Your September commentary "Don't buy into the import hype" (page 50) left me wondering: who benefits by downplaying the impact of trade on the cattle producer?
The cattle industry has very few tools left to ensure a fair market value. There's no balance of bargaining power, and as Thelma Askey of the International Trade Commission (ITC) pointed out in November 1999, "This disparity in bargaining positions enables beef packers to have a more significant influence on price levels in the slaughter market than the feedlot producers."
Basically, the cattle producers' only leverage is in managing supplies. So as long as supply impacts prices, as long as we continue to import at the level we are today, and as long as the major importers are the major buyers of U.S. cattle and beef, we will continue to be impacted by imports. And, we will be impacted whether we have a declining deficit or not, even during periods of what some call good cattle markets.
Let's look at the export side. The U.S. Meat Export Federation (MEF) has received more than $70 million in beef checkoff dollars to aid in developing international markets for the U.S. beef industry. These folks have done an excellent job and reported that "given production levels and demand" that export sales in 1996 totaling 1.87 billion lbs. added $99.70/head to the value of a U.S. calf.
So, wouldn't it be logical to analyze, based on these same production-demand levels, what impact 3.3 billion lbs. of imports (beef and live equivalent) had in 1996, and more than 4 billion lbs. had in 1999, on the value of U.S. calves?
Also, lost market share is important, whether it's pork, poultry, plant proteins or imported beef and cattle. A study promoted by the Cattleman's Beef Board (CBB) and National Cattlemen's Beef Association (NCBA) reported that if the U.S. cattle industry could regain just half (6%) of the market share lost to poultry since the 1980s, we would improve calf prices nearly $90/head.
Today, imports represent nearly 16% of the total U.S. supplies. What impact has this lost market share had on U.S. cattle prices, our communities and our rural economies?
The other side ignores the fact that supply impacts price and that the impact on cattle prices from increasing imports still outweighs gains in the export market.
This is especially true in a commodity market such as ours that hasn't produced enough beef to meet U.S. demand since the 1950s. It also ignores the impact of artificially cheap import supplies on U.S. cattle prices.
The overall trade deficit on a volume and value basis has declined in 1999 versus 1998. But, as the ITC reported in a 1999 annual report on merchandise trade shifts, U.S. trade in cattle and beef went from a surplus of $199 million in 1996 to a deficit of $370 million in 1998.
During this same time, imports of cattle and beef increased steadily, while the number of domestic cattle operations fell by 50,000, and U.S. production fell by some $5 billion. In a volume-sensitive business, a swing of trade volumes and values in that period created significant market problems for U.S. producers.
Improved export performance of our sector does not mean our industry doesn't face major import problems. Nor does it address the leverage that increasing imports have given the U.S. beef industry to suppress cattle prices.
Even if we run persistent trade surpluses in cattle and beef, it doesn't mean we won't face various import problems. Other important sectors of the U.S. economy that have been export powerhouses also have had import problems that needed or may need government attention.
We need a trade policy that puts Americans first.