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COOL chills live cattle and hog sales to U.S.

(Resource News International) — Sales of live cattle and hogs from Canada to the U.S. under the U.S. government’s new country-of-origin labelling (COOL) laws have suffered since the rule’s implementation, industry sources report.

As for Canadian pork and beef product sales, however, the jury remains undecided.

“On the live hog front, we are starting to see a situation which is putting a lot of uncertainty into the weaner pig market,” said Martin Rice, executive director with the Canadian Pork Council. “That uncertainty, meanwhile, is starting to negatively impact the local producer’s bottom line.”

“Since weaners pigs to the U.S. are subject to mandatory COOL rules there has been a serious reduction in the price of feeder pigs,” Rice said, singling out Manitoba, where hog values had dropped to as little as $5 per hundredweight per animal.

“End-users have become very nervous about buying these feeder pigs, as they are worried about selling the finished pig in the U.S.,” Rice said.

He said there is a lot of pressure being put on U.S. processors to not mix more than a certain amount of animals. “In fact there are a lot of processors dropping Canadian content altogether in order for them to sell product under a U.S. label,” he said.

“Much uglier situation”

Cargill, Smithfield and Morel were some examples of companies who have already taken or were planning to take this kind of action, Rice said.

“This is turning out to be a much uglier situation than we had anticipated and because of that, the process of gathering the necessary data to launch a WTO (World Trade Organization) and/or NAFTA (North American Free Trade Agreement) challenge has started,” Rice said.

Live cattle shipments into the U.S. have also been seriously affected, according to Travis Toews, chairman of the foreign trade committee for the Canadian Cattlemen’s Association.

“There are a lot of fundamentals weighing on cattle prices in Canada at present, but we are quite certain the implementation of COOL has made it that much less profitable to move Canadian live cattle into the U.S.,” he said.

Toews said cattle shippers into the U.S. have been advised by U.S. packers that the basis price has been widened by at least C$3 per cwt, effective immediately, because of COOL.

“That is a pretty significant bearish price impact,” he said.

Toews agreed this kind of price effect will be enough to prompt a NAFTA or WTO challenge.

“We have depended on price arbitrage with U.S. buyers in the past, and we have seen the effects when there have been border closures and when there had been no price arbitrage,” Toews said, noting that lower prices mean fewer cattle being shipped into the U.S.

When Canada will launch a NAFTA or WTO challenge to the COOL rule is still to be determined, Toews said, but it was hoped the Canadian government would accelerate the action.

As for the impact on the shipments of Canadian beef products because of the U.S. COOL rule, it’s still too early to tell, according to John Baker, executive director of trade ,arketing for the Beef Information Centre at Mississauga, Ont.

“There is nothing to support any increase or decrease in the amount of Canadian beef being shipped into the U.S. with the implementation of COOL,” Baker said. “Right now the implementation of COOL has been more of an outreach and education process for the Canadian sellers and U.S. buyers.”

With USDA’s COOL program only one month old, a lot of the procurement strategies are still being evaluated, he said.

Baker said the recent drop in value of the Canadian dollar has only served to add in some confusion to the situation.

“We are probably seeing an increase in Canadian beef product sales into the U.S., as the U.S. dollar now has greater buying power,” Baker said.

However, Baker acknowledged that the Beef Information Centre will monitor beef shipments into the U.S. closely to see if there will be any significant effect.

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