> **Preliminary Regulatory Impact Analysis and**
>
> **Initial Regulatory Flexibility Analysis**
>
> **Proposed Rule**
>
> **Bovine Spongiform Encephalopathy; Minimal-Risk Regions; Importation
> of Live Bovines and Products Derived from Bovines**
>
> **(Docket No. APHIS 2006-0041)**
>
> **U.S. Department of Agriculture**
>
> **Animal and Plant Health Inspection Service**
>
> **October 27, 2006**
>
> **Summary**

Bovine spongiform encephalopathy (BSE) is a progressive, fatal
neurological disorder of cattle, bison, and certain other bovidae. It is
spread through bovine consumption of feed that contains the infective
agent. There is no treatment or vaccine available for BSE. Included in
Title 9 of the Code of Federal Regulations (CFR), Parts 93-96, are
regulations that prohibit the importation of ruminants and most ruminant
products (meat and certain other products and byproducts) from regions
where BSE exists and regions that present an undue risk of introducing
BSE into the United States because of import requirements less
restrictive than those that would be acceptable for import into the
United States or because of inadequate surveillance.

On January 4, 2005, the United States Department of Agriculture, Animal
and Plant Health Inspection Service (USDA APHIS or the Agency) published
a final rule entitled "Bovine Spongiform Encephalopathy; Minimal-Risk
Regions and Importation of Commodities," referred to as the BSE
minimal-risk regions rule. It established a category of regions that
present a minimal risk of introducing BSE into the United States through
importation, under certain conditions, of live ruminants and ruminant
products and byproducts from such regions, and named Canada as a BSE
minimal-risk region. This proposed rule would amend the BSE minimal-risk
regions rule.

[The Proposed Rule and this Analysis]{.underline}

The purpose of the proposed rule is to remove certain restrictions on
the importation of certain bovine commodities from BSE minimal-risk
regions. APHIS has determined that the restrictions are not warranted by
scientific research and evidence, and that they are unnecessary to
prevent the introduction and dissemination of BSE into the United States
from such regions. We are proposing to allow the following commodities
to be imported from Canada under specified conditions (in addition to
commodities currently allowed to be imported from BSE minimal-risk
regions):

• Live bovines that were born on or after March 1, 1999;

• Bovine small intestines, minus the distal ileum;

• Bovine casings; and

• Bovine blood and blood products.

The risk assessment for the proposed rule analyzes the likelihood that
importing these commodities from Canada would introduce and disseminate
BSE into the U.S. cattle population. The likelihood of release
(introduction of the disease agent), the likelihood of exposure for
susceptible animals given release, and the magnitude of consequences
given release and exposure are evaluated either quantitatively or
qualitatively. The risk estimation that combines these components
concludes that the BSE risk posed by the proposed rule would be
negligible.

This preliminary regulatory impact analysis addresses expected economic
effects of allowing resumption of imports from Canada of the above
commodities. Expected benefits and costs are examined in accordance with
Executive Order 12866. Expected economic impacts for small entities are
also considered, as required by the Regulatory Flexibility Act. Effects
for Canadian and other foreign entities are not addressed in this
analysis. However, the Agency expects reestablished access to U.S.
markets to benefit Canadian producers and suppliers of commodities
included in the proposed rule and, for at least one commodity, cull
cattle/processing beef, result in partial displacement of processing
beef imports from other sources.

[Analytical Approach]{.underline}

We expect the proposed rule to have effects for several different
categories of commodities, and benefits to exceed costs overall. Using
projected baseline data for the United States and projected imports from
Canada with and without the rule, we compute impacts for four commodity
categories: cull cattle/processing beef would be the commodity primarily
affected, due to the resumption of cull cattle imports from Canada;
feeder cattle, fed cattle, and fed beef would be affected secondarily,
as Canada's slaughter mix adjusts to reestablished exports of culled
cows, bulls, and stags to the United States.

