via a special arrangement with Informa Economics, Inc.
Impacts on trade and direct and indirect
effects on prices
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following is from a recent Congressional Research Service (CRS) report
on the potential farm sector effects of the 2009 H1NI flu:
Share of U.S. pork exports represented by
countries restricting trade:
Countries that have instituted full or partial bans, as of mid-May, on
U.S. pork exports represent 13-16 percent of U.S. annual pork trade, based
on trade data for the past three years from 2006 through 2008. The bulk
of this lost potential is the result of restricted trade from Russia and
China. Other countries restricting U.S. pork imports comprise a small overall
share of annual U.S. pork trade. Japan, the largest U.S. market for U.S. pork,
with more than one-third of the market in 2008, has repeatedly indicated
it will not restrict U.S. pork exports; also, Hong Kong, despite mainland
China's trade restrictions, has also indicated it will not restrict trade.
International obligations of U.S. trading
Under WTO rules, health and safety measures applied to imports must be
supported by scientific evidence. Obama administration officials and many
in Congress are strongly urging all U.S. trading partners to base any food
safety measures on scientific evidence and to act in accordance with their
international obligations under the WTO, OIE guidelines, and WTO member
obligations under the Sanitary and Phytosanitary (SPS) Agreement.
Regarding 2009 H1N1, OEI – the global animal health
standards organization – asserts that, “the imposition
of ban measures related to the import of pigs and pig products do not
comply with international standards published by the OIE and all other
competent standard setting international bodies for animal health and
food safety. Accordingly, it is argued, there currently is no justification
for imposing trade measures against the import of pork and pork products
based on 2009 H1N1.
International actions being taken:
As some countries continue to pursue trade restrictions on North American
pork products, some affected exporting countries are considering formal
trade actions within the WTO. The U.S. Trade Representative (USTR) is urging
all U.S. trading partners to base any food safety measures on scientific
evidence in accordance with their international obligations. In a statement,
USTR said that “restrictions on U.S. pork or pork products or any
meat products from the U.S. resulting from the recent outbreak do not appear
to be based on scientific evidence and may result in serious trade disruptions
without case.” USDA also has emphasized that “the science
is clear that consuming or handling pork, consistent with safe handling
practices, is of no risk to consumers.” Many in Congress also are
urging U.S. trading partners to base these decisions on science, and therefore
not to ban imports of U.S. pork.
Media reports indicate that Mexico has issued a statement
asking its trading partners to “eliminate any restrictive
measures established on Mexican products, which are not in accordance
with the scientific information available or with their international
obligations”; other reports indicate that Canada has said it will
consider bringing a WTO challenge to China's ban on imports of Canadian
pork. The European Union (EU) Standing Committee on the Food Chain and
Animal Health also asserts that, based on the available evidence, trade
restrictions are not justified.
Many regard the trade bans and restrictions as politically
motivated or intended to protect pork producers in their own countries.
Russia, for example, is not competitive on the global market
in red meats and poultry, and its domestic production has not kept pace
with consumption as income rise, even though government policies have
attempted to encourage domestic production. In recent years, imports
have accounted for a growing share of Russian pork consumption, and
reached more than 50 percent of supplies in 2008. Russia periodically
has imposed SPS measures that have impeded U.S. meat and poultry imports
in recent years. In March 2002, Russia announced a ban on U.S. poultry
imports over the possible presence of avian influenza in the United
States. U.S. officials countered that the ban was not scientifically
defensible and was discriminatory.
China is among the world's largest pork markets and producers,
and imports account for a negligible share of overall supplies. However,
imports have grown in recent years an are important to exporting nations
such as the U.S., given the sheer size of China's market.
The National Pork Producers Council (NPPC) has said it expects
current restrictions on U.S. pork exports because of concerns about the
H1N1 virus to be temporary, particularly as international authorities
continue to emphasize that the virus is transmitted through human contact
and not through pork consumption. However, many producers are concerned
that these initial trade restrictions will be difficult to remove, once
fully instituted. For example, the EU's livestock beef production has
not returned to the level it maintained prior to the outbreak of BSE,
which also affected U.S. beef producers in 2003 when the first U.S. case
was announced. Russia was among the many countries to bank U.S. beef,
although it had not been a major purchaser of such products.
Other U.S. ag markets affected by the outbreak:
Initially, as domestic pork sales fell in response to the spread of the
H1N1 flu, futures prices for corn, soybeans, and wheat declined sharply.
This was a result of concerns that lower pork demand and production could
reduce demand for other commodities, including U.S. feed grains and protein
meals (i.e., soybean meal), as well as other farm inputs. Grain prices
have moved higher since their initial drop.
In other livestock markets, wholesale beef and cattle
futures prices were initially higher following reports of the outbreak.
The U.S. produce sector also expressed concerns about possible restrictions
on fresh produce trade with Mexico and the processing of agricultural
guest labor workers from Mexico because of the 2009 H1N1 outbreak, but
these fears so far have not materialized.
Estimated aggregate market costs to U.S.
Initial reports of the aggregate economic effects to the farming sector
– especially to U.S. hog producers – were grim. Analysts at
the University of Missouri estimated the U.S. pork industry could see losses
of up to $400 million in the next few months, given lower market prices.
Analysts at Purdue University estimated that from 25 percent to 33 percent
of U.S. hog producers may be “forced to reconsider their positions
in the industry.” Yet 2009 H1N1 is expected to have less of an impact
on the pork industry than BSE had on the beef industry in 2003 or avian
influenza on the poultry industry in 2005-2006. Other analysts noted that
although pork prices have declined, supplies are also lower than last
year, and it remains unclear whether pork sales have actually decreased.
In other markets, analysts at the University of Illinois
highlighted that “grains have had quite a rally in prices, after
the market's initial 'knee-jerk' reaction,” although pork prices
continue to be lower.
NPPC has sent a letter to USDA to request assistance for the
U.S. pork industry to compensate for losses it said it has incurred
since the outbreak. Specifically, NPPC is asking USDA to implement a
purchase program for $50 million of pork products to help boost cash
hog prices; to work with U.S. trading partners to remove all restrictions
on exports of U.S. pork and pork products; to develop a comprehensive
surveillance program for early detection of swine diseases; and to work
to keep open the border between the U.S. and Canada to allow for movement
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retransmission is prohibited under U.S. copyright laws.