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Disease-Related Trade Restrictions Shaped Animal Product Markets in 2004 and Stamp Imprints on 2005 Forecasts

by 5m Editor
29 August 2005, at 12:00am

By the National Agricultural Statistics Service (NASS) - This report looks at Disease outbreaks and related trade restrictions that affected U.S. animal-product markets and exports in 2003, and how they continued to constrain markets in 2004.

Disease-Related Trade Restrictions Shaped Animal Product Markets in 2004 and Stamp Imprints on 2005 Forecasts - By the National Agricultural Statistics Service (NASS) - This report looks at Disease outbreaks and related trade restrictions that affected U.S. animal-product markets and exports in 2003, and how they continued to constrain markets in 2004. USDA NASS

Abstract

U.S. cattle and beef markets were most affected. Bans on key U.S. beef export markets were implemented and adjusted; court cases in the United States related to reopening the U.S. border to Canadian cattle and beef imports are moving forward.

On July 14, 2005, the Ninth District Court of Appeals lifted the preliminary injunction that blocked implementation of the BSE minimal-risk regions rule. Pork, dairy, and lamb markets did not face any direct disease issues but both U.S. and international outbreaks of Avian Influenza buffeted poultry markets. Forecasts of 2005 U.S. animal-products trade reflect expected market responses given the uncertainties surrounding cattle and beef markets in the United States.

Introduction

Beef, cattle, and poultry trade restrictions related to disease have been key features of animal-product markets in the United States since the middle of 2003. In particular, cattle and beef markets continue to be impacted by the trade restrictions that followed the discovery of Bovine Spongiform Encephalopathy (BSE) in North America in 2003. Both U.S. and international outbreaks of Avian Influenza (AI) influenced poultry markets late in 2003 and during all of 2004.

Other factors shaped worldwide animal-product markets in 2004, including the changing flow of animal products as countries adjusted to redefined markets. Brazil in particular has emerged as a significant competitor of the United States in international poultry markets and as a major player in international beef markets. Exchange rate movements that weakened the dollar relative to key currencies also played an important role. The cloud over beef and poultry trade contrasted with the robustness of the pork, lamb and mutton, and dairy markets. International forces were at play in these markets, but not in such a negative way as for beef and poultry. The outlook for the U.S. meat, poultry, and dairy markets in 2005 relies on assessments of domestic production, the continuing effects of disease and trade restrictions on exports to major trading partners, the role of “new” animal product suppliers, and currency exchange relationships.

Hogs/Pork

Hog slaughter in the United States in 2004 was around 103 million head, about 8 percent of which were of Canadian origin. About two-thirds of the 8.5 million head that came into the United States from Canada last year were feeder pigs, with most of the remainder for immediate slaughter. The importance of live hog exports from Canada has grown due in part to a changing hog and pork industry structure in both Canada and the United States. Hog production in Canada has been moving to the western provinces, with firms specializing in producing feeder pigs and slaughter hogs for export. Incentives for this movement include favorable U.S. feed costs and western Canada’s favorable climate with respect to disease control.

U.S. hog imports are expected to decline slightly in 2005 to about 8 million head (fig. 3). This expectation is based on a slight growth in U.S. hog numbers. Even though there is a decline, U.S.-Canada hog trade has been facilitated by the resolution of an antidumping complaint. In March 2004, U.S. pork producer organizations and individual producers filed petitions with the U.S. Department of Commerce and the International Trade Commission (ITC). Those petitions alleged illegal subsidization of Canadian exports in 2003 and sought trade relief in the form of antidumping and countervailing duties. On April 6, 2005, the ITC determined that the domestic hog industry is not materially injured or threatened by material injury by reason of live swine imports from Canada, effectively terminating this antidumping case.


U.S. pork exports in 2004 reached a record 2.18 billion pounds, up 27 percent from a year earlier (fig. 4). This increase was achieved by growth in almost all major markets, with those in Asia taking more pork since both beef and poultry imports from major suppliers were restricted. Exports to Canada also grew substantially. The largest increase in pork exports was to Mexico, an increase of 53 percent over 2003. Mexico accounted for about 25 percent of U.S. pork exports in 2004. Japan remained the largest export market, accounting for 42 percent of U.S. exports. U.S. pork exports fell substantially to South Korea and Hong Kong, but increased to Taiwan and to mainland China.


Canada has emerged as the major competitor to the United States in world pork markets. Canada’s share of global pork exports in 2004 was about 21 percent, the same as the U.S. share. Japan has been the world’s largest single pork importer for several years, and has become an increasingly important market for both the United States and Canada. In 2004, the United States and Canada together supplied 51 percent of Japan’s pork imports (31 percent by the United States, 20 percent by Canada). However, for Canada, the major pork export market is still the United States, to which 50-60 percent of Canadian pork exports flowed in 2004. Canada could remain competitive with the United States in international pork markets, but its competitiveness traditionally has been limited by the Canadian pork industry’s heavier reliance on live animal exports rather than pork production—a situation that has been changing somewhat in recent years.

U.S. pork exports are forecast to rise about 21 percent in 2005 to over 2.6 billion pounds, the 14th consecutive annual record, while imports are expected to decline by about 8 percent after having fallen 7 percent in 2004 from the previous year (fig. 4).

Conclusions

Cattle and poultry trade restrictions related to disease clearly shaped the animal product markets in 2004. Beef, cattle, and poultry trade directly responded to changing situations related to diseases. Pork, dairy, and sheep and lamb markets were indirectly affected. Other factors of some consequence in shaping last year’s markets include the emergence of competing animal product suppliers—Brazil being a prime example—and exchange rate movements that made U.S. exports more competitive on the international stage. As legal proceedings and regulatory actions are resolved, the import and export expectations and forecasts for animal products will be adjusted. Pork, sheep, and lamb trade forecasts are less influenced by these factors, and dairy markets often move to a different beat altogether.

Exports of U.S. animal products should remain competitive in international markets as exchange rate movements continue to result in a relatively weak U.S. dollar. The dollar’s position would tend to limit imports somewhat, at least from some suppliers. Countries like Brazil and Canada emerged as significant competitors of the United States in some animal product markets—beef and poultry for Brazil, pork for Canada. This initial outlook for the U.S. meat, poultry, and dairy markets in 2005 and forecasts into the future rely on continuing assessments of the various ongoing legal and regulatory actions, the role of competing animal-product suppliers in international markets, and currency exchange relationships. While 2005 forecasts are highlighted in this report, USDA started making initial forecasts for 2006 in May 2005.

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Source: USDA NASS - August 2005