The demand for cull cattle is derived from the demand for processing
beef, and only a small portion of the U.S. supply of processing beef
would come from imported Canadian cull cattle. Therefore, cull cattle
and processing beef are combined into a single commodity category.
Processing beef refers to lean, boneless beef that is mixed with
trimmings from grain-fed cattle to produce ground beef, thereby
complementing the domestic production of fed beef. Demand for processing
beef is high, as reflected in robust ground beef sales. Despite higher
domestic cull cattle slaughter in past months in response to drought
conditions, U.S. production of processing beef is currently trending low
because the industry is in the early stages of the expansion phase of
the cattle cycle.

Historically, Canada has been a major trading partner of the United
States in livestock and meat. In 2002, prior to the discovery of BSE in
Canada, the United States imported 1.7 million live bovine from Canada,
valued at more than \$1.1 billion and accounting for more than 67
percent of U.S. total bovine imports. That same year, the United States
imported from Canada 382,110 MT of bovine meat, also valued at \$1.1
billion, which comprised about 44 percent of bovine meat imports from
all sources. U.S.-Canadian cattle and beef trade changed dramatically
following Canada's May 2003 BSE discovery. Canada's cattle population
increased rapidly following the loss of export markets for its cattle
and beef. Its excess cow population and the strong U.S. demand for cull
cattle/processing beef underlie imports of Canadian cull cattle expected
to occur with this rule.

We evaluate welfare impacts of the proposed rule for cull
cattle/processing beef, feeder cattle, fed cattle, and fed beef using a
net trade, non-spatial partial equilibrium model. Present and annualized
values of welfare gains and losses for the 5-year period, 2007-2011, are
computed using 3 percent and 7 percent discount rates. The present and
annualized values are expressed in 2006 and 2001 dollars. A complete
description of the model is provided in: Forsythe, K.W. \"An Economic
Model for Routine Analysis of the Welfare Effects of Regulatory
Changes.\" V3.00. U.S. Department of Agriculture, Animal and Plant
Health Inspection Service, Veterinary Services, Centers for Epidemiology
and Animal Health, April 20, 2005 (draft). It can be found at
<http://www.aphis.usda.gov/peer_review/content/printable_version/bas_model_econOnly_apr20.pdf>.

For five other commodity categories---breeding cattle, vealers and
slaughter calves, bison, bovine casings and small intestine products,
and bovine blood and blood products---we do not quantitatively model
expected effects of the proposed rule. For the first three of these
categories, changes in import quantities projected under the proposed
rule are very small, suggesting that impacts for U.S. entities would not
be significant. For bovine casings, small intestine products, and blood
and blood products, insufficient information about the commodities and
quantities that would be imported and levels of U.S. production and
consumption prevents us from modeling expected effects of the rule.

[Price and Quantity Impacts for the Modeled Commodities]{.underline}

The proposed rule is expected to result in the resumption of cull cattle
imports from Canada. In addition, declines in imports of feeder cattle,
fed cattle, and fed beef are expected to occur as a result of the
resumption of cull cattle imports affecting the slaughter mix in Canada.
The baseline along with the projected changes are presented in table
VIII. Relative prices highlight the different situations for the
Canadian and U.S. cull cattle markets. For example, in September, 2006,
the price of slaughter cows in Canada was only 70 percent of the
comparable U.S. price.

*Cull cattle/processing beef.* With the rule, imports of cull cattle
from Canada would result in price declines for processing beef. Over the
period of analysis, the annual decrease in the price of processing beef,
all things equal, is expected to average about 4.3 percent, ranging from
declines of \$5 per cwt (hundredweight, 100 pounds) in 2007, to \$3 per
cwt in 2009. In response to this price effect, wholesale demand for
processing beef would increase by an average of about 114 million pounds
per year over the period of analysis, and domestic supply would decrease
by an annual average of about 131 million pounds.

