AFF Sentinel Vol.5#49

Some potential bright spots for U.S. livestock producers - like trade -- are frustrating right now.

Canada, one of our best meat customers and enthusiastic trading partners, is an example. If the goal of the protectionist, anti-trade, anti-Canadian American livestock producers was to drive a wedge of unfriendliness and hatred between mainstream American and Canadian producers, they have failed. The two are communicating better and appreciating interdependence more than ever. But if the obstructionists' goal was to make it difficult for American packers to buy Canadian cattle for immediate slaughter, they have succeeded.

If the obstructionists' goal was to harass and further threaten the existence of American border packers already hammered by the unnecessary extension of the BSE border restrictions, they are succeeding. It seems the radicals like R- CALF and National Farmer's Union will not be satisfied until they have driven all northern tier American packers out of business. The perpetration of mCOOL is one weapon. Ironically, the cow/calf operators most hurt will be the ones in the northern U.S. - both east and west -- where packers depend on feedlots on both sides of the border to keep their plants running.

These plants have been faced with terrible options: close down for lack of enough U.S.- fed cattle within their region to operate plants at profitable volumes or continue to buy American and Canadian slaughter cattle and spend money in tough times to segregate and track. Even limiting Canadian cattle to certain days lessens but doesn't eliminate problems, as carcasses and primals move through the plants at different rates, on different paths, into the average 294 individual packages from each carcass. Hundreds of SKUs are added to inventory.

Some of these plants will cope by no longer selling beef to U.S. retailers. They'll have to market all of their beef to foodservice -- it doesn't require COOL labeling -- or to export markets. Eliminating an entire market decreases margins and revenue, devaluing prices for feeders and for feeder cattle. Ironically, those mCOOL proponents who claimed they wanted U.S. beef more available to consumers, will actually achieve the opposite. Whole regions of the beef industry that supplied U.S. beef to American retail customers will now be shut out of that market.

Increasing dependence on export markets is problematic, as exports are improving but slowly. And it is Canada and Mexico - which Congress has been busy antagonizing - that have been our mainstay customers. While Washington was quick to attend the Automaker's Bailout Ball, Congressional trade help for agriculture has been nearly non-existent - unless it was downright hostile.

This Congress passed only the Peru Free Trade Agreement (FTA). Congressional leadership has refused to even consider FTAs that could generate even more business -- South Korea and Colombia. Agriculture could use the stimulus from an eagerly awaited, made-to-order trade boost.

But Congress apparently understands little and cares less about trade and income for producers. President-elect Obama's attitude towards trade is unfathomable, given the contradiction between his protectionist campaign promises and more trade friendly economic appointments. Meanwhile, Canada signed a FTA with Colombia, putting American goods at a disadvantage.

Canada has the evidence of damages needed to challenge COOL under WTO rules. Some plants are refusing to buy Canadian cattle while others are discounting $60-90 per head if they buy. The Canadian Cattlemen's Assn. (CCA) noted at least 11 packing plants no longer buying Canadian slaughter cattle. American pig finishers, who normally source four million Canadian feeder pigs, have shut the pipeline and thousands of Canadian feeder pigs have had nowhere to go.

Canada's government has requested COOL "consultations" with the U.S., the first phase of the WTO process. Canada is estimating mCOOL to cost Canadian cattle producers $400 million annually. The consultation stage can last 60 days. If that resolves nothing, dispute panels are appointed and reports, negotiations and appeals can take 6-9 months, WTO timelines indicate. Retaliation, cross- retaliation and compensation steps can add more months.

"Ultimately, we want the U.S. to abide by our trade agreements that require Canadian cattle to be treated as favorably as U.S. cattle," Brad Wildeman, CCA president said.

Very few people believed COOL regulations were possible that would not violate WTO or NAFTA agreements.

We shall see.

Meanwhile, U.S. packers and retailers spend many millions to implement the law. Packers who depend on Canadian slaughter cattle struggle. Costs will be passed back to ranchers. Canadian cattlemen suffer losses again - this time strictly by the hand of men, rather than aided by forces of nature.

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