November 30, 2004

Canada's Cattle Producers Suffer Losses of C$5 Billion Due to US Ban

Canadian cattle producers have lost an estimated C$5 billion since a single BSE-infected cow was detected in Canada, according to a report from BMO Financial's Economics Department.

The US border has been shut to live Canadian cattle since May 2003, when a single cow with bovine spongiform encephalopathy, or mad cow disease, was discovered in Alberta. That animal was condemned at slaughter, thus no meat from the carcass entered the food system.

"In economic terms, the closing of the border has been devastating to Canadian ranchers and their families," says Rick Egelton, senior vice-president and deputy chief economist, BMO Financial Group. "Cattle producers have been hit by lower output, weaker prices, and narrowing margins."

"Canada's ranchers are good, hard-working people of strong character," said Ted McCarron, senior vice-president, Prairies Division, of BMO Bank of Montreal in the report. "They are adjusting their business practices and doing everything they possibly can. But what they really need is to have the US Office of Management and Budget complete its final review quickly and allow for the importation of live cattle - in weeks, not months."

The report stated that although cattle prices have risen from their lows immediately following the May 2003 announcement, they remain weak. Moreover, the large increase in the number of cattle on farms suggests that prices could remain soft during the next year, even if cross-border markets are reopened.

The BMO Financial report said cattle producers have continued to face poor market conditions in 2004, with cash receipts through the first six months close to 30% lower than the average for the five years ending in 2002.

The longer-term viability of the sector will be dependent on the degree to which consumers remain confident in the beef supply, the report said. Unlike earlier episodes where domestic consumption plummeted (e.g. in the United Kingdom), demand in Canada and the US has held up well. This was likely due to greater awareness about the disease along with the perception that Canadian and US risk mitigation systems are reliable.