Softwood Lumber

[farmers_son]

Canada and U.S. trade has fundamentally changed as a result of the softwood lumber deal reached yesterday. While NAFTA was originally intended to be a free trade deal, as of yesterday it is a managed trade deal. Canada has agreed to restrictions, under certain conditions, on imports of lumber to the U.S. while the U.S. has unrestricted access for their goods into this country as well as unrestricted access to our energy.

Canadian cattle producers have been waiting for the other shoe to drop for months now in anticipation of a rule allowing imports of cows and cow beef into the U.S. It is clear to me that the rule was on hold pending this softwood lumber deal. We can expect a similar “deal” from the Americans regarding trade in cattle and beef. The next rule will allow for “managed” access for cattle and Canadian beef, not free access. At the same time the U.S. will demand free access for their beef and live cattle imports into Canada.

Obviously NAFTA had no political influence within the U.S. The much touted dispute settlement mechanism did not work as Canadians were forced to reach a negotiated settlement after winning NAFTA ruling after NAFTA ruling. NAFTA is dead, dead as a doornail. In its place is a new deal called NAMTA, the North America Managed Trade Agreement.

[Willowcreek]

farmers son quote: "NAFTA is dead, dead as a doornail."
---------------------------------
I hope you are right- throw it out and get a FAIR trade deal...

But remember concerning cattle- the Canadians were the ones to first put on restrictions and never did open the border to free trade in cattle going north with your "ALL US cattle were considered diseased" policy...

Now when US producers try to protect the US cattle herd- Canada screams protectionism...

You can't have it both ways folks!!!!

[jensend]

the canadian government should step back and see just how dead nafta is and start to diversify markets for all sectors of the canadian economy. within a year the american softwood producers will start another challenge and the whole process will start again and a precedent has been set with negotiating after winning the nafta process. heck, let's ship the oil to china; they aren't any worse to deal with than the yanks. we're only neighbours when we have something they want. btw, willowcreek, are there still any cattle movement restrictions within the usa due to anaplasmosis or bluetongue?

[farmers_son]

What bull...

Here is the straight goods. Diseased U.S. feeders for the last almost 10 years were allowed into this country without restriction during the winter months when the vector to spread the disease did not exist. Even during the summer months all that was ever required was a $5 blood test.

Compare that to the outrageous protectionism that the Americans have been subjecting our cattle industry to because of BSE, a disease which is at a low incidence in both countries, and you see what game is being really played here.

The only thing stopping U.S. feeders from coming into Canada last winter was the U.S. embargo on our live cattle and beef.

Lets see... unresticted access for U.S. feeders in the winter and a $5 blood test in the summer. Or the U.S. position which is absolutely no access for cow beef or live cows and dentition, preg checks, brands, governemnt inspections on our live calves.

BSE is not a communicable disease, both countries have measures in place to prevent the spread of BSE and to ensure the safety of the food product. There is absolutely no excuse for the U.S embargo on our cattle except to protect their producers and manage the level of beef and cattle trade between the two countries.

[Willowcreek]

jensend: "btw, willowcreek, are there still any cattle movement restrictions within the usa due to anaplasmosis or bluetongue? "

Not in about 45 states of the union- but Canada still considers "ALL" US cattle as diseased...

As far as oil goes- both countries have too much invested together in the pipelines and facilities to change...

I read an article yesterday- the reason they are only paying $30 barrel for Montana and ND oil- lack of transport- all the pipelines are tied up with Canadian oil which has purchased priorities on the lines....

[jensend]

ot: As far as oil goes- both countries have too much invested together in the pipelines and facilities to change...

that would be the american pov. the chinese and canadians might not be so committed if a better deal walks in the door. the chinese are already taking equity positions up here. maybe they can help free up some pipeline capacity for you.

r-calf had a chance to do something good and could have gathered more support on both sides of the border but the hillbilly way ain't gonna cut it. you've probably gone about as far as you can. the packers used you as a front to screw the canadian producer and your strategy worked for them to set the stage to do the same down there and you can already see it can't you?

[Willowcreek]

Jensend- Why doesn't Canada send some of that beef to China? Why is it all shirttailed on the US cattleman?