*Feeder cattle, fed cattle, and fed beef.* Imports of feeder cattle, fed
cattle, and fed beef are projected to decrease because of the rule. Of
these commodities affected secondarily, the largest impacts would be for
feeder cattle. We estimate that the price of feeder cattle would
increase in 2007 by about 0.3 percent, from \$733 to about \$735 per
head in 2006 dollars. Over the 5-year period of analysis, the annual
increase in feeder cattle prices attributable to the proposed rule, all
things equal, is expected to average about 0.6 percent, ranging from
about \$2.20 per head in 2007, to about \$4.60 per head in 2010. In
response to these price increases, there would be an average annual
decrease in the demand for feeder cattle of about 152,000 head over the
period of analysis, and an average annual increase in domestic supply of
about 66,000 head.

For fed cattle, our analysis indicates that the price would increase by
less than 0.1 percent in 2007. Over the 5-year period, the annual
increase in fed cattle prices attributable to the proposed rule, all
things equal, is expected to average less than 0.2 percent, ranging in
2006 dollars from 35 cents per head in 2007, to about \$1.90 per head in
2009. We estimate that these small changes in price would cause the
demand for fed cattle to decrease by an average of about 33,000 head per
year and the domestic supply of fed cattle to increase by an average of
26,000 head per year.

Impacts of the proposed rule for fed beef are expected to be very small,
with the price increasing in 2007 by less than 0.3 percent, or about 36
cents per cwt carcass weight equivalent from a base price of \$142. Over
the 5-year period of analysis, the increase in fed beef prices, all
things equal, is expected to average less than 0.1 percent, with no
effect projected for the last three years.

Clearly, the largest price effects would result from the resumption of
cull cattle imports from Canada, an expected outcome matched by
estimated welfare impacts.

[Welfare Effects for the Modeled Commodities]{.underline}

In this analysis, consumption and production have commodity-specific
definitions that differ from their commonly understood meanings. These
definitions are central to interpreting the changes in welfare, and are
shown in Table I. They imply that the proposed rule may have mixed
effects for at least some entities in the affected industries.

  ----------------------- -------------------------- -------------------------
  Table I. Definitions of                            
  consumers and producers                            
  for the modeled                                    
  commodity categories                               

  [Commodity              [Consumers]{.underline}    [Producers]{.underline}
  Category]{.underline}                              

  Feeder cattle           Buyers of cattle for       Sellers of U.S.-raised
                          feedlot feeding in the     cattle for feedlot
                          United States              feeding in the United
                                                     States

  Fed cattle              Buyers of fed cattle for   Sellers of U.S.-sourced
                          slaughter in the United    fed cattle for slaughter
                          States                     in the United States

  Cull cattle/processing  U.S. buyers of processing  Sellers of U.S.-produced
  beef                    beef at the wholesale      processing beef at the
                          level                      wholesale level

  Fed beef                U.S. buyers of fed beef at Sellers of U.S.-produced
                          the wholesale level        fed beef at the wholesale
                                                     level
  ----------------------- -------------------------- -------------------------

*Cull cattle/processing beef.* Projected cull cattle imports from Canada
are converted to their processing beef equivalent using projected
carcass weights for cows, bulls, and stags, as shown in the note to
Table II. Consumers (buyers of processing beef at the wholesale level)
can be expected to benefit from welfare gains and producers (sellers of
processing beef at the wholesale level) can be expected to bear welfare
losses due to the cull cattle imports. The present value of the welfare
changes in 2006 dollars when using a 3 percent discount rate would be
\$1.24 billion in consumer gains, \$657 million in producer losses, for
a net benefit of about \$587 million. Annualized values over the five
years, in 2006 dollars when using a 3 percent discount rate, would be
consumer gains of \$271 million, producer losses of \$143 million, and
net benefits of \$128 million.

