Study: Mad cow disease and Canada's trade in beef

Prior to May 2003, Canada was the third largest exporter of beef in the world. In 2002, Canada's export market for beef amounted to about $4.1 billion.

On May 20, 2003, however, the nation's beef industry was rocked by a totally unexpected development: a single breeder cow in northern Alberta had tested positive for bovine spongiform encephalopathy (BSE), more commonly known as mad cow disease. Within hours, most nations had imposed a ban on Canadian beef products.

The analytical article "Mad cow disease and beef trade", available today, traces Canada's beef exports and imports throughout the early days of the beef export ban, with a particular focus on the American market.

This article is the first in a series that will be published in Statistics Canada's new online free publication Analysis in brief. The series will shed light on current economic issues and is written in a style that journalists, students and the general public can easily grasp.

Monthly exports of beef fell to zero following ban

In 2001, Canada held about 15% of the world beef market. The United States was second with a share of 16%, while Australia was first with 23%.

In 2002, Canada's export market was worth about $4.1 billion. Following the imposition of the ban by several countries this spring, however, the value of these Canadian exports in June, July and August dropped to virtually zero.

Export markets have traditionally been important to Canadian beef farmers. Before the ban, almost half the cattle sold in Canada were exported as either live animals or meat.

Canada exports the vast majority (90%) of its beef products to the United States, the world's largest beef-importing country. About 55% or $3.7 billion worth of live cattle and bovine meat products imported into the U.S. in 2002 came from Canada. U.S. importers did not increase imports from other countries to fill the gap created by banned Canadian beef. In fact, total U.S. beef imports in August were slightly lower than those recorded in June.

In terms of imports, the amount of beef coming into Canada increased above historical levels in June before dropping in July and August. These imports, mostly from the United States, have not been trivial; in 2002, they amounted to about $900 million. They represent a substantial proportion of the Canadian meat supply, almost 30% over the past three years.

Canada has exported far more beef products than it has imported. Last year, the nation's surplus in beef trade amounted to about $3.2 billion.

Beef accounted for nearly one-half of farm cash receipts for cattle in 2002

In 2002, the farm value of the animals sold for slaughter and exported as meat amounted to $1.8 billion. The corresponding exports, worth about $2.2 billion, included all the other costs such as processing and transportation.

In addition, the farm value of live animals exported also amounted to $1.8 billion.

This total of $3.6 billion in farm cash receipts accounted for nearly one-half (48%) of the $7.5 billion total farm cash receipts for cattle in 2002.

Among the provinces, producers in Alberta are clearly incurring the biggest losses. The province's average beef exports from January to April 2003 amounted to about $160 million per month.

Alberta was followed by Ontario where exports were averaging $62 million a month and by Saskatchewan ($23 million) and Quebec ($11 million).

Retail prices soar to record levels south of the border

In contrast to Canada, the beef supply in the United States was tight, pushing retail prices to record levels.

Retail prices for beef in the United States were at record levels in February 2003, before the case of mad cow disease in Canada was confirmed. Record retail beef prices continued through August, reaching US$3.74 a pound, the highest since June 2001, when prices reached US$3.48 a pound.

Canada has became the first country in the world with a case of BSE to get its products back into the United States. Along with Mexico, the United States reopened its borders to selected cuts of Canadian beef.

As of mid-September, Canadian boneless beef from animals younger than 30 months has been allowed into the U.S. under a permit process. On October 16, Canada's Minister of Agriculture reported that Canadian companies had shipped 28,000 tonnes of fresh, chilled and frozen beef products to the United States up to October 15, which typically represents about half of September exports.

The publication Analysis in brief : Mad cow disease and beef trade (11-621-MIE2003005, free) is now available online.

For more information, or to enquire about the concepts, methods or data quality of this release, contact Denis Poulin (613-951-1999), International Trade Division.