a single cow with bovine spongiform encephalopathy (BSE) was discovered in Alberta. Although the USDA, along with its Canadian counterpart, is now confident in the safety of the North American beef supply, a judge temporarily blocked plans to reopen the border to young Canadian cattle in February.
The border closure has also given vital beef markets such as Japan and South Korea the excuse of resisting re-opening their markets to US beef.
The effect of all of this on the US beef processing sector has been significant. Yesterday we reported that Tyson Foods, the largest beef processor in the world, posted a $75 million increase in operating losses in the fiscal second quarter due largely to the continued border restrictions.
In addition, the meat processor was forced to suspend operations at several North American plants earlier this year due to lack of supply.
A major driving force behind opposition to reopening trade borders with Canada has been R-CALF, the Ranchers-Cattlemen Action Legal Fund, which represents thousands of US cattle producers. Last month it accused Canada of substantially decreasing testing for BSE.
"Reports by the Canadian Food Inspection Agency (CFIA) show that Canada tested 7,088 cattle for BSE during December 2004, while the average number tested per month for January, February and March totaled only 5,258 cattle per month - a 28 per cent drop," said Leo McDonnell, R-CALF USA president.
"At this slow rate of testing, even a relatively large BSE problem may remain hidden for many months or years."
R-CALF wants Canada to begin testing hundreds of thousands of cattle on an annual basis - rather than the tens of thousands Canada is proposing - as the only means by which Canada can conclude that its prevalence rate is not as high as those of countries considered to have a serious BSE problem.
R-CALF however has been accused of blatant protectionism, and the CCA has scolded the group for bringing confusion into BSE dispute. It said that Canada's beef producers and the Canadian Food Inspection Agency had in fact increased BSE surveillance by almost 800 per cent in each of the first four months of this year compared with the same period in 2004.
The USDA, along with many beef processors in the US, is now desperately keen to reopen the border to Canadian beef. The agency is now confident in the safety of the beef supply, and says that the current ban on specified risk materials from the human food chain provides protection to public health, should another case of BSE ever be detected.
The problem though is that BSE remains a sensitive issue for consumers, policy makers and the beef industry. The global beef industry's worst fear is a rerun of the BSE crisis that gripped the UK in the late 1990s. Domestic sales of beef products declined immediately by 40 per cent following reports of a possible link between BSE and new variant CJD - a human form of BSE - in 1996. Export markets were completely lost.