A U.S. court ruling that brings the permanent reopening of the border to live cattle one step closer is good news for Ontario cattle producers.

Since the border was closed after a case of bovine spongiform encephalopathy (BSE) was discovered in Alberta in May 2003, the province's cattle producers have endured $650 million in losses. "That's $650 million less to be multiplied around the rural economy in Ontario, so it's hurt equipment dealers, it's hurt car and truck dealers, it's hurt dentists," says Dave Stewart, executive director of the Ontario Cattlemen's Association. "It's hurt all sorts of people that live and work in rural Ontario."

With beef producers in every county, the impact of mad-cow disease has been felt across the province. Ontario's 21,000 beef farms accounted for $1.2 billion in farm gate receipts in 2002, the last normal year of operations.

The border was ordered reopened after a July 14 ruling in Seattle by the Ninth Circuit Court of Appeals reversed a preliminary injunction issued in March by the U.S. District Court in Montana that upheld the ban on live cattle. However, a separate hearing still will be held July 27 in Montana that could still close the border permanently to Canadian beef imports, including boxed meat "This is wonderful news that has long been awaited," Stan Eby, president of the Canadian Cattlemen's Association, said of the July 13 decision.

Ned Bekavac, Business Edge
Milton cattle farmer Andrew Wilson's hay operation and factory job are keeping him afloat.

Earlier this month, Canada's agriculture ministers and beef industry officials had gathered in Kananaskis, Alta. to work on contingency plans in case the United States imposed new restrictions on beef exports as a result of two court cases.

The details of the plans will not be made public until the results of both U.S. court cases are known. The plans cover a range of possibilities, including the worst-case scenario that the Montana judge might include boxed cuts of Canadian beef when he considers a permanent injunction banning live cattle.

Some Ontario cattle farmers, such as Andrew Wilson, have simply given up waiting for the border to reopen. Earlier this year he was preparing a number of cattle for market in time for early March, when it was originally scheduled to reopen for cattle younger than 30 months Then the Montana judge granted a temporary preliminary injunction to a group of protectionist U.S. ranchers and cattlemen that kept it closed. The Ranchers-Cattlemen Action Legal Fund argues that Canada's three cases of BSE mean northern herds are unsafe.

"That just crushed me," says Wilson, who has 60 cows in his cow-calf operation and finishes 200 head of cattle on a small feedlot. He also grows hay on his property just north of Milton, about 100 kilometres west of Toronto.

As the myriad of cases, cross-motions and appeals made their way through the U.S. courts, Wilson stopped paying attention. Instead, he has been focusing on the things that bring in money, namely his 40-hour-a-week job at a Milton factory that he holds in addition to running the farm and his 25,000-square-bale hay operation.

Wilson says he is managing to get by and while government assistance over the past two years has been helpful it has not been enough.

"It is appreciated - don't get me wrong," he says, "I don't want to be ungrateful.”

But at less than 50 cents to the dollar, it only softened the blow of BSE.

It is estimated that so far the Canadian beef industry has suffered more than $7 billion in export losses.

Prior to May 2003, beef production was basically a fully integrated industry, Stewart says. Canada had the cattle, the United States had the packing plants and 1.1 million head of cattle were shipped south each year for slaughter.

When the border slammed shut, there simply were not enough packers here to process Canadian cattle, so prices plummeted. Producers were selling their animals for less than 30 cents a pound, or about $400 for a finished animal, and many went under.

Today, thanks to a concerted government effort, Canadian slaughter capacity has been boosted to 88,000 head per week, a 22-per-cent increase, and as a result, cattle prices have risen to 80 to 85 cents per pound. However, for Canada to be completely self-sufficient, slaughter capacity would need to reach 105,000 head per week.

So long as the border remained closed, Canadian beef producers had only one market for their cattle: Canadian packers. However, those packers can sell boxed meat to the U.S. - at least until the July 27 court hearing - where beef is scarce without the influx of Canadian cattle. About 8,000 meat-packing jobs have been lost in the U.S. over the past two years, according to the American Meat Institute.

In early July, Americans learned they had their first native case of BSE in a 12-year-old Texas cow. The only other U.S. case was in a Washington dairy cow that had been imported from Canada.

"Basically that's one less reason for them to keep the border closed," says Lianne Appleby, communications manager of the Ontario Cattlemen's Association Ontario farmers are also feeling the impact of several new pieces of legislation, as well as the effects and ongoing uncertainties from the border closing. The Nutrient Management Act and the proposed source water protection legislation - both designed to protect surface water and groundwater from fertilizer and manure runoff - will place new demands on beef producers.

The 2005 Greenbelt Act, which protects agricultural land in the Golden Horseshoe from development, also will affect rural land values.

Cattle farmer Wilson points to land in nearby Georgetown that is currently selling for $80,000 to $100,000 an acre. "The greenbelt would put it down to about $10,000 or $15,000," he says.

On top of everything, Stewart says, there is also the weather. In some areas farmers are contending with drought, while in others, they have had 18 centimetres of rain.

Dairy farmers are faring a little better. BSE was not as devastating for them, says Bill Mitchell, a spokesperson for the Dairy Farmers of Ontario. However, the border closure has meant a 10- to 15-per-cent drop in income because they can no longer sell breeding stock to the U.S. or ship cull cattle to U.S. packers.

Ontario's 5,000 dairy farmers are also facing ongoing skirmishes over dairy product dumping from the U.S. and Europe. While approximately 93 per cent of dairy products are consumed in their country of origin, much of the world trade in dairy products is American and European surplus that is often sold below cost.

Mitchell cites the example of butter oil-sugar blends - a combination that neatly sidesteps Canadian tariffs on butter and sugar. Today, about half the butterfat used in Canadian ice cream comes from the imported blends designed to exploit tariff loopholes.

Overall, however, dairy producers are doing well, Mitchell says. He credits a quota system that establishes each producer's share of the domestic market. The result is a reasonably predictable income for farmers and reasonably stable prices for consumers.

In contrast, beef production has always been a risky business. Stewart admits that Canada's enormous reliance on a single customer - the U.S. - has made beef farmers very vulnerable to trade actions.

And although the Ontario Cattlemen's Association is working hard to expand the customer base and Stewart is hopeful Japan will open its borders before Christmas, exporting to the U.S. remains a key goal.

"From Ontario, we can ship to about 130 million customers within a 24-hour truck ride," he says. "That's a tremendous market."

Canadian producers may not have access to that market any time soon, though. It could take up to 18 months for all the appeals to wind their way through the courts, Stewart says.

And even if the border is reopened, the exchange rate will be a huge issue, since the Canadian dollar has gone up approximately 30 per cent since BSE was first discovered.

Stewart is cautiously optimistic about the future. Although it will take decades to replace the equity that producers have lost, he believes beef is still a good business for Ontario.

Increased BSE testing, age verification and new radio frequency tags to track cattle provide more safety to consumers, and will hopefully make Canadian beef attractive to foreign markets.

As for Wilson, there's no question where his future lies.

"I've owned cattle since I was about four or five," he says. "I don't think there would be too many years of my life that I (did not) have cattle. Once you get it in your blood, you can't get it out."

- With files from The Canadian Press

(Julie Stauffer can be reached at stauffer@businessedge.ca)