R-CALF USA to ITC: Proposed USMCA will substantially harm cattle producers in U.S.
December 26, 2018
Billings, Mont. – Today, R-CALF USA filed its final submissions to the U.S. International Trade Commission (ITC), culminating the group's efforts to ensure the ITC's upcoming report to the President and Congress will accurately describe the likely impacts the recently proposed U.S.-Mexico-Canada Agreement (USMCA) will have on the U.S. cattle industry.
"The likely impact of the USMCA on the U.S. cattle industry will be substantial, and it will be substantially negative," R-CALF USA CEO Bill Bullard said in oral testimony before the ITC.
The Trade Priorities and Accountability Act of 2015 requires the ITC to submit to the President and to Congress a report assessing the likely impact of the USMCA on the United States economy and on specific industry sectors. The ITC's investigation and report must be completed within 105 days after the President signed the agreement.
R-CALF USA has been participating in the ITC's investigation since October 15. On October 29 the group submitted its pre-hearing brief. It provided oral testimony during the ITC's November 16 hearing and submitted its post-hearing brief on December 19. Today the group submitted its final summary regarding the USMCA's likely impact on the U.S. cattle industry.
“The likely impact of the USMCA on the U.S. cattle industry will be substantial, and it will be substantially negative.” Bill Bullard, R-CALF USA CEO
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In its submissions, the group explained that because the USMCA adopts the same provisions in the original North American Free Trade Agreement (NAFTA) regarding cattle and beef trade, the likely impacts of the new agreement can be assessed by reviewing the impact that the NAFTA had on the industry during the past 24 years.
The group stated the impact of those NAFTA provisions were disastrous to independent cattle producers because they empowered multinational beef packers to indiscriminately displace domestic cattle and beef production with cheaper, undifferentiated imports of both cattle and beef. This, the groups said, has substantially weakened the U.S. live cattle supply chain and has caused the dismantling of the domestic supply chain's critical marketing channels and infrastructure, which has substantially reduced competition for the industry and is contributing to the hollowing out of America's rural communities.
The group identified 10 indices of harms the NAFTA agreement has wrought on the U.S. cattle industry. Those indices include:
Twenty percent of all U.S. beef cattle operations exited the industry from 1994 to 2012, based on latest available census data.
Seventy-five percent of all U.S. cattle feedlots exited the industry from 1996 to 2017.
By 2014, the U.S. beef cow herd declined to the lowest level in seven decades and today is nearly three million head less than it was in 1994.
Forty-eight U.S. beef packing plants exited the industry between 1995-2014, and there have been very few new entrants into the sector or new packing plants built.
The average annual returns per bred cow for U.S. cow/calf producers declined from an average of $50 during the seven years prior to 1994 to only $37 from 1994 through 2017.
The only years cow/calf returns per bred cow exceeded the NAFTA period's $37 average were in 2004-2005 when the U.S. banned Canadian cattle imports; and after the 2009 implementation of country-of-origin labeling (COOL).
Under NAFTA, the U.S. cattle industry suffered on average an annual $1.4 billion deficit in the trade of cattle, beef, beef variety meats and processed beef, resulting in a cumulative NAFTA trade deficit of negative $31 billion.
In 2014, the U.S. cattle industry suffered a 41 percent value-based import surge from Canada and Mexico, resulting in the collapse of U.S. cattle prices beginning in 2015.
The U.S. cattle producers' share of every consumer beef dollar declined from 56 percent the year before NAFTA to just 45 percent in 2017; consequently, packer margins reached unprecedented levels in recent years, averaging $216 per head from 2016 through mid-2018.
Average returns to U.S. cattle feeders during the past 18 years under NAFTA were a negative $20.40 per head per month.
In its post-hearing brief, R-CALF USA refuted what it called baseless and false claims made by the North American Meat Institute (NAMI) and the National Cattlemen's Beef Association (NCBA). The group refuted what it called false claims by the NCBA that exports have returned $320 per fed animal to U.S. cattle producers, that country-of-origin labeling (COOL) did not benefit the U.S. cattle industry, and that the greatest threat to the U.S. cattle industry is labor.
For example, R-CALF USA stated the NCBA deceptively uses wholesale beef prices received by beef packers and beef exporters to calculate its $320 per head benefit from exports.
"Proceeds from export sales are not based on cattle prices paid to domestic cattle producers," they are based on what packers and other wholesalers receive and that is why packers are now earning record margins while U.S. cattle prices remain depressed," said Bullard.
The group also explained how the testimony by the NAMI and NCBA actually proves R-CALF USA's position that NAFTA has displaced domestic cattle and beef production.
In conclusion, R-CALF USA stated that because the USMCA incorporates NAFTA's fundamentally flawed provisions, it should be expected that the USMCA will now cause the elimination of the critical mass of competitive marketing channels and industry infrastructure needed to sustain an independent family farm and ranch system of cattle production in the United States. Thus, the new USMCA will accelerate the destruction of the U.S. cattle industry as we know it today.