> Table II. Cull cattle/processing beef: present and annualized values
> of welfare changes with the proposed rule, 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare                                

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  \$1,243,147              -\$656,540               \$586,607

                       7%                  \$1,120,778              -\$590,070               \$530,708

  2001 Dollars         3%                  \$1,080,856              -\$570,814               \$510,043

                       7%                  \$974,488                -\$513,038               \$461,450

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  \$271,447                -\$143,358               \$128,089

                       7%                  \$273,347                -\$143,912               \$129,435

  2001 Dollars         3%                  \$236,010                -\$124,640               \$111,370

                       7%                  \$237,669                -\$125,125               \$112,544
  -------------------- ------------------- ------------------------ ------------------------ -------------------

> Note: Consumers are U.S. buyers of processing beef at the wholesale
> level; producers are sellers of U.S.-produced processing beef at the
> wholesale level. Cull cattle imports from Canada in thousand head are
> converted to processing beef in million pounds carcass weight
> equivalent by multiplying by the following carcass weights (pounds)
> for cows and bulls/stags, respectively: 2007, 576 and 888; 2008, 579
> and 893; 2009, 583 and 899; 2010, 586 and 904; and 2011, 590 and 909
> (Source: Expert opinion, USDA Economic Research Service, Market and
> Trade Economics Division, Animal Products, Grains, and Oil Seeds
> Branch).

Welfare changes for the cull cattle/processing beef category dominate
the modeled effects. The relatively large impacts are not unexpected,
given that this is the one modeled commodity category for which imports
from Canada would be newly reestablished. The numbers of cull cattle
that would be imported with the rule, projected to average 545,000 cows
and 66,000 bulls and stags per year, 2007-2011, are much larger than the
projected average annual declines in feeder cattle (218,000 head) and
fed cattle (59,000 head).

*Feeder cattle, fed cattle, and fed beef.* Fewer feeder cattle and fed
cattle and less fed beef are projected to be imported from Canada with
the rule than would enter without the rule, and the model indicates for
these commodities gains in producer welfare (higher prices and less
competition from Canadian suppliers) and losses in consumer welfare
(higher prices and fewer feeder, fed cattle, and less fed beef available
for purchase). Of these three commodities, the largest impact would be
for feeder cattle, with estimated producer welfare gains of \$494
million, consumer welfare losses of \$518 million, for a net loss of
\$24 million (2006 dollars, discounted at 3 percent).

*Combined welfare effects.* Effects of the proposed rule for cull
cattle/processing beef, feeder cattle, fed cattle, and fed beef are
summed in Table III.

> Table III. Present and annualized values of combined welfare changes
> for the modeled commodities with the proposed rule, 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare^1^                             

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  \$444,740                \$111,662                \$556,401

                       7%                  \$407,740                \$96,136                 \$503,876

  2001 Dollars         3%                  \$386,246                \$97,526                 \$483,775

                       7%                  \$302,447                \$133,266                \$435,714

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  \$97,110                 \$24,384                 \$121,494

                       7%                  \$99,452                 \$23,457                 \$122,908

  2001 Dollars         3%                  \$84,339                 \$21,296                 \$105,634

                       7%                  \$86,339                 \$20,514                 \$106,851
  -------------------- ------------------- ------------------------ ------------------------ -------------------

^1^ Combined welfare changes for cull cattle/processing beef, feeder
cattle, fed cattle, and fed beef.

The analysis tells us that the present value of the combined welfare
changes in 2006 dollars when using a 3 percent discount rate, for
example, would be \$445 million in consumer gains, \$112 million in
producer gains, for a total welfare benefit of \$556 million. Annualized
values over the five years, in 2006 dollars when using a 3 percent
discount rate, would be consumer gains of \$97 million and producer
gains of \$24 million, yielding benefits of over \$121 million.

