Tuesday, February 24, 2004

SPOTLIGHT: The beef industry

Mad cow disease: Body blow for the beef industry

The discovery of a single reported case of bovine spongiform encephalopathy (BSE), or mad cow disease, on May 20, 2003, dealt a body blow to Canada’s beef industry.

The discovery led to an immediate worldwide ban on all Canadian beef exports. In September 2003, the United States, followed by a number of other countries, agreed to allow imports of Canadian boneless beef from animals younger than 30 months under a permit process.

Canadian farmers were just getting their hopes up that the border would be opened to the export of live cattle and calves. Those hopes were crushed when the United States announced on December 23, 2003 that a dairy cow in Washington State had tested positive for BSE. The origin of this dairy cow was traced to northern Alberta.

Nine months after BSE was discovered in Alberta, the beef industry is still struggling. For example:

• The value of exports of beef meat plunged to almost zero in the three months following the ban in May. Since August, exporters have adjusted to pre-ban levels. November’s exports of fresh and chilled boneless beef were comparable to all bovine meat exports in the same month in 2002. However, overall beef meat exports for the year will be far below those of 2002.
• Imports of beef peaked in June, then dropped sharply through July and August. Since then, the value of imports has been only about half of what they were a year earlier.
• Levels of domestic cattle slaughter also plunged in the weeks following the May 20 ban. However, under the impact of payments from short-term government support programs, slaughter levels started to recover in July.

Business far from normal

As a consequence, business is still far from normal in the Canadian cattle industry. For the moment, Canada and the United States continue to allow trade in boneless beef from animals younger than 30 months under a permit process.

However, cow-calf producers face a depressed market for calves; the market for cattle over 30 months in age has collapsed; the meat rendering industry has suffered cutbacks; and there is still no export market for Canadian live cattle and calves.

Between January and September, farm cash receipts fell to their lowest nine-month level in three years, as the fallout from mad cow disease slashed revenues for cattle farmers.

Consumer prices decline

Consumers did see a drop in the price of beef at the retail level. However, the decline amounted to less than half of the drop in cattle prices.

The price of cattle and calves dropped almost 50% between May and July 2003, as measured by Statistics Canada’s Farm Product Price Index. According to the Consumer Price Index, retail beef prices fell only 14% between May and September 2003. However, they did reach their lowest levels since January 2001.

The analytical article “Mad cow disease and beef trade:  An update” (11-621-MIE2004010, free) is now available online in the Analysis in Brief series.

For more information, contact Robert Plourde (613-951-8716), Agriculture Division.

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© 2004, Statistics Canada.