The Canadian cattle industry has ridden a bubble since May 20, 2003. That's when the announcement came that an Alberta cow had been diagnosed with bovine spongiform encephalopathy (BSE).
Over the next five months, Canadian beef was isolated from world markets. For a time, travelers crossing the border even had to hand their baloney sandwiches over to U.S. border officials.
The aftershocks of the event are still rumbling through Canada.
The U.S./Canada border opened to specified beef imports in September. Imports quickly resumed a normal pace and have passed year-ago levels.
While the border remains closed to live cattle imports from Canada, talks are in progress to restore trade to the pre-May 20 climate. But, life for many Canadian producers will never be the same.
An outspoken rancher, auction market owner and auctioneer from Lethbridge, Alberta, Bob Balog, talked with BEEF magazine about the Canadian beef business today, the dynamics of pre-BSE and post-BSE life in Canada, and the big picture of the beef trade between both countries.
BEEF: What impact did that one cow with BSE have on your country?
Balog: It's, without a doubt, the worst single event in Canada's history. No person from any walk of life has gone unscathed, and we're only seeing the tip of the iceberg.
As for cattlemen, bigger the cattle feeders will survive but many small ones will perish. The loss to cow-calf ranchers is harder to assess. Some cow-calf ranchers who were economically fit coming into the crisis may survive. Hundreds of other ranchers — those carrying significant debt — won't.
BEEF: Has your government stepped in to help ranchers and feeders?
Balog: Government programs have helped but they're not a cure-all. The provincial governments are trying their best to help the industry but money was already tight before May 20. The bottom line is this: If you're going down due to this BSE event, you're going down whether the government is there to help or not.
Most Canadian cattlemen feel every decision made by your USDA since May 20 has been a tremendous asset to the two American beef packers operating in Canada.
First, those packers are the ones who got the bulk of our government's financial assistance after May 20. They each had 30,000-40,000 head on feed. Guess who killed their cattle first?
And, they're virtually the only packers sending beef to the U.S. today. They've been able to buy cattle very cheap here and sell into your record-high beef markets. It's been a gravy train for them.
BEEF: How are your producers coping? What does the future hold?
Balog: The real tragedy is that no young person in his or her right mind will return to the cattle business. Most of our ranchers are closer to 65 than 35. They're saying “enough of this industry” and selling out.
I'm ashamed to tell you how many farm sales I've booked for the spring. They'll either rent the land or sell to the Hutterites. Cattle operations that survive will get bigger — there will be tremendous consolidation.
There's no question the border closures were devastating to our industry. But, some Canadian feeders and ranchers were already having tough times before May 20.
We've had a lot of the same drought problems some area of the U.S. have had. Many Canadian feedlots, ironically, are and have been relying a great deal on U.S. corn imports because the past two or three barley crops have been disasters.
BEEF: Some people in the U.S. cattle business have fought for years to close U.S. borders to Canadian imports. Now, they claim the BSE border closure proves their contention that Canada's cattle and beef exports have suppressed U.S. markets over the past decade. What's your response?
Balog: If you think Canadians have enough power and influence to make or break your cattle markets, you're not thinking straight. We're a drop in the bucket compared to your industry.
If you're seeing record prices, it's because your country is doing a good job of promoting and marketing beef in your domestic and international markets. Demand for your beef has skyrocketed.
Plus, remember that all of Canada's international beef markets were closed off. Where's the world going to go to replace the kind of beef Canada produces? They have to go to the U.S.
Don't forget, too, that the strength of the American dollar has been a tremendous advantage to anyone trading with you. Everybody wants to sell to the U.S. That was a very significant factor in the trade scenario.
BEEF: That said — it's inevitable that the U.S. border will open to live cattle trade from Canada. Many U.S. cattle producers fear a massive backlog of fed cattle will flood the U.S. market at that time. Is it true?
Balog: There's no big backlog. Our market was extremely aggressive in October and November and we almost got back to the numbers and prices of a year ago. By the time we get to the middle of January, we're going to use up a lot more of our cattle.
Yes, whenever the border opens — depending on the rules — prices in your country might drop for a few days while the guys in Chicago take their profits. But then, everyone will figure out there aren't as many cattle up here as they think.
I'm not suggesting that Canada is out of cattle, but if you're asking whether our feedlots are more full today than in years past, the answer is absolutely not.
BEEF: Fed cattle are one thing, but today your cow and bull markets are in the tank due to the 30-month age restriction related to BSE. Your government recently developed programs to help alleviate the impact of not being able to sell cull cows. Will that help the cowman in the country?
Balog: Our single biggest problem now is what to do with our cull cows and bulls. It appears government programs similar to those developed to help with finished steers and heifers will be implemented. To qualify for the program, producers will have to kill their cows. I'll guarantee you that the slaughter plants will get the benefit.
Beyond that, the big, long-term problem is that our cowherd is growing older and will grow larger — but not in the right way.
Some ranchers won't take old cows to town because they dislike government. Plus, they're selling off unbred heifers to pay the bills. There won't be young cattle going back into the system.
The U.S. alleges we're heavily subsidized but we have zero subsidies for our cattlemen. We've had some emergency programs to deal with BSE but that's a far cry from what you would call a subsidy.
BEEF: Following the BSE announcement, Canadian consumers never even blinked at eating beef. Was there never even the slightest fear that BSE would get into Canada's food chain?
Balog: You're absolutely correct. There wasn't one second's hesitation in Canada that our beef supply was unsafe. BSE was a non-factor — in fact, it went the other way.
It was one of the greatest shows of solidarity ever seen in Canada. People here were, and still are, eating beef like crazy. It was wonderful.
BEEF: Did your national cattle identification [ID] program perform well in regard to the BSE case?
Balog: Yes, it was an asset. Now, is every producer “in” on the program? No (he laughs) — they think brands will still serve the purpose. But, they will be changing to ID before long.
We're looking for it to help a lot more along the way as we get back into world markets. There's no question our ID system can be improved — we need better tags and better ways to follow the cattle along the food chain.
In the future any country wishing to be a world trader will need a national ID system that works.
BEEF: Obviously, your Alberta cattle feeding and packing industries aren't going to go away. Neither is the trade framework that's been a subject of such animosity between our producers. Are there ways we can all get along?
Balog: I've sat around kitchen tables on both sides of the U.S.-Canada border and talked to producers. I firmly believe, more now than ever, that we need more integration between the beef sectors of Western Canada and the western U.S.
We have to go beyond the politicians and the rhetoric. Things may change when Paul Martin replaces Jean Chrétien as Canada's Prime Minister on Jan. 12. Martin says he wants to be more “neighborly” with your people and George Bush. And, perhaps Bush wants to be friendlier with Martin than he was with Chrétien.
With regard to cattle, it's just plain common sense that we use our feeding and packing industry — coupled with your ability to produce calves — to feed the people in the Western U.S.
First, we need to put this BSE thing behind us, open the border, and get on with business. We need to understand the big picture of the livestock industry in North America. Then we need one set of rules so cattle can move freely back and forth across the border.