Will Verboven, Contributing Editor

The USDA announced on December 29, 2004, that the U.S. border would be reopened to live Canadian cattle imports by March 7, 2005. One day later, on December 30, the Canadian government announced that a second BSE case had been diagnosed in Alberta. What a truly amazing coincidence that these announcements were made a day apart and in that specific order. One could be cynical, but I expect that most of us who follow the convoluted world of BSE trade politics see some high level bureaucratic monkey business with the timing of those two announcements.

It is more likely that both governments wanted to avoid a repetition of the same cow opera that occurred almost exactly a year ago on December 23 when the U.S. BSE case was found. That case occurred scant weeks before the USDA had planned to announce a re-opening of the border to live cattle imports. Because of that BSE discovery, the USDA decided to delay any border decision for a year as it turned out.

The big fear in the Canadian cattle industry is that this new BSE discovery will cause the U.S. government to give second thoughts to its border re-opening decision, particularly in light of the expected reaction of American anti-Canadian trade groups, since any new BSE case will give them more ammunition to block the re-opening of the border to Canadian cattle imports.

However, it would seem that if the USDA sticks to its science-based decision mantra and is able to derail the inevitable lawsuits by disgruntled trade protectionists, Canadian cattle will be returning to the American market sometime this March. That would restore a trade that has been going for over 150 years.

Some cattle market wizards are predicting a veritable flood of Canadian cattle into the U.S. as soon as the border re-opens. That’s a legitimate concern, but it needs to be tempered with some market realities. First and most important, the value of the Canadian dollar has miraculously improved against the U.S. buck – by around 20 percent over the past two years. The reality is that in the low margin cattle business, it was the currency difference that in many cases put the profit into selling Canadian cattle in the U.S.

Second, the big American-owned packing plants in Canada have been running flat-out at over capacity and have been able to virtually process all the available slaughter cattle, even those that would normally have gone to the USA. These plants have also embarked on multi-million-dollar expansion plans that will see them in a position to process virtually all Canadian slaughter cattle on a regular basis. It is unlikely after all that expansion expenditure that they will let many slaughter cattle go to U.S. plants without a fight – even their own plants.

Another factor that will affect the resumption of live cattle exports to the U.S. is the size of the Canadian livestock trucking industry. It was downsized considerably after the border closure. There are just not that many livestock liners available for long distance hauls into the U.S. Those still in business will need considerable incentives to expand their fleets – and that will take time.

The one cattle export area that has some potential is with feeder cattle. But even that has some uncertainties. Last year when it looked like the border was going to reopen in the spring of 2004, American cattle buyers went on a speculative buying binge and bought up around 100,000 head of Canadian cattle. When the border didn’t open, most of those buyers took a financial beating. Those U.S. buyers are probably having second thoughts about the Canadian market this time – no matter what the USDA says about any reopening.

Another wild card has been the renewed interest of Canadian cattle feedlot operators in buying feeder cattle – some recent feeder cattle sales have seen prices surpass pre-BSE levels. Compare that to last year at this time when Canadian cattle buyers were virtually out of the market – preoccupied with licking some deep financial wounds. But, it would seem that one year later enough scar tissue has built up to cause feedlot operators to forget about those painful losses. But then that comes as no surprise – the risk taking nature of feedlot operators can’t be suppressed for very long.

Speculation also has it that the big packers are securing their supply lines with feeder cattle to prevent them from going south. Considering their present flat-out production and soon to come on-line expansion plans, that would seem to be a prudent move.

In the end, the Canadian cattle export scenario will be entirely dependent on how eager American packing plants, feedlot operators and speculators are willing to spend big dollars importing those cattle. That’s the beauty of the cattle marketing business – everything is possible.