Willowcreek: It is highly unlikely that NAFTA will not survive. I would point out that our mutual frustration with NAFTA stems from different causes, mine because NAFTA has been unresponsive to seeing normal trade resume with beef and live cattle and no doubt your perspective would be that NAFTA has not kept those darned Canuck cattle on the right side of the border.
On the subject of trade, although Canada and the U.S. are exchanging words over softwood lumber at least prominent Americans have not as yet not threatened to shoot our Prime Minister. I am thinking our government should be giving the same amount of attention to seeing normal trade resume in beef as they are to seeing 2X4s cross the border. The restrictions the U.S. has on trade or non trade in our live cattle are costing our producers way more than any tariffs being paid by the softwood lumber people.
I would say just one thing. While your preference would no doubt be to see no imports of beef and cattle, whose imports would you prefer? Would you prefer Australian and South American imports or would you prefer North American cattle which operate in at least a similar cost structure as you do? While in a perfect world we would have no imports while enjoying export sales the world does not work that way from my vantage point.
But let’s imagine a scenario where the U.S. protectionist lobby was successful in keeping out what are seen as competing imports. This is what I would think would happen… There would be a brief period of higher prices while the U.S. beef herd increased in size by a maximum of 5% to make up for the displaced imports (assuming there was room in the industry for expansion against competing uses of the land). After which the packers would return prices paid for live cattle to previous levels or more likely even below prior levels to limit production and maximize their profits. Packer concentration would increase, competition for live cattle would decrease, resulting in lower prices being paid for live cattle. If that sounds like producers cannot win for losing let me explain.
I believe supply and demand do not explain the prices paid for commodities, rather a lack of competition for live cattle and the inability of the primary producer to obtain a competitive advantage does. Attempts by domestic producers to limit or short the commodity supply will not have a lasting effect on producer’s profitability unless some way is found for them to increase their competitive position in the marketplace. The method to address that problem in Canada is seen by many producers as a few properly structured producer owned packing plants to create competition in the marketplace. Frankly I think Canadians are on the right track in seeking solutions to chronically low producer returns when compared to the American producers who are simply seeking to block imports rather than seeking to improve their competitiveness with the packers.
On the subject of trade, although Canada and the U.S. are exchanging words over softwood lumber at least prominent Americans have not as yet not threatened to shoot our Prime Minister. I am thinking our government should be giving the same amount of attention to seeing normal trade resume in beef as they are to seeing 2X4s cross the border. The restrictions the U.S. has on trade or non trade in our live cattle are costing our producers way more than any tariffs being paid by the softwood lumber people.
I would say just one thing. While your preference would no doubt be to see no imports of beef and cattle, whose imports would you prefer? Would you prefer Australian and South American imports or would you prefer North American cattle which operate in at least a similar cost structure as you do? While in a perfect world we would have no imports while enjoying export sales the world does not work that way from my vantage point.
But let’s imagine a scenario where the U.S. protectionist lobby was successful in keeping out what are seen as competing imports. This is what I would think would happen… There would be a brief period of higher prices while the U.S. beef herd increased in size by a maximum of 5% to make up for the displaced imports (assuming there was room in the industry for expansion against competing uses of the land). After which the packers would return prices paid for live cattle to previous levels or more likely even below prior levels to limit production and maximize their profits. Packer concentration would increase, competition for live cattle would decrease, resulting in lower prices being paid for live cattle. If that sounds like producers cannot win for losing let me explain.
I believe supply and demand do not explain the prices paid for commodities, rather a lack of competition for live cattle and the inability of the primary producer to obtain a competitive advantage does. Attempts by domestic producers to limit or short the commodity supply will not have a lasting effect on producer’s profitability unless some way is found for them to increase their competitive position in the marketplace. The method to address that problem in Canada is seen by many producers as a few properly structured producer owned packing plants to create competition in the marketplace. Frankly I think Canadians are on the right track in seeking solutions to chronically low producer returns when compared to the American producers who are simply seeking to block imports rather than seeking to improve their competitiveness with the packers.
Comment