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Trade & Economic Impacts of Animal Disease Outbreaks

Trade & Economic Impacts of Animal Disease Outbreaks. Parr Rosson Professor & Director Center for North American Studies Texas A&M University. Animal Disease Implications. Disruption of Trade Flows Impacts on Prices, Markets Impacts on Market Integration. Background.

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Trade & Economic Impacts of Animal Disease Outbreaks

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  1. Trade & Economic Impacts of Animal Disease Outbreaks Parr Rosson Professor & Director Center for North American Studies Texas A&M University

  2. Animal Disease Implications • Disruption of Trade Flows • Impacts on Prices, Markets • Impacts on Market Integration

  3. Background • Since Mid 1980s, Market Integration in North America Has Accelerated • Exports/Imports • Foreign Direct Investment • Animals & Meat Trade Among Fastest Growing Components • Discovery of BSE, FMD, Exotic Newcastle, Avian Flu Have All Disrupted Trade • Market Integration Has Outpaced Regulatory Integration • Regionalization Allows Trade to Resume

  4. World Meat Trade Million Metric Tons 7 6 Broiler Meat Beef 5 Pork 4 3 2 1 0 2004 (Jan-May) 1970 1975 1980 1985 1990 1995 2000 Source: ERS/USDA

  5. U.S. Meat Exports, 1970-May 2004 1,000 Metric Tons 3,000 Russian Ban Broiler Meat Beef 2,500 ) BSE Boost Pork 2,000 1,500 BSE Decline ) ) ) ) ) 1,000 ) ) ) ) ) ) ) ) 500 ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) ) 0 1970 1975 1980 1985 1990 1995 2000 2004 (Jan-May) Source: ERS/USDA 2004

  6. U.S. Broiler Prices, 12 Market Avg. Cents/Pound 80.0 77.3 Asia/Canada High Path. Outbreaks 70.0 63.0 63.0 61.2 60.0 58.4 57.5 55.7 58.8 58.1 54.7 56.3 55.9 55.5 55.3 51.8 50.0 2004 (Jan-July) 1990 1995 2000

  7. U.S. Imports of Beef and Pork 1,000 Metric Tons 1200 Beef Pork 1026 987 987 1000 880 945 898 800 734 715 823 642 600 641 401 382 367 400 325 321 266 217 209 194 191 184 200 0 1995 2000 2004 F

  8. U.S. Cattle and Hog Imports from Canada 7.4 5.7 5.3 4.4 4.1 4.1 3.2 2.8 1.7 1.7 1.5 1.4 1.3 1.3 1.2 1.1 1.0 2.0 1.0 0.9 1.0 0.8 0.5 0.0 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 Source: USDA/FAS Million Head No Cattle Imports in 2004 Hogs Cattle 10.0 8.0 6.0 4.0

  9. U.S. Beef Exports, 2003 4 Markets, 90% Mexico 19.0% Korea 24.0% Canada 10.0% Other 10.0% Japan 37.0% Source: ERS/USDA

  10. U.S. Pork Exports, 2003 3 Markets, 84% Japan 55.0% Other 9.0% Taiwan 2.0% Canada 13.0% Korea 5.0% Mexico 16.0% Source: ERS/USDA

  11. U.S. Broiler Meat Exports, 2003 5 Markets, 58% Turkey 3% Mexico Russia 8% 27% Canada 11% China 5% Korea 3% Hong Kong 7% Cuba Other 3% 33% Source: ERS/USDA

  12. Integration in the North American Cattle and Integration in the North American Cattle and Beef Industry, 2002 Beef Industry, 2003 $1.1 Billion, 1.7 Million Head of Beef Cattle $396 Million, 512,000 Head of Beef Cattle $1.1 Billion, 392,000 Metric Tons of Beef $850 Million, 256,000 Metric Tons of Beef $283 Million, 76,000 Metric Tons of Beef $70 Million, 20,000 Metric Tons of Beef $50 Million, 134,000 Head of Beef Cattle $30 Million, 68,000 Head of Beef Cattle $218 Million, 67,000 Metric Tons of Beef $321 Million, 81,000 Metric Tons of Beef $75 Million, 105,000 Head of Beef Cattle $23 Million, 24,000 Head of Beef Cattle $592 Million, 206,000 Metric Tons of Beef $606 Million, 193,000 Metric Tons of Beef $301 Million, 816,000 Head of Beef Cattle $470 Million, 1.2 Million Head of Beef Cattle $23 Million, 6,000 Metric Tons of Beef $34 Million, 6,700 Metric Tons of Beef

  13. Mad Cows & Other Monsters!!

  14. European Commission Estimates of BSE Impacts on Beef Use & Prices Percent Change, Oct. 1-Dec. 31, 2000 20% 0% -20% -25% -27% -35% -36% -37% -40% -40% -50% -50% -50% -60% -80% -80% -100% UK France Italy Greece Germany EU Consumption Beef Prices Financial Times, 1/15 and 1/30 2001.