Our analysis shows producer welfare changes to be negative in 2007 and
positive in each of the following four years, 2008-2011. In 2007,
producer welfare losses for the cull cattle/processing beef category
would be larger than the combined producer welfare gains for the other
three commodities. For the years 2008-2011, the opposite would occur.
This is largely due to the fact that, given Canada's excess cull cattle
supply, the largest annual number of cull cattle would be imported in
2007, with imports diminishing thereafter. Table III shows positive
changes in producer welfare because the discounted producer welfare
gains in 2008-2011 would exceed producer welfare losses in 2007.

By far, the largest effects of the proposed rule would be due to
resumption of Canadian cull cattle imports. As shown in Table IV, the
present value of consumer welfare gains for the cull cattle/processing
beef category outweighs the combined consumer welfare losses for the
other three categories (\$1.24 billion in consumer benefits, compared to
\$798 million in combined consumer losses, in 2006 dollars and
discounted at 3 percent). Producer welfare losses attributable to
resumption of cull cattle/processing beef imports are smaller in
magnitude than the combined producer welfare gains for the other three
categories (\$657 million in producer losses, compared to over \$768
million in combined producer gains).

We invite public comment on these estimates of welfare changes. In
particular, we welcome informed opinion regarding the price elasticities
we use in the analysis for cull cattle/processing beef (price elasticity
of supply, 0.84; price elasticity of demand, -0.40) that result in the
welfare gains for buyers of processing beef being so much larger than
the welfare losses for sellers of processing beef.

  ------------------- -------------------- --------------------- ------------ ------------------- ------------------------
  Table IV. Present                                                                               
  values of separate                                                                              
  and combined                                                                                    
  welfare changes                                                                                 
  with the proposed                                                                               
  rule for cull                                                                                   
  cattle/processing                                                                               
  beef, feeder                                                                                    
  cattle, fed cattle,                                                                             
  and fed beef, in                                                                                
  2006 dollars and                                                                                
  discounted at 3                                                                                 
  percent, 2007-2011                                                                              

                      Cull Cattle/         [Feeder               Fed cattle   [Fed                [Combined]{.underline}
                      Processing           Cattle]{.underline}                Beef]{.underline}   
                      [Beef]{.underline}                                                          

                      (Thousand Dollars)                                                          

  Change in consumer  \$1,243,147          -\$518,352            -\$176,136   -\$103,919          \$444,740
  welfare                                                                                         

  Change in producer  -\$656,540           \$494,483             \$171,791    \$101,928           \$111,662
  welfare                                                                                         

  Net change          \$586,607            -\$23,870             -\$4,345     -\$1,991            \$556,401

                                                                                                  
  ------------------- -------------------- --------------------- ------------ ------------------- ------------------------

[Displacement of Processing Beef Imports from Other
Countries]{.underline}

The net impact of cull cattle imports from Canada would depend upon the
extent to which they would displace (substitute for) processing beef
imports from other countries. About 35 percent of cull cattle imports
from Canada over the period of analysis are projected to displace
processing imports from other countries and the remainder are projected
to contribute to an increase in the U.S. supply of processing beef
(respectively, 5-year averages of 132 million pounds and 245 million
pounds, carcass weight equivalent). These projections are based on the
expert opinion of staff of the USDA Economic Research Service, Market
and Trade Economics Division, Animal Products, Grains, and Oil Seeds
Branch. We consider here the effects of extreme displacement
possibilities, that is, if either none or all of the Canadian cull
cattle imports were to displace processing beef imports from other
countries.

Projected imports of cull cattle from Canada are shown in Table V,
together with changes in the U.S. supply of processing beef under the
three displacement scenarios: none of the Canadian imports displacing
imports from other countries, projected displacement, or all of the
Canadian imports displacing imports from other countries. In the third
scenario, we assume that the cull cattle imports from Canada would have
no impact on the U.S. supply of processing beef.

