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The petitions were entered March 5 at the U.S. Department of Commerce and International Trade Commission (ITC) by NPPC and several state pork producer organizations, as well as individual pork producers, and ask U.S. authorities to determine if Canadian producers are benefiting from illegal subsidies and selling hogs in the U.S. at prices that are lower than prices in Canada, i.e., "dumping," a violation of U.S. and World Trade Organization rules of trade.

If investigators so find, the petitions suggest duties of five to 20 percent on Canadian live swine exported into the U.S. to eliminate and remedy the unfair practices. The petitions do not cover U.S. Department of Agriculture-certified purebred breeding stock and pork.

Iowa pork producer and NPPC president Jon Caspers announced the filing at the National Pork Industry Forum in Atlanta, listing a number of grievances that the U.S. industry feels toward its North American neighbor, including billions of dollars in price supports that have allowed Canadian producers "to ignore" market conditions in Canada and the U.S., which is "seriously injuring the U.S. pork industry."

Canadian subsidies and trading activities "are destroying competitive and efficient U.S. producers," added NPPC International Trade Counsel Nick Giordano. "If these unfair Canadian practices are left unchecked and U.S. producers are made to continue to compete with Canadian producers who do not have to meet the test of profit, U.S. producers will continue to lose sales, income and market share," he said.

Caspers and Giordano said the objective of the petitions is to restore demand-and-supply mechanics and normalcy to the U.S. hog markets.

According to Feedstuffs, U.S. pork producers have lost money in four of the last six years and are projected to at best break even this year, and according to the petitions, the primary reason for this extended period of little or no profits is a growing and now substantial number of Canadian-born hogs in the U.S. slaughter that has resulted in an oversupply situation.

Caspers said while U.S. producers have responded responsibly by decreasing the U.S. breeding herd's size and, therefore, U.S. pig crops, Canadian producers have done just the opposite, expanding the Canadian breeding herd's size every quarter since 1997. Furthermore, he said, while U.S. producers have pulled back hog production 4.5 million head since 1998, Canadian producers have increased production 8.6 million head.

He said this is a consequence of Canadian government subsidies, including one program that is "a no-lose situation. ... If markets are good, Canadian producers get a market reward, and if markets are bad, they get a government reward." He noted that in 1998, as U.S. producers took their worst-ever losses due to a horrendous oversupply situation, the average Canadian producer's hog income totaled $44,000, of which $43,000 came from government payments.

He noted that the Canadian industry has increased production despite low prices in Canada and the U.S. and the situation surrounding the discovery of bovine spongiform encephalopathy (BSE) in Canada last year that buried the Canadian markets in beef and destroyed the Canadian hog and pork markets. He said this irresponsible expansion "appears directly related to the receipt of billions of dollars in subsidies."

(A case of BSE was found in one cow in Alberta last May, and beef importing nations worldwide immediately banned Canadian beef, which increased the amount of beef on the Canadian domestic market more than 50 percent and pushed livestock, meat and poultry prices to extreme lows, prompting Canadian producers to export an extraordinarily large number of market hogs into the U.S. Mexico and the U.S. began retaking Canadian beef late last year.)

Caspers said Canadian exports of feeder pigs and hogs increased 37 percent in the last two years from 5.3 million head in 2001 to 7.3 million head last year, and the "onslaught ... contributed significantly" to a decline in market prices in the U.S., with an average hog price of $44.08/cwt. in 2001 that fell to $33.25 in 2002 and only recovered slightly to $37.63 last year. He said the inelasticity of the U.S. hog market, in which a minimal increase in production causes a maximum and negative decrease in prices, responded terribly to the additional 2 million head from 2001 to 2003.

Moreover, the petitions allege those hogs were dumped. The petitions said from Oct. 1, 2002, to Sept. 30, 2003, the average import price for a Canadian feeder pig was $28.98 per head in the U.S. and $36.15 in Ontario, a difference in which Canadian producers sold feeder pigs $7.17 less in the U.S.

In the same timeframe, the average import price for a Canadian market hog was $86.12 per head in the U.S. but was $93.32 in Ontario, a difference of $7.20. (Selling hogs in one country at lower prices than they are worth in their home nation meets the U.S. and WTO definition of dumping, NPPC said.)

An analysis done exclusively for Feedstuffs by Chuck Levitt at Alaron Trading Co. in Chicago, Ill., that was published two weeks ago shows that the Canadian component of the U.S. slaughter has increased steadily since the early 1990s -- from less than 1 percent to 7.6 percent last year -- while U.S. producers have held the U.S. component quite steady.

Indeed, almost all of the increase in the U.S. slaughter since 1994 has come from hogs wearing Canadian flags, Levitt noted. However, he also said 65-70 percent of that has been in the form of feeder pigs that are bought and finished by midwestern producers.

When pressed that much of the "Canadian problem" actually is on the U.S. side of the border, Caspers acknowledged that even he has purchased Canadian feeder pigs and said this was "carefully considered, but the decision was made that they had to be included in the countervailing and dumping investigations."

Giordano added that not only did NPPC's board of directors "closely reflect" on this matter but so did state organizations, including the Iowa Pork Producers Assn., whose members represent one of the largest importers of Canadian feeder pigs, that voted unanimously to support the petitions.

"It's not U.S. producers who are subsidizing Canadian producers," he said. "It's not U.S. producers who are engaged in unfair trade, ... but it (the feeder pig situation) will be part of a kitchen sink full of arguments that we are expecting."

Caspers emphasized that NPPC is not petitioning to close the U.S. border to Canadian hogs or otherwise halt the Canadian industry from exporting into the U.S., and he said NPPC has not changed its policy on trade. "We continue to be strong advocates for increased trade," he said, "and rightfully so" considering that the U.S. pork sector has increased pork exports more than 150 percent since the Uruguay trade round.

"We would be foolish to do anything other than support expanded trade," Caspers said. "However, supporting trade and opposing unfair trade practices are not mutually exclusive."

He recalled that NPPC sought and won countervailing duties on several Canadian pork sector subsidy programs in the mid-1980s that led the Canadian government to reduce subsidies over time and the U.S. government to eventually revoke the duties. Since then, he said, "the Canadians have reinvigorated their subsidy programs to the detriment of U.S. pork producers."

Giordano said Commerce has until March 25 to accept the petitions and, if it accepts the petitions, will begin investigating the complaints to determine if countervailing and dumping duties are in order. He said it would be expected that Commerce would issue its preliminary determination by mid-April and level preliminary duties by June 1 for the countervailing case and by Aug. 12 for the dumping case, according to normal procedure schedules. At that point, the U.S. Customs Bureau would require importers to post cash deposits and bonds, he said.

Commerce would be expected to complete its investigation one year from now and determine final duties, after which ITC would begin collections.

Source: National Pork Producers Council (NPPC) - 15th March 2004