Oh I forgot- you guys have no control over your industry anymore- All American run- sold out to the highest bidder...And Cargill/Tyson want to ship US beef to China and then ship their captive Canadian cattle to the US to keep the US price down-- Win-Win for them-- Lose -Lose for producers...But Canadians are happier then pigs in sh*t- we got our US border open again- we can help the packers screw everyone....

Since the Border opened and the Packers got access to the Canadian cattle so they can manipulate the market- the prices have steadily went down...Looking at $60 fats this summer- and more bankrupt feedlots-- No buyers even offering to buy fall calves-- but Canadians are jumping for joy- we'll get the OTM's open so Americans can have $20 culls too...

[Willowcreek]

I need to clarify my "all Canadians" because their are a few that actually see what is happening-- the rpkaisers, Cam Ostertags, few more- that really can see the manipulation in the market and want to try and do something about it, just like R-CALF is trying...

The rest just set back, give their money to CCA and ABP to carry on the same-o same-o and blame all their BSE and everything else on R-CALF...

[farmers_son]

Willowcreek: You are incorrect. If you check the Live Cattle weekly charts you will see that live cattle futures are at levels that are not lower then they have been since there was BSE in North America. In fact futures prices were at this level approximately each April for the last three years. If you notice every time restrictions were eased on imports of Canadian beef or cattle your futures market responded positively.

In April 2004 the market rebounded after the U.S. lifted restrictions on ground beef and bone in cuts of beef. The market rebounded again in July 2005 after the Appeal Court overturned the R-Calf injunction. I am expecting a similar positive move when the U.S. announces its next rule on imports of Canadian cattle. Unfortunately that has been delayed. You are incorrect when you say “Since the Border opened and the Packers got access to the Canadian cattle so they can manipulate the market- the prices have steadily went down...” The opposite was the case every time.

The border being closed or restricted to Canadian live cattle has resulted in further consolidation of the U.S. packing industry, I would think to the detriment of producers on both sides of the border. Canada has build packing capacity on this side of the border, unfortunately too much of that packing capacity is in the hands of two major players which works against needed increased competition.

[Willowcreek]

farmerson- I don't know what futures market you are looking at- must not be the same one I am...What I do know is that:

Border open- years of low and hohum prices...

Border closed- Record high prices on calves, culls, and fats....

Border open again- Prices going back into the dumps....

[jensend]

ot: I need to clarify my "all Canadians" because their are a few that actually see what is happening-- the rpkaisers, Cam Ostertags, few more- that really can see the manipulation in the market and want to try and do something about it, just like R-CALF is trying...

lots of us see what is happening but as you have been told so many times r-calf only made it worse. i'm sure randy will be relieved to hear he has been outed as a closet r-calfer. you really are hilarious.

[farmers_son]

http://futures.tradingcharts.com/chart/LC/W

Last time I checked, the border was not open to the U.S. While Canada accepts U.S. cows for immediate slaughter, our cows and cow beef are still not good enough for the Yankees. There remains a whole range of restrictions, more than 500 pages, on importation live Canadian cattle under 30 months including sealed containers, branding, preg checking, age verification.

http://www.inspection.gc.ca/english/anima/heasan/disemala/bseesb/americ/imprestricte.shtml

[Willowcreek]

"We have seen an increase in the number of feeder cattle that are being exported to the US over the last several months and some of that may be based upon the uncertainty related to the corn countervail issue but we are currently exporting about 9,000 head of feeder cattle per week out of Canada to the US and that compares to about 4,300 per week during our last normal five year average prior to BSE so our feeder imports are up."

farmersson- That statement by a CCA Director, Ian McKilltop, looks like the border is open-- In fact with twice normal numbers it looks like the glut is on, which is not helping US feeder prices-- Canada is going back to the same-o of riding on the backs of the industry the US cattleman built...And Canada still has the gall to call "ALL US cattle diseased"--we don't want any US feeders competing in Canada...

The only thing good about it is that many many more US cattle producers are awakening to how huge the negative impact of the Canadian imports are- and to how onesided the "freetrade" has been!!....

[jensend]

ot: it looks like the glut is on

how many head per week go on feed down in the states? is 9,000 a significant number?

