02/21/05 The packers` argument, Part two

There have been some high profile legal matters filed in court over U.S.D.A.'s proposed final rule to reopen the American border to Canadian live cattle and some beef products currently banned. Most of those have centered on keeping Canadian product out. But one of interest has been the American Meat Institute's plans to sue U.S.D.A. That is because A.M.I., which represents the cattle processing and packing industry, wants U.S.D.A. to proceed with the final rule as it was originally proposed by the agency. That means allowing live cattle and beef from cattle thirty months and older to be imported into the U.S. Earlier this month, U.S.D.A. announced it would delay allowing Canadian cattle and beef from cows thirty months and older, citing inconsistency in the final rule by allowing beef from cattle from the older age range into the U.S. but not live cattle in that same age group. U.S.D.A. Secretary Mike Johanns urged U.S. officials to move forward in considering and developing a plan to allow import of both slaughter animals and beef in the thirty months and older range. But as U.S.D.A. sorts this all out, the change in the final rule has put the A.M.I. and packers in a quandary. Let's put it in this context. This is U.S.D.A. Chief Economist Keith Collins discussing the final rule with the Senate Ag Committee, explaining why the numbers would be enticing for U.S. packers to buy Canadian cows for processing. COLLINS: You look at Canada. Cows sell for less than twenty dollars a hundredweight. In the United States, they sell for fifty dollars a hundredweight. If you look at the price of lean beef in the United States, it's one-hundred forty dollars a hundredweight. So in Canada, a packer in Canada can buy a cow for twenty dollars a hundredweight, and sell the beef for one-hundred forty dollars per hundredweight. That is one heck of an incentive to pull cows, to pull cow beef, across the border. But that was before importation of Canadian cattle thirty months and over was delayed. You see, cows and lean beef usually come from animals older than thirty months of age. That is one reason why the A.M.I. has taken their case to court. And after temporary shut downs and shift closures at packing plants like Tyson's facilities in Boise and Pasco, and reports of other packers moving their operations to Canada, it would seem that cattle processors could use Canadian live cattle to make up for shortages in U.S. beef cattle, and in turn, help restore some profitability to the U.S. packing industry.