flynn adcock and parr rosson center for north american studies dept. of agricultural economics

The Integration of the North American Meat Supply Chain

Presentation for theFAMPS Track Organized Symposium:Impacts of North American Economic

Integration of U.S. Agricultural Products

Flynn Adcock and Parr RossonCenter for North American Studies

Dept. of Agricultural EconomicsTexas A&M University

Prepared for the AAEA Annual MeetingsLong Beach, CA, July 25, 2006

Overview

Trends in North American Agricultural Trade

The Growing Integration of the North American Beef and Pork Industries

Factors Impacting the North American Beef and Pork Supply Chains

Summary and Implications

Trends in North American Agricultural Trade

U.S.-Canada and U.S.-Mexico Trade Began to Grow Significantly following CUSTA (‘89) and NAFTA (‘94)

Canada-Mexico Trade Growing but Restricted by Distance and Large U.S. Market

32% ($19.9 Million) of U.S. Ag Exports Now Go to N.A. - 12.5% in 1989 ($5 Million)

35% ($20.6 Million) of U.S. Ag Imports Now Come from N.A. - 24% in 1989 ($5.2 Million)

The Evolving North American Beef and Pork Supply Chain

CUSTA and NAFTA Have Led to Greater N.A. Trade in Beef, Pork, Poultry and Live Animals

Greater Integration of Other Resources (Capital, Technology, Grains) Has Also Occurred

A North American Beef and Pork Complex Has Resulted

BSE Changed the Nature of N.A. Beef Supply Chain

N.A. Pork Supply Chain Presently Stable

U.S. Imports of Live Cattle fromCanada and Mexico, 1989 - June 2006

Source: U.S. Trade Intenet System, www.fas.usda.gov/ustrade

1989 1994 2000 20050.0

500.0

1000.0

1500.0

2000.0 Cattle Mexico

U.S. Beef Exports

5 82

5 98

6 76 6 98

7 85 8 1

3

7 56 8 0

1

8 21

1 35 2 0

2

1995 1997 1999 2001 2003 20050

200

400

600

800

1000

1,000 MT (Retail Weight)

Mexico Canada Japan Korea Taiwan Others

Source: U.S. Trade Internet System, www.fas.usda.gov/ustrade

U.S. Beef Imports


6 42

6 41 7 3

3 8 23 8 8

1 9 45 9 8

7

9 87

8 98

1 ,10

4

1 ,07

2

1995 1997 1999 2001 2003 20050

200

400

600

800

1,000

1,200

1,400


Canada Australia New Zealand Uruguay Others

Composition of U.S. Beef Imports,by Source, 2005

Source: FAS/USDA attache reports and U.S. Trade Internet System, www.fas.usda.gov/ustrade

3 28 .

5

2 0.6

4 .9

5 .2 2 2

.5

1 8.0

2 77 .

6

1 92 .

4

1 4.7

7 .2

0 .3

0 .1

0 .0

1 39 .

6

1 .01 4

.0

1 .2

0 .9 1 3

.8

0 .0

Canada Australia New Zealand Uruguay Central America0.0

50.0

100.0

150.0

200.0

250.0

300.0

350.0

400.0

1,000 MT

Fresh/Chilled Boneless, Note 3

Frozen Boneless, Note 3

Other Frozen Boneless

Other

Canadian Beef Exports

Source: Agriculture and Food Canada, USDA/FAS

1 89

2 47

2 92 3 2

9

4 01

4 85

4 45

4 89

2 96

4 54 4 8

7

1995 1997 1999 2001 2003 20050

100

200

300

400

500

600

1,000 MT, Retail Weight

U.S. Mexico Japan Korea Others

Mexico Beef Imports

Source: FAS/USDA attache reports, U.S. Trade Internet System, and Agrculture and Food Canada

30

60

110

150

180

220 24

0

280

225

205

210

1995 1997 1999 2001 2003 20050

50

100

150

200

250

300

350

1,000 MT

U.S. Canada Others

The North American Beef Supply Chain: Comments

BSE Reduced and Altered N.A. Beef Industry Integration, Especially Among Canada and the U.S.

While Unable to Export Fed Steers to the U.S., Canada Increased Feeding, Slaughter Capacity, and Beef Exports to U.S.

U.S. Firms (Tyson/IBP, Cargill) Have Increased Investment in Canadian Processing Plants

Will Resumption of Canadian Cattle Exports to U.S. Spark Return to 2002 Scenario – Maybe but Too Early to Tell

Will Latest BSE Cases Disrupt Trade Again?

U.S. Swine Imports from Canada

Source: U.S. Trade Intenet System, www.fas.usda.gov/ustrade

1.1

0.9 1.1

0.7 0.8

0.9

1.7

2.8 3.

2

4.1

4.1 4.4

5.3 5.

