If the ban on Canadian cattle exports lasts one month, it will cost an estimated $550 million. If the trade ban drags on for four months, it could cost Canada $2.5 billion, according to a report commissioned by government and industry.
The cattle industry can recover from a one-month ban, but a four-month trade ban would cause serious and permanent damage, said Ralph Ashmead of Serecon Management Consulting, author of the report.
“If you lift the ban over the next week, the secondary impacts will not be that big a deal. If it goes to the four month (scenario) we get permanent and sustainable impact on the supply industry to agriculture and to rural communities,” said Ashmead. He said he believes it’s realistic to expect a one- to four-month ban.
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“The four-month scenario we hope is the absolute worst-case scenario.”
In the economic impact assessment, the period between May 20 and June 20 was used to get a snapshot of the damage.
Under the scenario, Alberta, the province with the largest cattle industry, faced the greatest impact.
Under a one-month border closure, the direct impact to the cow-calf, feeder and processing industries in Alberta were calculated to be $98 million. The total losses would be closer to $318 million.
The direct damage to Alberta in a four-month trade ban would be an estimated $412 million.
The total economic impact would be closer to $1.4 billion, about half the overall damage to the Canadian cattle economy.
Many foreign buyers, most notably the United States, have banned Canadian cattle after a cow from Wanham, Alta., was found on May 20 to have bovine spongiform encephalopathy.
After an aggressive tracing program, no further cases have been discovered.
Determining impact
Jackson Gardner with Alberta’s BSE team said he expects an economic assessment report commissioned by the Alberta government will reveal similar damages.
“You can’t just shut down the entire export industry and not have consequences. Clearly, we know the impact is large. It’s a question of degree,” said Gardner, who expected the Alberta government report to be released by June 12.
Serecon’s BSE Economic Impact Assessment report said rendering plants, slaughter plants and feedlots were hit hard by the border closures. The rendering industry may never recover.
“Nobody will want animal parts to feed in the industry now, or forever,” he said.
With little hope that the trade ban will be lifted soon, packing plants, which have already dramatically reduced the number of animals killed, may choose to permanently close.
“Packing plants can’t operate at 50 percent capacity. They will shut down if there is no expectation of going back to a break-even production level.”
But packers could recover if the ban is lifted soon, said Ashmead.
Move to a broader view and it is clear the effects are wide ranging.
The trucking industry has parked many of its trucks, business for companies that supply boxes to packers has slowed down and grain farmers are questioning the wisdom of selling feed to feedlots that may not be able to pay their bills.
“There’s an infinite number of supply industries that supply the primary and secondary agriculture sectors.”
The analysis also included a rapid recovery and a delayed recovery once the border was reopened.
In an optimistic scenario, after one month the industry would be back to 50 percent of its pre-BSE operations, and before the end of the year be at 90 percent.
Under a delayed recovery scenario, where only meat and not live cattle are allowed out of the country, each province is affected differently.
Manitoba would be hit the hardest by a meat-only export restriction because most of its trade is in live animals.
