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Canada's beef industry and BSE

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The discovery of the first of three cases of bovine spongiform encephalopathy (BSE) in May 2003 caused the United States and other countries to close their borders to shipments of Canadian live cattle and beef products. The U.S. border has since been reopened, in stages, to Canadian cattle.

By the end of 2004, financial losses for Canadian beef producers as a result of BSE reached $5.3 billion. Government programs partly offset these losses: $2.5 billion was paid out from May 2003 to December 2004 in BSE-related government payments.

Chart: Cattle cash receiptsMore than one million head of live cattle were exported to the United States annually before BSE. When Canada's international export markets closed, Canada did not have the plant capacity to process these extra animals.

Canadian beef cattle prices plunged immediately after the border was closed. Even in the fall of 2004, a year and a half after the crisis began, slaughter prices were still about 73% of what they were before May 2003.

Farmers faced difficult choices: sell as many animals as possible in Canada at depressed prices, or hold onto them, wait for better times, and pay for feed that added no value to their product. In 2004, producers sent a record four million cattle for slaughter, 27% more than in 2003. Despite the record slaughter, Canada's cattle herd swelled to 17.3 million head in July 2005, up 12% from July 2002.

In response to the BSE situation, the Government of Canada has launched new initiatives to increase Canada's meat processing capacity and to reduce the beef industry's reliance on the U.S. market.