NORTHERN "AG" EXPOSURE

by Mark Miller
Rolette County Extension Agent

Published 8-27-01 Turtle Mountain Star

Trade Agreement and Dollar Influence Livestock Prices

Trade liberalization under the Canada/United States Free Trade Agreement (CUSTA) along with other factors such as the strength of the U.S. dollar has influenced the flow of livestock and meat from Canada to the United States, resulting in small but statistically significant reductions in U.S. domestic prices of beef, pork and hogs, according to North Dakota State University agricultural economists.

A report published by Jeremy Mattson, Cheryl Wachenheim, Won Koo and Timothy Petry of the NDSU Department of Agribusiness and Applied Economics gives results of a study to determine factors affecting flows of Canadian exports of beef, live cattle, pork and live hogs to the U.S. and determine effects on U.S. prices.

Canadian exports of beef and live cattle to the U.S. have increased substantially since the late 1980s, and hog exports have increased since the mid 1990s. U.S. producers allege that these increased imports have been harmful to them because of lowered  prices.

"Evidence supports the hypothesis that trade liberalization under CUSTA has had a significant influence on trade flows, facilitating movement of Canadian beef and live cattle to the United States," Mattson says.

Appreciation of the U.S. dollar relative to the Canadian dollar appears to have been an important contributor to increased Canadian beef, live cattle and live hog exports to the U.S., he says. The Canadian hog inventory has also affected the level of exports to the U.S. as increased numbers strained Canadian slaughter capacity.

Relative prices also appear to have influenced Canadian exports to the U.S., says Mattson, as Canada increases cattle and pork exports when the U.S. price advantage increases. The study indicates that increased exports from Canada have resulted in lower U.S. prices, but over the long term these effects have been small, he says.

"Changes in live cattle imports from Canada have had virtually no effect on cattle prices, although Canadian beef exports to the United States likely have had some effect on U.S. cattle prices," Mattson says. "The magnitude of the price impact caused by Canadian exports is quite small for cattle and pork but somewhat more important for beef and live hogs."

For a copy of the report, "Canadian Exports of Livestock and Meat to the United States," contact: Carol Jensen, P.O. Box 5636, Fargo, ND 58105, e-mail cjensen@ndsuext.nodak.edu .This  publication is also available on the World Wide Web at:  http://agecon.lib.umn.edu/ .

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