POTENTIAL EFFECTS ON U.S. CATTLE AND BEEF PRICES FROM REOPENING THE BORDERS

U.S. trade of beef and live cattle has declined substantially since the discoveries of bovine spongiform encephalopathy (BSE) in Canada and the United States in 2003. Imports of live cattle from Canada resumed in July 2005, but U.S. beef exports remained substantially below pre-BSE levels as important export markets in Japan and Korea were not regained. The removal of the ban on Canadian imports and the eventual lifting of bans to export markets could affect U.S. cattle and beef prices. In this study, an econometric model is developed and estimated to determine the effects of lifting trade restrictions on cattle and beef prices. Results show that if net cattle imports from Canada increase to 1.5 million animals per year, with beef imports held constant, the slaughter steer, feeder steer, and retail beef prices would decrease $4.65/cwt, $5.31/cwt, and 6.55 cents/lb, respectively. However, the drop in prices from increased imports would be more than negated if beef exports returned to near previous levels. If beef exports increased to 100 percent of the 2003 level, slaughter steer, feeder steer, and retail beef prices could increase by $7.83/cwt, $8.95/cwt, and 16.0 cents/lb, respectively