1. 1 BSE and the Alberta Beef Industry Presentation to Canada/US Transportation Border Working Group Calgary, Alberta October 20, 2004 Nithi Govindasamy, P.Ag. Policy Secretariat Alberta Agriculture, Food and Rural Development

2. 2 Outline  Size and Economic Importance of Cattle and Beef Industries  Impacts of BSE and border closures  Contingency Planning  Policy Responses  The Future

3. 3 Agri-Food Trade with the US C$ Millions Exports19992000200120022003 Alberta2,5662,7793,2883,0352,030 Canada13,43514,42716,85717,65715,763 Imports Canada10,16010,98512,26713,16912,600 Total Canada/US Bilateral Trade: $28.36 Billion (2003) (Largest Bilateral Agricultural Trade Relationship in the world)

4. 4 Beef Cows – USA and Canada

5. 5 North American Cattle Numbers Jan 2004Jan 2003change Canada – total 14.7 mil13.5 mil+1.2 mil US - total94.9 mil96.1 mil-1.2 mil NA total109.6 mil No change

6. 6 Canada What is the 2004 imbalance?  Supply –3.6 million fed cattle –820,000 non fed animals –4.42 million total marketings  2004 kill projections –3.31 million fed cattle 290,000 head carryover (8%) –500,000 non-fed cattle 320,000 head surplus (40%)  For cull animals, capacity has been reduced because of inability to kill OTM and UTM in the same plant. Has helped fed capacity.

7. 7 SIZE OF INDUSTRY (2002)  Cattle and calves in Alberta: 5.2 million head (Canada: 13.4 million head) (39%).  Cattle slaughtered in Alberta: 2.34 million head.  Federally inspected: 2.34 million head.  In 2003 cattle slaughter in Alberta was about 2.08 million head – down 11% from 2002.

8. 8 Size of Industry (cont’d)  Provincially inspected: 30,724 head (less than 1.5% of total).  Alberta feeds over 2.4 million cattle with total beef production of over 800,000 tonnes.

9. 9 Size of Industry (cont’d)  Alberta’s beef production: –13% sold in Alberta; –15% to Quebec; –30% to other Provinces; –32% to US; –9% to other countries.  71% of all Canadian cattle fed  68% of total Canadian slaughter

10. 10 Size of Industry (cont’d)  Farm cash receipts (FCR) in Alberta: $8.23 billion (includes program payments).  Cattle and calves accounted for $3.89 billion or 47.3% of total FCR. Largest single agricultural sector.  Meat packing is Alberta’s second largest manufacturing industry.

11. 11 Size of Industry (cont’d)  Value of Alberta’s cattle and beef exports to all countries: $2.27 billion.  Value of Alberta’s cattle and beef exports to US: $1.93 billion (85%).  Alberta shipped over half a million cattle to the US.

12. 12 Canada/US C$ Millions Cattle19992000200120022003 Exports 1,0681,1271,6551,821596 Imports 1582652387738 Beef Exports 1,4541,5121,7701,8091,241 Imports 335336347350352 Total Exports 2,5222,6393,4253,6301,835 Total Imports 493631585427390

13. 13 Alberta Trade in Cattle and Beef C$ Millions (Exports to the US) Exports19992000200120022003 Cattle461510712634196 Beef1,0741,1151,2181,298909 Total1,5351,6252,0301,9321,105

14. 14 US Beef Exports in 2002 Top 5 Markets (C$ Millions) Japan1,531(34%) Mexico1,038 South Korea999 Canada361 Russia90 % of Total90% Total All Countries4,466

15. 15 Canada Beef Exports in 2002 Top 5 Markets (C$ Million) United States1,809(82.5%) Mexico199 Japan81 South Korea50 Taiwan20 % of Total98.5% Total All Countries2,192

16. 16 Economic Impacts  BSE incident reduced 2003 cattle and beef export revenue by about $1 billion for Alberta and $2 billion for Canada.  Declines in farm cash receipts estimated at $1.38 billion in Alberta ($2.1 billion for Canada).  Receipts for cattle alone declined by $1.32 billion in Alberta and $2.52 billion in Canada.  Average income loss estimated at $20,000 per farm family.

