04/10/2006

Imported Beef Likely to Capture Record Share of 2006 Domestic Market
R-CALF United Stockgrowers of America

Op-Ed by R-CALF USA President and Region V Director Chuck Kiker

Billings, Mont. – The gap between domestic beef production and consumption is greater than ever, yet prices to cattle producers fail to reflect this fact. While some industry analysts may point to the loss of U.S. export markets to explain reduced production and falling prices, worth examining is another trend affecting cattle producers: rising imports of cattle and beef.

An industry review suggests we could soon suffer a repeat of 2002. Remember 2002? The U.S. cattle industry reeled from depressed prices, with Choice fed steers averaging only $67.30 per cwt – well below production costs.

Consider the following facts from Kansas State University (KSU) and various USDA agencies – including the National Agriculture Statistics Service (NASS), the Economic Research Service (ERS) and the Foreign Agriculture Service (FAS) – facts that ought to give cattle producers serious pause.

In 2005, after eight years of herd liquidation, the U.S. slaughtered 3.3 million fewer cattle and produced 2.4 billion pounds less beef than in 2002. Remarkable, given that 2005 total domestic beef consumption remained near 2002 levels, and that the KSU Beef Demand Index was six points higher in 2005 than in 2002. The U.S. cattle industry is now under-producing for the domestic market, falling short by 3 billion pounds – the beef equivalent of 3.9 million cattle.

These facts suggest cattle prices should be on the rise, an expectation further reinforced by the widest gap between domestic beef production and consumption our industry has seen in at least 40 years.

So, why have fed-cattle prices fallen from $96.50 in December 2005 to $86.01 in March 2006? That’s a loss of over $125 per head, even while domestic beef production remains well short of consumption.

Processed-beef imports, as well as imports of live foreign cattle, are being used to satisfy the ever-growing U.S. appetite for beef, meaning the amount of such imports rapidly continues to multiply. Let’s look at the facts:

In 2002, the U.S. imported a record 5.1 billion pounds of beef and live-cattle equivalent, an 18 percent share of the domestic beef market, which resulted in depressed domestic cattle prices.

When the Canadian border closed in 2003, imported beef volume and live-cattle equivalent fell to 4.3 billion pounds, a 16 percent share of the domestic beef market. As a result, U.S. cattle producers recaptured 2 percent of their domestic beef market, and U.S. cattle prices rose.

In 2004, while fighting back to regain that lost market share, importers procured record volumes of processed beef, but the ban on Canadian cattle impeded those efforts and live-cattle imports remained well below 2002 levels. In 2004, the volume of imported beef and live-cattle equivalent totaled 4.7 billion pounds, which caused the importers’ share of the domestic market to rebound to 17 percent.

In July 2005, the Canadian border reopened, and live-cattle imports expanded significantly, restoring the volume of imported beef and live-cattle equivalent to the 2002 level of 5.1 billion pounds, consequently allowing importers to again realize their previous 18 percent record share of the domestic beef market.

This escalating trend suggests imports more than likely will capture a record share of the 2006 domestic beef market, which will put significant downward pressure on U.S. cattle prices.

2006 data already show that January imports of processed beef were 35 million pounds more than those in January 2005, and that January 2006 imports of live cattle were 115,000 head greater than in January 2005.

Unless Congress takes immediate action to implement Country-of-Origin Labeling (COOL) so consumers have the right to choose either U.S. beef or foreign beef, producers will not be able to compete against these soaring imports. How long will Congress continue to deprive U.S. producers of their right to differentiate their beef products from foreign supplies?

It is a real travesty that the United States – a country founded on competition and free enterprise – has allowed itself to be held captive by multinational meatpackers that do not want U.S. consumers to know where their beef is produced. COOL is an essential tool our industry needs to compete against meatpackers’ efforts to replace domestic beef production with unmarked imported beef. Consumers need to be fully aware that when they see the USDA inspection stamp on beef, that mark does not mean the beef is of U.S. origin. Consumers need COOL so they can identify beef of U.S. origin.

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R-CALF USA (Ranchers-Cattlemen Action Legal Fund, United Stockgrowers of America) represents thousands of U.S. cattle producers on domestic and international trade and marketing issues. R-CALF USA, a national, non-profit organization, is dedicated to ensuring the continued profitability and viability of the U.S. cattle industry. R-CALF USA’s membership consists primarily of cow/calf operators, cattle backgrounders, and feedlot owners. Its members – over 18,000 strong – are located in 47 states, and the organization has over 60 local and state association affiliates, from both cattle and farm organizations. Various main street businesses are associate members of R-CALF USA. For more information, visit www.r-calfusa.com or, call 406-252-2516