CME: Sharp Decline in Canadian Hog Imports to US

by 5m Editor
3 December 2008, at 12:54pm

US - CME's Daily Livestock Report for 2 December 2008.

It has been just over two months that the Country of Origin Labeling law (COOL) came into effect and Canada has taken the first step to try and overturn it on the grounds that it violates WTO rules governing trade between member countries. According to published media reports, Canadian authorities have asked US officials for formal consultations concerning the law in question. This is the first step before the issue is brought to a formal WTO panel that will then seek to mediate the dispute. It may seem somewhat odd that a panel consisting of ad hoc appointees of groups with even stranger acronyms would be involved in US law. But the US is a member of the World Trade Organization and as such it has agreed to abide by the mediation process that all signatories to that charter have devised.

A WTO decision on the matter cannot overturn US law, rather the purpose of bringing the case before the WTO is to seek some form of dispute resolution via negotiation and, if that fails, the aggrieved party is then justified to impose sanctions of equal measure. Normally it takes about 60 days for the consultations and mediation between the two parties. If the dispute is not resolved, then the Dispute Settlement Body (DSB), which is basically all WTO members, creates a panel that hears the case and makes a final ruling. According to the WTO outline of the dispute resolution process, the entire process can take a little over a year to complete. Those interested to read more on the process can do so by clicking here.

The Canadian complaint follows a sharp decline in Canadian hog imports to the US, which in part is blamed on the implementation of the COOL legislation. There have been some media reports indicating that US packers were either avoiding to purchase or purchasing at a discount Canadian hogs to account for the increased costs of processing pigs that would require additional handling. Pork packers are loath to add new SKU’s to their product line and generally when they do so , they insist on all sorts of premiums, which then filter back and are reflected in discounts for hogs purchased.

As the chart above shows, the share of Canadian hogs in US slaughter mix has declined dramatically since this fall and currently there are about 20 per cent fewer Canadian hogs in the US slaughter mix than a year ago. We estimate that in November Canadian hogs accounted for about 6.9 per cent of US hog slaughter, compared to about 9.1 per cent a year ago. Imports of Canadian slaughter hogs in the past four weeks were down 74 per cent while feeder imports were down 13 per cent.