Closing U.S. borders to North American trade: Consequences and further reaching waves
U.S. Cattlemen’s Association vice president Justin Tupper said he isn’t hoping the plug will be pulled on cattle and beef trade between the U.S, Mexico and Canada but he is hoping to see some sort of priority given to domestic cattle as shackle space is at a premium.
With the glut of fat cattle still being worked through the packing system, Tupper said slowing imports could allow the backlog to be remedied with U.S. cattle being first through.
Tupper said there are a number of feeder cattle that go to Canada to be fed before they return to the U.S. to be harvested and those ought not be confused with foreign cattle.
“Canada definitely does not have the kill capacity to kill all of their own cattle so we’re always going to see some of them down here, but we think in this time when people can’t get a kill slot and the cattle are getting bigger and bigger, we would like them to prioritize the domestic herd,” he said.
While he said there are few fat cattle coming in from Brazil, there is boxed beef being imported but he also recognizes that the grocery store meat case stock is limited. Until chain speeds return to normal, supply will still need to be met through some imports.
“It’s a delicate balance when you start talking about trade, some people would like to see us not take in anything but at U.S. Cattlemen, we have a broader thought process,” he said. “We know we need to do some trade with some of these countries, and maybe beef imports support hog exports or vice versa, but those are delicate measures that need to be weighed out but in the time of crisis here when you can’t get shackle space, we need to prioritize the domestic herd,”
Once the backlog of fat cattle is relieved, he said it’ll then be time to begin working on the other problems facing the industry. Tupper said there are huge implications with Sen. Chuck Grassley’s spot market bill that would impact how fat cattle are marketed, returning leverage to the producer. With four packers controlling 85 percent of fat cattle, Tupper said producers must force them to pay competitive prices for cattle rather than depending upon a captive supply. Tupper called the potential passage of Grassley’s bill a game changer for cattle producers.
Brett Crosby, a fifth-generation Cowley, Wyo., rancher and co-owner of the economic consulting firm, Custom Ag Solutions, said any shortage of product in a free market economy causes price to be the factor that rations supply. With the beef supply lower than demand as packers return to near-full capacity levels, and grocery stores limiting purchases, he said it appears the price at the meat counter is still too low to ration product.
“We don’t want consumers to be priced out of beef,” he said. “We don’t want them to run out of beef, we want them to keep eating beef during this temporary supply constraint in the packing plants. That’s why closing the borders to imports is ultimately counterproductive for the industry.”
Crosby said we import more feeder cattle from Mexico than we export but trade agreements also allow the U.S. to export feeder cattle to Canada to be fed and, oftentimes, returned to the U.S. to be harvested.
“Mexico is one of our biggest beef buyers, and Canada both,” he said. “They are third and fourth, depending on the year, behind Japan and South Korea, so it’s important that we have free trade across the borders.”
It’s crucial to continue importing boxed beef, he said, especially in times like today when packing plants are not able to produce at full capacity, grocery store shelves would be bare of beef at affordable prices.
“Now, once we get back up to full capacity, that’s a different story,” he said. “Once we’re able to kill at full capacity, I expect that the price and quality of domestic beef will keep imports from competing with us domestically.”
Export and import value, Crosby said, are relatively equal with one caveat.
“We need the stuff we import because we don’t produce enough lean beef, to mix with the 50/50 trim that comes off fat cattle to make hamburger and we get far more value for the products that we export than we would if we had to try to sell them domestically,” he said. “Not a lot of market out there for beef tongue in the U.S.”
Crosby said he does think it unfair for packers to purchase imported beef and call it a product of the U.S. because it was processed stateside and that is a practice that needs to be addressed.
“The problem with mCOOL is that the World Trade Organization said it was illegal and we would be sanctioned for it if we continued,” he said. “A lot of work needs to be done to bring it back but remember, that may add value at the retail counter and if we’ve learned one thing through the last year, we’ve learned that packers don’t necessarily have to pass down the value to the feedlot. Just because it’s worth more on the retail side, doesn’t mean our cattle are going to be worth more.”
As for an investigation, Crosby said it appears the packers have found a loophole to captive supply through securing cattle in yards that are committed to them, for example, he said, the largest yard in Colorado is committed to JBS although they don’t own those cattle.
That exclusivity allows them a captive supply through quasi ownership because they know they’re coming and they can use that as leverage to manage supply, which then affects prices,” he said, “It’s legal and they are acting in their own best interest, which is what we expect businesses to do in free markets, but it is against the spirit of the P&S (Packers and Stockyards) Act of captive supply and packer ownership.”
On the live cattle side, closing trade from partners within NAFTA wouldn’t amount to a tremendous change according to Kate Miller, a tenured food industry analyst, but it would be detrimental to the American ranchers who purchase and background Mexican feeder cattle.
“It supports American subsidiary businesses like pharmaceutical companies and veterinarians, and that’s where the largest economic impact would be in those southern states,” she said. “In the north, fats cross the border everyday but it’s in insignificant numbers, especially in comparison to the exports that walk across the border as boxed beef.”
The real pain of trade closures would be pork, she said. With Mexico as a major importer of pork, she anticipates such a closure would prompt disastrous consequences and leave producers with negative valued hogs. ❖
— Gabel is an assistant editor and reporter for The Fence Post. She can be reached at firstname.lastname@example.org or (970) 768-0024.
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