[dalek]

Opinion: Deal ends myth of free trade
Apr. 28, 2006. 12:31 PM
THOMAS WALKOM


Think of the latest deal on softwood lumber as a wake-up call — not just for those Canadians who make their living sawing down trees, but for all of us.

It is a wake-up call in two ways.

First, it demonstrates the futility of trying to bind the United States through bilateral free trade deals.

The 1989 Canada-U.S. Free Trade deal and its successor, the North American Free Trade Agreement were designed specifically to solve trade disputes like that of softwood lumber. But they did not and cannot. The U.S. government is a complex beast that, in the end, will always act in American interests. That is reality.

If this reality requires Washington to ignore solemn trade covenants — particularly when dealing with minor countries like Canada — it will do so happily.

As Prime Minister Stephen Harper noted so eloquently in another context: Get used to it.

Second, the deal leaked to the media Wednesday and confirmed yesterday demonstrates the poverty of our own industrial structure.

Canada is still trying to get by through exporting raw and semi-processed commodities to the world. That was fine in the 19th and 20th centuries. It is not any more.

Today, many countries can produce two-by-four lumber as cheaply, or even more cheaply, than Canada. The Russians are doing it; so too are the South Americans.

Ditto with other commodities — from corn to soy beans — that Canada once had a comparative advantage in producing.

This doesn't mean that Canadian farmers have to go belly-up. Nor does it mean that lumber towns like Hearst in northern Ontario will have to shut down.

But if we are to remain a high-wage, high-income country, things have to change. For Canada, extensive raw material development is on its way to becoming a thing of the past. This doesn't necessarily preclude us from cutting trees (although we may want to cut more carefully and selectively).

It does, though, mean that it is no longer enough to transform every pine or spruce or fir we fell simply into lumber suitable for house framing.

So in that sense, perhaps the intransigent Americans have done us a favour. After 25 years of non-stop harassment, they have made it absolutely clear that they will never give Canadian softwood lumber producers free access to their markets.

By implication, they have served fair warning that Canada will face similar trade restrictions on any future export that threatens powerful U.S. interests.

It's now up to us to quit whining and figure out what to do.

Here's what we should not do.

We should not respond to this latest slap in the free trade face by attempting to negotiate even further cross-border integration. This is the strategy of Canada's largest businesses, as represented by the Canadian Council of Chief Executives, and it is a dead end.

A common market or customs union arrangement with the U.S. will be no better than the existing NAFTA. Unless we literally become part of the United States (which I suspect many Americans would oppose), we can never hope to wield any real clout in Washington. Canada's ambassador, no matter how imposing his business or political credentials, will always be trumped by the most junior senator from the smallest state.

Nor should we use our foreign and military policy to appease the U.S. administration in the hope of winning trade points. As the softwood lumber saga illustrates, U.S. presidents have little authority when it comes to the day-to-day intricacies of trade policy.

George W. Bush may be impressed that Harper plans to keep Canadian troops in Afghanistan indefinitely. But senators and congressional representatives from the lumber-producing states are not.

Instead, we should get on with it. By acknowledging that softwood lumber exports will have to be dealt with through managed trade rather than free trade, Canada's federal government is finally coming to terms with the limits of NAFTA.

As a concept, managed trade isn't so bad. It worked for many years with automobiles. It was what the political left — when there was a political left — called for in 1988 instead of then-prime minister Brian Mulroney's much-vaunted Canada-U.S. free trade deal. Given that it fits with American desires, it is also practical.

In yesterday's deal, it is not the concept that is troubling. It is the detail. Canadian producers will be allocated a quota of the U.S. market. But, depending on factors such as lumber prices and the value of the currency, they could also face export taxes.

In addition, the U.S. would be allowed to keep about $1 billion of the penalties it illegitimately imposed. American lumber producers would, in effect, have their legal bills bankrolled by the Canadian industry.

The deal is supposed to last until 2013. But it is not clear whether it will fare any better than NAFTA if American lumber interests change their mind and challenge it before then.

Could Canada have struck a better arrangement? Perhaps. Both Harper and his predecessor Paul Martin (at least in his earliest iteration) were inordinately anxious to mend fences with the U.S. Maybe if they had held out longer we could have done better. Or maybe not.

But at least the veil has been torn away. Thanks to yesterday's deal, we can stop pretending we have a free trade arrangement with the U.S. and move on.