Table VI compares the present and annualized values of welfare changes
and average annual price changes for the cull cattle/processing beef
category under the three displacement scenarios, in 2006 dollars.
Discounting at 3 percent, the present value of net welfare benefits for
the cull cattle/processing beef category would be about \$927 million
when no displacement is assumed to occur, compared to net benefits of
about \$587 million when projected levels of displacement occur, and
zero benefits or costs when we assume all imported Canadian processing
beef would displace imports from other countries. Annualized net values
for the three scenarios, discounted at 3 percent, range from \$203
million, to \$128 million, to no impact. Over the 5-year period, annual
declines in prices would average about \$6 per cwt if no displacement
were to occur, about \$4 per cwt with projected levels of displacement,
and there would be no price effect if all processing beef imports from
Canada were to displace imports from other countries.

  ---------------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Table V. Projected imports                                                                                       
  of cull cattle from Canada                                                                                       
  with the proposed rule and                                                                                       
  changes in the U.S. supply                                                                                       
  of processing beef if (i)                                                                                        
  none of the cull cattle                                                                                          
  imported from Canada                                                                                             
  displace processing beef                                                                                         
  imported from other                                                                                              
  countries, (ii) projected                                                                                        
  displacement occurs, or                                                                                          
  (iii) all of the cull cattle                                                                                     
  imported from Canada                                                                                             
  displace processing beef                                                                                         
  imports from other                                                                                               
  countries, 2007-2011, in                                                                                         
  million pounds carcass                                                                                           
  weight equivalent                                                                                                

                               [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}

  Projected cull cattle        458                  403                  333                  343                  346
  imports from Canada                                                                                              

  Projected processing beef    0                    0                    0                    0                    0
  imports from Canada                                                                                              

  Projected displacement of    170                  149                  128                  106                  106
  processing beef imports from                                                                                     
  other countries by                                                                                               
  processing beef imports from                                                                                     
  Canada                                                                                                           

  Change in U.S. supply if     458                  403                  333                  343                  346
  none of the processing beef                                                                                      
  imports from Canada displace                                                                                     
  imports from other countries                                                                                     

  Change in U.S. supply of     288                  254                  205                  237                  240
  processing beef if projected                                                                                     
  displacement occurs                                                                                              

  Change in U.S. supply if all 0                    0                    0                    0                    0
  of the processing beef                                                                                           
  imports from Canada displace                                                                                     
  imports from other countries                                                                                     

  Note: Cull cattle (slaughter                                                                                     
  cows, bulls, and stags) are                                                                                      
  converted from thousand head                                                                                     
  to million pounds carcass                                                                                        
  weight equivalent by                                                                                             
  multiplying by the following                                                                                     
  carcass weights (pounds) for                                                                                     
  cows and bulls/stags,                                                                                            
  respectively: 2007, 576 and                                                                                      
  888; 2008, 579 and 893;                                                                                          
  2009, 583 and 899; 2010, 586                                                                                     
  and 904; and 2011, 590 and                                                                                       
  909 (Source: Expert opinion,                                                                                     
  USDA Economic Research                                                                                           
  Service, Market and Trade                                                                                        
  Economics Division, Animal                                                                                       
  Products, Grains, and Oil                                                                                        
  Seeds Branch).                                                                                                   
  ---------------------------- -------------------- -------------------- -------------------- -------------------- --------------------

Table VI. Present and annualized values of welfare changes and average
annual price changes for cull cattle/processing beef if (i) none of the
cull cattle imported from Canada displaces processing beef imported from
other countries, (ii) projected displacement occurs, or (iii) all of the
cull cattle imported from Canada displace processing beef imports from
other countries, in 2006 dollars, 2007-2011

  ------------ ----------- -------------------- ---------------------------- ------------------------ ------------------------ -------------------
                           Discount             Amount of Imports from       Changes in Welfare                                
                           [Rate]{.underline}   Canada assumed to Displace                                                     
                                                Imports from Other                                                             
                                                [Countries]{.underline}^1^                                                     

               (Percent)                                                     (Thousand Dollars)                                

                                                                             [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}

  Present                                                                                                                      
  Value                                                                                                                        

