The Future of Animal Agriculture in North America - Farm Foundation

Chapter 4
Global Competitiveness and Trade
International trade in animal and particularly animal products
has increased dramatically in recent years. North America’s
natural resources, combined with technologically advanced
production systems, ongoing research and development, and
extensive transportation and utilities infrastructure, position it
as a significant competitor in the global livestock and poultry
industries. An importer of meat and dairy products, North
America is a leading exporter, as well. Projected population and
income growth patterns indicate exports will continue to be
important to the sector’s success.
This chapter focuses on the importance of trade and the issues
affecting trade. The chapter discusses the current situation for
major animal industries, market institutions that impact trade
and private-sector innovation to benefit from emerging trade
opportunities. It addresses drivers of change, barriers to trade
and trade agreements. It concludes by identifying policy options
and areas needing additional research.
Current Situation
North American animal agriculture has undergone dramatic
change during the past two decades. Increased trade and
investment in animals and animal products resulted in more
market integration than at any previous time. Animal producers
especially were impacted by these changes as prices were
increasingly determined by events, policies and forces beyond
national boundaries.
Beef and Beef Cattle
The most significant North American trend during the past 25
years is the growth of the Canadian and Mexican beef cow
herds and calf crops relative to the United States. The period
1980 to 1985 marked the high point for the U.S. beef cattle
inventory, relative to Canada and Mexico, and has been
trending downward ever since. During that same period,
Mexican and Canadian beef cattle numbers have been trending
upward.
North America accounted for 14 percent of world exports of
beef cattle in 2004, and most of that was within North
America—Canada and the United States exporting to each
other and both exporting to Mexico. Previously, North America
accounted for nearly a quarter of world beef exports. This
decrease is the result of many other national markets remaining
closed to Canadian and U.S. beef as a result of bovine
spongiform encephalopathy (BSE) being identified in 2003. Prior
to BSE being identified in Canada in May 2003, 85 percent to
90 percent of Canadian beef exports were to the United States
and Mexico. Primary markets for U.S. beef exports were Japan,
Korea and Mexico, with a smaller amount going to Canada.
North America accounted for 43 percent of world beef imports
in 2004, a level similar to that of the past five years and above
that of much of the 1990s, when it was 25 percent to 35
percent of world beef imports. The United States accounted for
about 81 percent of North American beef imports in 2004,
followed by Mexico (14 percent) and Canada (5 percent). The
U.S. 2004 value compares to 65 percent to 70 percent in the
previous seven years. This increase is in large part due to a slight
rise in U.S. beef demand, lower beef supplies due to the U.S.
cattle cycle being at a low point, and higher imports of lean
beef to service the ground meat and fast-food markets. Mexican
and Canadian imports were lower in 2004 compared to those
in previous years.
Brazil has emerged as a major trader of beef, with exports at 1.1
million metric tons (mmt) in 2004, compared with 178
thousand metric tons (tmt) in 1996 (Figure 1). Brazil’s major
export markets are the Middle East, the European Union (EU)
and Chile. Other major beef exporters include Australia and
New Zealand, which on average have exported a combined 1.3
mmt during the past five years, mainly to the United States,
Japan, Korea, Taiwan and Canada.
Canada is also a major beef exporter, though more than 90
percent of shipments go to the United States and Mexico
(Figure 2). The EU, the second largest beef producer in 2004,
exported only 225 tmt outside the EU, primarily to Russia. The
Ukraine exported a 10-year low of 77.6 tmt in 2004, with more
than 99 percent of that shipped to Russia.
While the U.S. beef trade surplus recovered in 2003, BSE put
an end to the surplus and helped to cause a $2.8 billion beef
trade deficit in 2004. Whether this continues long term
57