  15. Canadian Beef/Cattle Trade Situation • 60-65% of Beef Production Exported • 90-95% of Beef Exports to U.S. Market • Nearly All Cattle Exports to U.S. Market • Highly Export Dependent, Extremely Dependent on United States • BSE Having Major Impacts on Canadian Beef/Cattle Industry

  16. Alberta Direct Sale Steer Prices CN$/CWT BSE (5/20/2003) $115.0 $113.0 $110 $107.0 $106.0 $90 $84.0 $88.3 $77.4 $75.0 $70.8 $70 $50 Mid-month Average Prices $41.5 $36.2 $30 Jul-03 Sep-03 Jan-02 Jan-03 Jul -02 Jun-03 Jun-04 Feb-04 Nov-03 Aug-03 Mar-02 May-03 Source: Alberta Agriculture, Food and Rural Development, www.agric.gov.ab.ca

  17. Canadian Beef Exports to US Market, Jan-Apr 1989-2004 140 120 Actual Trend 100 80 60 40 1,000 Tons 20 0 1989 1995 2000 2004

  18. Canadian Beef Exports to US Market 1,000 Tons (January-April) 140 Boneless Bone In 120 111 101 100 90 80 72 60 40 31 27 24 20 1 0 2001 2002 2003 2004

  19. Canadian Cattle Inventory 16 Million Head, January 1 14.66 13.76 14 13.41 13.40 13.36 13.20 13.21 13.61 12.71 13.49 11.86 12 12.0 10 USDA, ERS, PSD. 8 1993 1995 2000 2004

  20. Alberta Direct Sale Steer Prices CN$/CWT $120 & & BSE & & & $100 & & & & & & & $80 $60 2001 2002 2003 2004 & 2003 $40 $20 Jul Jan Sep Oct Feb Jun Dec Apr Nov Aug Mar May Source: Alberta Agriculture, Food and Rural Development, www.agric.gov.ab.ca 2001 prices are monthly averages, source CANFAX calculated by LMIC.

  21. U.S. Trade Situation • Meat Trade Fairly Concentrated-Top 3-4 Markets Represent Large Share of Trade • < 10% of Beef, Pork Exported • 17% of Poultry Meat Exported • Cattle Trade Limited to North America • U.S. Imports Feeder Calves from Mexico and Fed Steers from Canada • U.S. Exports Feeder Calves to Canada • For Each 1% Decline in Beef Supply, U.S. Cattle Prices Rise 1.6%

  22. US Feeder Cattle Futures, Nov 03-Jan 04 BSE 12/23/03

  23. US Fed Cattle Futures, Nov 03-Jan 04 BSE 12/23/03

  24. U.S. Beef Production & Demand Index Billion Pounds Million Head/Index 28.0 120.0 # 27.0 110.0 # # # 26.0 100.0 # # 95.8 94.9 25.0 90.0 # # # # 24.0 80.0 # # # # 23.0 70.0 # # # # # # # # Beef Production # 22.0 60.0 Cattle Inventory # Retail Choice Beef Demand Index 21.0 50.0 1980 1984 1988 1992 1996 2000 2004 Source: USDA/FAS, www.fas.usda.gov/psd, LMIC

  25. $10 Above Trend $17 Above Average $85.59

  26. Monthly Omaha Choice Steer Prices $/100 Pounds $120 $105.50 $100 2004 $91.95 ? $80 $72.24 2003 $76.73 2002 $60 $62.49 $40 $20 $0 J F M A M J J A S O N D

  27. US Cattle Imports from Mexico 2000 1,000 Head 1,653 1,360 F 1500 Annual Avg. 800,000 Head 1000 500 2004 is CNAS forecast 0 1970 1975 1980 1985 1990 1995 2000 2004F

  28. US Feeder Cattle Futures, May-Jul 04 Chicago Mercantile Exchange

  29. US Fed Cattle Futures, May-Jul 04 Cull Cows at Record Prices $55.64/cwt Chicago Mercantile Exchange

  30. Summary • U.S. Meat Exports Concentrated • Strong U.S. Demand, Low Domestic Production, Limited Imports of Canadian Cattle • Record High U.S. Cattle Prices • U.S. Pork Exports Have Gained As Beef & Poultry Exports Have Declined

  31. Implications • Degree of Trade Dependence Determines Potential Severity of Animal Disease Impacts • Maintaining Consumer Confidence Important • Strong U.S. Demand, Low Domestic Production, Limited Imports of Canadian Cattle • Record High U.S. Cattle Prices • U.S. Pork Exports Have Gained As Beef & Poultry Exports Have Declined

  32. Center for North American Studies C NAS “Informed Decisions for Global Change” Parr Rosson Ph: 979-845-3070 E-mail: prosson@tamu.edu

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