The segregation issue is particularly important because of the way the Canadian packing industry is sorted and the fact that the majority of packing plants kill both slaughter cows and fed cattle, and the geographic location of their plants. Segregation could result in the restructuring of their packing industry as the plants are forced toward more specialization.
It's estimated that the single Alberta cow found with bovine spongiform encephalopathy (BSE) has cost the Canadian cattle industry around $1 billion. Since that May 20 announcement regarding BSE, Canada's total cattle and calf inventory has set an all-time record high, according to Statistics Canada, with the July 1 inventory level up 1.9% from a year ago.
That's an increase of less than 300,000 head from 15.4 million to 15.7 million head. That increase is largely due to calves and feeders that normally would have been in the feed yard but instead were kept on grass or in backgrounding programs. This is borne out by the fact that cattle-on-feed numbers in Canada as of July 1 were down 9%. Meanwhile, the number of beef cows in Canada came in at just slightly less than 5 million head.
Canada's total cattle inventory, as of July 1, was essentially the same as for Texas, which was 15.5 million head. But, the Texas beef cow inventory was 5.89 million head or roughly 20% larger than the number of cows in Canada. As of July 1, the total cattle inventory in the U.S. was 103.9 million head.
Canadian feeder cattle prices are expected to remain extremely tough until the backlog of feeder cattle is placed into the feed yards. Then, the fed industry will have to work through those cattle on the other end. This is the time that is most likely to affect U.S. fed cattle prices.
Canadian slaughter levels had fallen to 30,000 head/week but they've risen back to 60,000/week. That's still well below the 75,000/week they were processing prior to the BSE discovery.
Everyone will be watching the placement pattern in Canada carefully to see if the numbers are spread out to mitigate the effects. Cattle prices in Canada have fallen by as much as 70% since the discovery of BSE. That represents the biggest financial hit for ranchers since the Dust Bowl of the 1930s.
It's important to note that roughly half of Canada's exports to the U.S. were in live cattle, and reopening of the border to live cattle doesn't appear like it will happen any time soon. In part that's because of the time required to implement the new beef export program (BEV) announced by USDA this week, which is designed to meet Japan's new requirements on product to be exported to their country.
The BEV program sets up eligible suppliers and meets Japan's requirements that cattle be of U.S. origin. The system also dictates how the identified product will be segregated from that of non-identified cattle.
The industry would have been hard pressed to meet the deadline of September 1 that was established by Japan, but these steps won't have to be implemented until the border is reopened to Canadian live cattle. That means live cattle imports won't be restarted until at least this program is implemented.
The program has revived debate about country-of-origin labeling (COOL) once again, as producers wonder aloud if a similar type of a workable program couldn't be devised along similar lines. This would require new legislation that would allow the easier system while holding up to international trade agreement scrutiny.