U.S. Beef Cattle Trade Is Slow to Return to Normal

The beef price rally appeared to be short-lived, though, when a case of BSE was discovered in the United States near the end of 2003. The United States then joined Canada on the bovina non grata list, as its beef products were also unwanted on world markets. But unlike in Canada, the U.S. beef market was able to recover fairly rapidly from the BSE case, mostly because exports accounted for a much smaller share of total beef demand. Indeed, U.S. cattle prices recovered to near-record levels, and have stayed at this new plateau since.

Although the United States was less reliant on exports than Canada, exports were an important and growing source of its beef demand. The loss of the export market was partly offset by increased demand among U.S. consumers for beef. The popularity of high-protein diets, such as the Atkins Diet, deserves some credit, as does a bit more balanced approach to nutritional risks and benefits.

Prior to the BSE issue, Japan and South Korea were the most lucrative markets for U.S. beef. Although both countries have begun to accept U.S.-produced beef on a limited basis, progress has been much slower than hoped. In the meantime, Mexico has stepped in as a major purchaser of U.S. beef. Overall, beef exports have not nearly recovered to pre-BSE levels.

The U.S. has also been slow to completely "normalize" trade in live cattle with Canada. The United States closed its borders to Canadian cattle after its first case of BSE had emerged, and the first cow to be diagnosed with BSE in the United States had been imported from Canada. The United States has been importing cattle under the age of 30 months for a couple of years now, but is still in the process of opening the borders to cows over 30 months old. Thirty months is thought to be the minimum incubation period for BSE, so cattle younger than this are assumed by most countries (with the apparent exception of Japan and South Korea) to be BSE-free.

U.S. cattle prices also have been boosted by little or no growth in beef production over the past few years. This was partly due to a herd reduction that was already underway in 2003, and partly due to the lack of cattle imports from Canada. Most cattle imported from Canada go straight to slaughter. Even though the cattle are raised in Canada, cattle slaughtered in the United States are counted as U.S. beef production.

During the time that Canadian cattle imports were banned in the United States, imported cattle (especially feeder calves) from Mexico helped to pick up the slack. Cattle imports from Canada are getting back to pre-2003 levels, while imports from Mexico are decreasing due to reduced supplies.

Prior to 2003, Canada was a major supplier of lower-cost, lower-quality beef produced from cull cows. When the United States does finally resume imports of cattle over 30 months old, and the imported beef from those animals, U.S. beef supplies will see a bit of a boost.