7

7.4

8.5

8.2

1989 1994 2000 20050.0

2.0

4.0

6.0

8.0

10.0

Million Head

Feeder Pigs Slaughter Hogs

U.S. Pork Imports

1 94

1 84

1 91

3 21

3 25

2 17

2 66

3 67 4 0

1

3 76

3 59

1995 1997 1999 2001 2003 20050

100

200

300

400

500


Canada EU-25 Other


Canadian Pork Exports

Source: Agriculture and Food Canada, USDA/FAS

309 331 36

8 4 23 4 9

3

6 18 6 8

1 7 48 7 8

8

7 78 8 0

6

1995 1997 1999 2001 2003 20050

200

400

600

800

1000


U.S. Japan Mexico Korea Other

U.S. Pork Exports

2 28 2 6

8

2 86 3 5

6 3 86

3 93

4 75

4 67 4 9

5

6 51

8 04

1995 1997 1999 2001 2003 20050

200

400

600

800

1000


Mexico Canada Japan Other


Mexico Pork Imports

Source: FAS/USDA attache reports and U.S. Trade Internet System, www.fas.usda.gov/ustrade

49 54 63

91

114

166 18

1

235 26

9

257

371

1995 1997 1999 2001 2003 20050

100

200

300

400

500

1,000 MT

U.S. Canada Other

The North American Pork Supply Chain: Comments

Decrease in Canadian Grain Transportation Subsidies Helped Spur Canadian Animal Feeding

Canadian Hog Slaughter Capacity Has Decreased, and While U.S. Capacity Has Decreased, U.S. Hog Production Has Decreased Even More

U.S. Hog Producers Have Gone from Many Small, Farrow to Finish Operators to Fewer, More Specialized Operators

Canadian Pig Production More Efficient than U.S., and Exchange Rate Favored Importing Canadian Hogs from ’96 – ‘02

Potential Disruptions to N.A.Beef and Pork Supply Chain

Diseases Such as BSE, FMD, and Hog Cholera Could Disrupt Trade

Domestic Legislation, such as MCOOL and the Bioterrorism Act, Have Potential to Cause Disruptions

Anti-Dumping/Countervailing Duty Cases Filed by All Three N.A. Countries Against Each Other Strain Relations and Could Disrupt Trade Flows

Fluctuations in Exchange Rates Often Result in Temporary Changes in Advantages for Either U.S. or Canada/Mexico – and This Will Continue

Integration in the North American Cattle and Beef Industry, 2002

$301 Million, 816,000 Head of Beef Cattle$23 Million, 6,000 Metric Tons of Beef

$283 Million, 76,000 Met. Tons of Beef



$1.1 Billion, 1.7 Million Head of Beef Cattle$1.1 Billion, 392,000 Metric Tons of Beef

Integration in the North American Cattle and Beef Industry, 2005

$515 Million, 1,256,000 Head of Beef Cattle$47 Million, 7,600 Metric Tons of Beef

$139 Million, 52,000 Metric Tons of Beef

<$1 Million, 1,000 Head of Beef Cattle$550 Million, 146,000 Metric Tons of Beef


$526 Million, 562 Thousand Head of Beef Cattle$1.2 Billion, 367,000 Metric Tons of Beef

Integration in the North American Swine and Pork Industry, 2005

$17 Million, 125,000 Head of Swine$281 Million, 158,900 Metric Tons of Pork

$478 Thousand, 3,700 Head of Swine$269 Million, 80,000 Metric Tons of Pork

$598 Million, 8.2 Million Head of Swine$745 Million, 315,000 Metric Tons of Pork

$51 Million, 60,000 Metric Tons of Pork

Integration in the North American Swine and Pork Industry, 1989

$7.9 Million, 78,112 Head of Swine$48.4 Million, 19,275 Metric Tons of Pork

$101,000, 285 Head of Swine$8.4 Million, 2,610 Metric Tons of Pork

$101 Million, 1.1 Million Head of Swine$310 Million, 186,000 Metric Tons of Pork

SummaryNorth American Beef and Pork Industries

are Integrated - Almost One Supply ChainMarkets React Immediately to ‘News,’ But

U.S. Recovered Quickly While Pain Lingered in Canada

Unique Market Conditions Likely to ChangeU.S. Increased Cattle Imports from Mexico

and Beef Imports from Canada and Uruguay to Help Meet Demand

U.S. Pork Exports Have Gained As Beef & Poultry Exports Have Declined

ImplicationsDegree of Trade Dependence Likely Continue

Though Product Mix May ChangeDisruptions will Continue to Occur, But N.A. Supply

Chain Too Entrenched to Change DrasticallyMaintaining Consumer Confidence is Crucial for

Animal Health/Food Safety IssuesProtectionist Response to Increased Trade to

ContinueSupport for VCOOL Growing & Animal

Identification May Be Requirement to ExportCanada & Mexico May Seek Marketing Alternatives

Primary References Haley, Mildred. “U.S.-Canadian Hog Trade: Market

Integration at Work.” Amber Waves. Economic Research Service, USDA, Volume 3, Issue 1, February 2005.

Rosson, C. Parr, III and Flynn J. Adcock. “Food Chain Disruptions and Trade: The Importance of North American Market Integration.” Choices. 2nd Quarter, 2005, 20|2. On-line journal of the American Agricultural Economics Association, available at http://www.choicesmagazine.org, July 2005.

U.S. Trade Internet System and Attaché Reports, Foreign Agricultural Service, USDA, www.fas.usda.gov.

Flynn Adcock or Parr RossonFlynn Adcock or Parr Rosson

Ph: 979-845-8694 or 845-3070Ph: 979-845-8694 or 845-3070

E-mail: [email protected] or [email protected]: [email protected] or [email protected]

International Trade and Market Analysis

flynn adcock and parr rosson center for north american studies dept. of agricultural economics

Documents