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NPPC responds to unfair Canadian Trade practices

by 5m Editor
5 March 2004, at 12:00am

US - The NPPC is concerned about unfairly traded live hogs from Canada. On March 5, 2004, the NPPC, along with state pork producer organizations and individual U.S. pork producers, filed antidumping and countervailing duty petitions with the U.S. government in an effort to redress the injury that has been caused by the recent surge in unfairly traded imports of hogs from Canada.

NPPC responds to unfair Canadian Trade practices - US - The NPPC is concerned about unfairly traded live hogs from Canada. On March 5, 2004, the NPPC, along with state pork producer organizations and individual U.S. pork producers, filed antidumping and countervailing duty petitions with the U.S. government in an effort to redress the injury that has been caused by the recent surge in unfairly traded imports of hogs from Canada.
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With these petitions, the U.S. industry hopes to remedy the imbalance in the marketplace that has been caused by the substantial subsidies given by the Canadian government to Canadian hog producers.

The Department of Commerce should initiate the cases on March 25, 2004 and the International Trade Commission will make its preliminary determination on injury by April 19, 2004. Preliminary duties are expected to become effective on June 1, 2004 for the countervailing duty case and August 12, 2004 for the antidumping case, although short extensions of these deadlines are not unusual in these cases. The cases should be completed within a year.

U.S. pork producers are filing these petitions because surging imports from Canada have caused prices to plummet in the U.S. market. The imports from Canada have resulted in the oversupply of hogs in the U.S. market. Because U.S. production remained fairly stable between 2001 and 2002 before declining in 2003, the oversupply is primarily due to the increase in imports from Canada. Canadian producers have been able to increase their herd size because of substantial subsidies given to them by the Government of Canada. Additionally, Canadian producers have been able to grow market share in the U.S. market by selling their hogs in the United States below what they sell in their own market.

U.S. imports of live hogs from Canada grew from 5.3 million hogs in 2001 to 7.3 million hogs in 2003, or by 37 percent. This onslaught of Canadian hog imports has contributed significantly to the decline in live hog prices in the United States and the financial losses suffered by U.S. producers for the vast majority of the past two years.

U.S. prices of live hogs plummeted from an annual average price of $44.08 per cwt in 2001 to $33.25 per cwt in 2002, and although prices have increased slightly in 2003 to $37.63 per cwt, prices have remained below 2001 levels. The inelasticity of the hog market means that the increase of an additional 2 million hogs in the market has a significant negative effect on U.S. prices, resulting in the industry’s poor financial condition.

According to Statistics Canada’s most recent quarterly report of hog inventories, Canada’s swine breeding herd continues to grow in spite of the appreciation of the Canadian dollar; the impact of massive quantities of Canadian-produced beef on the Canadian market due to BSE; and, the low prices that continue to plague producers on both sides of the border. Indeed, the Canadian herd has not posted a year-over-year quarterly decline since 1997. All of the reduction in the North American swine breeding herd has been accomplished by U.S. producers. The Canadian hog producers’ failure to respond to economic signals appears to be directly related to the receipt of billions of dollars in subsidies. These benefits disrupt normal agricultural/business cycles, allowing Canadian producers to grow their herd sizes regardless of economic conditions. This results in oversupply that is exported to the United States, further disrupting normal agricultural/business cycles in the United States. Thus, the oversupply in the U.S. market is largely attributable to the increasing supply of hogs, both feeder and slaughterweight hogs, from Canada.

The Canadian pork industry has benefited from a well-known history of government subsidization. These subsidies have been the source of a longstanding dispute between the U.S. and Canadian industries. In 1984, the U.S. pork industry filed a countervailing duty (CVD) case with the U.S. Commerce Department and the International Trade Commission (ITC) challenging many of these Canadian subsidies. Commerce found that the subsidies provided by the Canadian federal and provincial governments were unlawful while the ITC concluded that this subsidization threatened injury to the U.S. industry. These findings resulted in the imposition of a countervailing duty order in 1985 which covered as many as 43 subsidy programs and which remained in place through 1999.

The Canadians have reinvigorated their subsidy programs in recent years to the detriment of U.S. pork producers. In the period after the market price collapse in the fall of 1998 the average Canadian pork producer had an income of $44,000 of which $43,000 came in the form of Government payments according to a Canadian government publication. One of the most significant programs available to Canadian hog producers is the “ASRA“ program in Quebec. This is an income stabilization program where benefits are received when producers are losing money and is based on prevailing market prices; substantial benefits appear to have been received in 2003 and will likely continue through 2004. The most recent addition to the policy mix in Canada provides pork producers with a guarantee that they will receive the Olympic average of the income they have earned over the past five years. This has put the Canadian producer in a no-lose situation, if markets are good, the producer gets a market reward and if markets are bad, the producer gets a government reward. With perfectly free trade across the U.S. and Canadian border this kind of risk subsidy will have an enormous impact on the growth of the pork industries in both countries.

In addition to the CVD case, an antidumping case is also warranted. The Canadian producers are selling their hogs to the United States at prices that are lower than their average prices in Canada and lower than their average cost when measured on a long-term average basis. For example, for the period October 1, 2002 to September 30, 2003, the average import price for a slaughter weight hog from Canada was $86.12/head; the average price for the same hog in Ontario was $93.32/head, a price differential of $7.20/head; the average import price for a feeder pig from Canada was $28.98/head while the average price for the same hog in Ontario was $36.15/head, a differential of $7.17/head. If the markets were truly competitive and if there were only one North American market, prices in Canada would be equivalent to U.S. prices.

The product subject to these investigations consists of live hogs from Canada except USDA certified purebred breeding swine.

Source: National Pork Producers Council (NPPC) - 5th March 2004

5m Editor