17. 17 Economic Impacts (cont’d)  Estimated loss in equity to the cow calf sector: $3 billion  Estimated decline of $ 5.7 billion in total output for Canadian economy,$ 1 billion decline in labour income and loss of 75,000 jobs.  Normal 7 to 8 cent per lb. spread for fed cattle has averaged 34 cents per lb. under the US price since January, 2004

18. 18 Source: Alberta Agriculture, Food and Rural Development, Strategic Information Services

19. 19

20. 20 Contingency and Industry Adjustment Strategies (CCA)  Increased slaughter of Canadian cattle with a high priority to increase Canadian processing capacity.  Development of a delayed marketing strategy.  Alternative tax strategies.  Cash advances, loan guarantees and debt restructuring.

21. 21 Contingency and Industry (cont’d)  Increased Canadian beef usage and export market diversification.  Increased surveillance and slaughter of cattle born prior to the 1997 feed ban.  Continued pursuit of all avenues to restore live cattle export trade.

22. 22 Surveillance  6,400 cattle tested up to early October, 2004 (all negative).  Target: 8,000 (2004) 30,000 (2005 and beyond)

23. 23 Access to the US  August 8 th, 2003 US – announcement of partial re-opening of border: boneless beef UTM; liver; tallow.  August 15 th, 2003 – product list amended to include trimmings; plant segregations allowed (UTM/OTM).  Sept. 4 th, 2003 – first shipments begin.  Nov 4 th, 2003 – rulemaking process begins.

24. 24 Access to the US (cont’d)  December 23 rd, 2003 – discovery of US BSE.  Jan. 5 th, 2004 – first comment period for Rule ends.  Jan. 5 th to March 6 th, 2004 – Rule making suspended.  March 7 th, 2004 – comment period re-opened for one month. Includes consideration for OTM meat.  April 7 th, 2004 – comment period ends.

25. 25 Access to the US (cont’d)  April 19 th, 2004 – USDA amends product entry list to include bone-in beef, ground beef, processed beef products.  April 21 st, 2004 – RCALF court challenge.  May 6 th, 2004 – injunction granted. Product list amended (August 15 th list now in operation).

26. 26 Canadian Policy Responses  Ruminant to ruminant feed ban in effect since 1997.  Removal of SRMs from food chain.  Enhanced surveillance.  Changes to feed ban (removal of SRMs from feed) -- scope and implementation to be determined.

27. 27 Canadian Policy Responses (cont’d)  Measured, consistent with known available science.  Need to be in harmony with US policy changes.  Trade considerations have been the main driver.  Not necessarily irrational.

28. 28 Canadian Policy Responses (cont’d)  Somewhat haphazard due to uncertainty of US actions.  Support programs exceed $1.5 billion.  Supplementary import permits restricted.

29. 29 International Panel Recommendations to US  Recognized integrated nature of NA industry.  Case of BSE in US cannot be considered in isolation.  North American BSE Task Force – consistent and scientifically valid policy development and implementation.

30. 30 International Panel (cont’d)  Limitations of NA cattle Identification System.  Recommended SRM removal from food and feed chain.  Significant enhancement of surveillance.  Testing of all cattle for human consumption unjustified in terms of protecting human and animal health.

31. 31 International Panel (cont’d)  US should demonstrate leadership in trade matters by adopting trade policies in accordance with international standards and discontinuing irrational trade barriers.

32. 32 Conclusions  One incident of BSE in Canada was sufficient to close all borders and create havoc in the industry.  Importance of maintaining and enhancing close relationship with the US highlighted.  Close integration and interdependence of NA cattle and beef industries.

33. 33 Conclusions (cont’d)  Export dependency of Canadian industry.  Urgent need to review, revise OIE guidelines to make them more practical and take into account trade realities while adequately safeguarding human and animal health.

34. 34 Conclusions (cont’d)  Guidelines need to become rules with compliance mechanisms.  NA harmonization of policies and regulations.  Strong public and government support for industry.

35. 35 Conclusions (cont’d)  Canada and US should move quickly to complete and implement remaining policy measures necessary to eradicate disease and reassure consumers and trading partners.  Additional policy measures, however, must be guided by sound science and should not be an overreaction to closed markets.

36. 36 Conclusions (cont’d)  Need for coherent, coordinated science- based policy undertakings.  Canada needs to continue applying pressure to re-open US market and other offshore markets.  To the extent possible, issue needs to be depoliticized.

37. 37 Conclusions (cont’d)  Rational trade policies, based on science, not on politics or protectionism.  Need for multilaterally accepted international rules of management and trade so as to avert problems experienced with BSE.