Disease-Related Trade Restrictions Shaped Animal Product Markets in 2004 and Stamp Imprints on 2005 Forecasts
By the National Agricultural Statistics Service (NASS) - This report looks at Disease outbreaks and related trade restrictions that affected U.S. animal-product markets and exports in 2003, and how they continued to constrain markets in 2004.
Abstract
U.S. cattle and beef markets were most affected. Bans on key U.S. beef export markets were
implemented and adjusted; court cases in the United States related to reopening
the U.S. border to Canadian cattle and beef imports are moving forward.
On July
14, 2005, the Ninth District Court of Appeals lifted the preliminary injunction that
blocked implementation of the BSE minimal-risk regions rule. Pork, dairy, and
lamb markets did not face any direct disease issues but both U.S. and international
outbreaks of Avian Influenza buffeted poultry markets. Forecasts of 2005 U.S.
animal-products trade reflect expected market responses given the uncertainties
surrounding cattle and beef markets in the United States.
Introduction
Beef, cattle, and poultry trade restrictions related to disease have been key
features of animal-product markets in the United States since the middle of
2003. In particular, cattle and beef markets continue to be impacted by the
trade restrictions that followed the discovery of Bovine Spongiform
Encephalopathy (BSE) in North America in 2003. Both U.S. and international
outbreaks of Avian Influenza (AI) influenced poultry markets late in
2003 and during all of 2004.
Other factors shaped worldwide animal-product markets in 2004, including
the changing flow of animal products as countries adjusted to redefined
markets. Brazil in particular has emerged as a significant competitor of the
United States in international poultry markets and as a major player in international
beef markets. Exchange rate movements that weakened the dollar
relative to key currencies also played an important role. The cloud over beef
and poultry trade contrasted with the robustness of the pork, lamb and
mutton, and dairy markets. International forces were at play in these
markets, but not in such a negative way as for beef and poultry. The outlook
for the U.S. meat, poultry, and dairy markets in 2005 relies on assessments
of domestic production, the continuing effects of disease and trade restrictions
on exports to major trading partners, the role of “new” animal product
suppliers, and currency exchange relationships.
Hogs/Pork
Hog slaughter in the United States in 2004 was around 103 million head,
about 8 percent of which were of Canadian origin. About two-thirds of the
8.5 million head that came into the United States from Canada last year
were feeder pigs, with most of the remainder for immediate slaughter. The
importance of live hog exports from Canada has grown due in part to a
changing hog and pork industry structure in both Canada and the United
States. Hog production in Canada has been moving to the western
provinces, with firms specializing in producing feeder pigs and slaughter
hogs for export. Incentives for this movement include favorable U.S. feed
costs and western Canada’s favorable climate with respect to disease
control.
U.S. hog imports are expected to decline slightly in 2005 to about 8 million
head (fig. 3). This expectation is based on a slight growth in U.S. hog
numbers. Even though there is a decline, U.S.-Canada hog trade has been
facilitated by the resolution of an antidumping complaint.
In March 2004, U.S. pork producer organizations and individual producers
filed petitions with the U.S. Department of Commerce and the International
Trade Commission (ITC). Those petitions alleged illegal subsidization of
Canadian exports in 2003 and sought trade relief in the form of antidumping
and countervailing duties. On April 6, 2005, the ITC determined
that the domestic hog industry is not materially injured or threatened by
material injury by reason of live swine imports from Canada, effectively
terminating this antidumping case.

U.S. pork exports in 2004 reached a record 2.18 billion pounds, up 27
percent from a year earlier (fig. 4). This increase was achieved by growth in
almost all major markets, with those in Asia taking more pork since both
beef and poultry imports from major suppliers were restricted. Exports to
Canada also grew substantially. The largest increase in pork exports was to Mexico, an increase of 53 percent over 2003. Mexico accounted for about
25 percent of U.S. pork exports in 2004. Japan remained the largest export
market, accounting for 42 percent of U.S. exports. U.S. pork exports fell
substantially to South Korea and Hong Kong, but increased to Taiwan and to
mainland China.

Canada has emerged as the major competitor to the United States in world
pork markets. Canada’s share of global pork exports in 2004 was about 21
percent, the same as the U.S. share. Japan has been the world’s largest single
pork importer for several years, and has become an increasingly important
market for both the United States and Canada. In 2004, the United States and
Canada together supplied 51 percent of Japan’s pork imports (31 percent by
the United States, 20 percent by Canada). However, for Canada, the major
pork export market is still the United States, to which 50-60 percent of Canadian
pork exports flowed in 2004. Canada could remain competitive with the
United States in international pork markets, but its competitiveness traditionally
has been limited by the Canadian pork industry’s heavier reliance on live
animal exports rather than pork production—a situation that has been
changing somewhat in recent years.
U.S. pork exports are forecast to rise about 21 percent in 2005 to over 2.6
billion pounds, the 14th consecutive annual record, while imports are
expected to decline by about 8 percent after having fallen 7 percent in 2004
from the previous year (fig. 4).
Conclusions
Cattle and poultry trade restrictions related to disease clearly shaped the
animal product markets in 2004. Beef, cattle, and poultry trade directly
responded to changing situations related to diseases. Pork, dairy, and sheep
and lamb markets were indirectly affected. Other factors of some consequence
in shaping last year’s markets include the emergence of competing
animal product suppliers—Brazil being a prime example—and exchange
rate movements that made U.S. exports more competitive on the international
stage. As legal proceedings and regulatory actions are resolved, the
import and export expectations and forecasts for animal products will be
adjusted. Pork, sheep, and lamb trade forecasts are less influenced by these
factors, and dairy markets often move to a different beat altogether.
Exports of U.S. animal products should remain competitive in international
markets as exchange rate movements continue to result in a relatively weak
U.S. dollar. The dollar’s position would tend to limit imports somewhat, at
least from some suppliers. Countries like Brazil and Canada emerged as significant
competitors of the United States in some animal product markets—beef
and poultry for Brazil, pork for Canada. This initial outlook for the U.S. meat,
poultry, and dairy markets in 2005 and forecasts into the future rely on continuing
assessments of the various ongoing legal and regulatory actions, the role
of competing animal-product suppliers in international markets, and currency
exchange relationships. While 2005 forecasts are highlighted in this report,
USDA started making initial forecasts for 2006 in May 2005.
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Source: USDA NASS - August 2005