                           3                    None                         \$1,928,548              -\$1,001,140             \$927,408

                           3                    Projected                    \$1,243,147              -\$656,540               \$586,607

                           3                    All                          \$0                      \$0                      \$0

                           7                    None                         \$1,742,482              -\$901,619               \$840,864

                           7                    Projected                    \$1,120,778              -\$590,070               \$530,708

                           7                    All                          \$0                      \$0                      \$0

  Annualized                                                                                                                   
  Value                                                                                                                        

                           3                    None                         \$421,107                -\$218,603               \$202,504

                           3                    Projected                    \$271,447                -\$143,358               \$128,089

                           3                    All                          \$0                      \$0                      \$0

                           7                    None                         \$424,975                -\$219,896               \$205,079

                           7                    Projected                    \$273,347                -\$143,912               \$129,435

                           7                    All                          \$0                      \$0                      \$0

  Average                                                                                                                      
  Annual Price                                                                                                                 
  Change and                                                                                                                   
  Percentage                                                                                                                   
  Price Change                                                                                                                 

                                                                             (Dollars per cwt)        (Percentage)             

                                                None                         -\$6.00                  -6.57%                   

                                                Projected                    -\$4.00                  -4.26%                   

                                                All                          -\$0                     0%                       
  ------------ ----------- -------------------- ---------------------------- ------------------------ ------------------------ -------------------

Note: Prices are in carcass weight equivalent.

^1^Projected displacement quantities for the five years, 2007-2011, in
million pounds carcass weight equivalent, are 170, 149, 128, 106, and
106. Displaced quantities for the five years, if all cull cattle
imported from Canada were to displace processing beef imports from other
countries, would be 458, 403, 333, 343, and 346 (Expert opinion, USDA
Economic Research Service, Market and Trade Economics Division, Animal
Products, Grains, and Oil Seeds Branch).

It is evident that the extent of import displacement would influence
impacts of the proposed rule for the cull cattle/processing beef
category. Table VII shows the significance of the displacement
assumption for the combined welfare effects. The larger the quantity of
processing beef imports from other countries that would be displaced,
the smaller the net benefits. The difference between consumer gains and
producer losses would exceed \$897 million (discounted at 3 percent) if
no displacement of processing beef imports from other countries were to
occur. The present value of net benefits would be about \$556 million
with projected displacement, and there would be a net welfare loss of
\$30 million if all of the imported Canadian cull cattle were to
displace imports from other countries. In the third scenario, the
modeled effects of the rule would be due to changes in the supply of
Canadian feeder cattle, fed cattle, and fed beef as a result of the cull
cattle imports affecting the slaughter mix in Canada. In this case,
consumer welfare losses for these commodities would exceed producer
welfare gains, resulting in a net decline in welfare.

Table VII. Present and annualized values of combined welfare changes for
the modeled commodities if (i) none of the processing beef imports from
Canada displace imports from other countries, (ii) projected
displacement occurs, or (iii) all of the processing beef imports from
Canada displace imports from other countries, in 2006 dollars, 2007-2011

  ------------ ----------- -------------------- ------------------------ ------------------------ ------------------------ -------------------
                           Discount             Amount of Imports from   Changes in Welfare                                
                           [Rate]{.underline}   Canada assumed to                                                          
                                                Displace Imports from                                                      
                                                [Other                                                                     
                                                Countries]{.underline}                                                     

               (Percent)                                                 (Thousand Dollars)                                

                                                                         [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}

  Present                                                                                                                  
  Value                                                                                                                    

                           3                    None                     \$1,130,141              -\$232,938               \$897,202

                           3                    Projected                \$444,740                \$111,662                \$556,401

                           3                    All                      -\$798,407               \$768,202                -\$30,206

                           7                    None                     \$1,029,444              -\$215,413               \$814,032

                           7                    Projected                \$407,740                \$96,136                 \$503,876

                           7                    All                      -\$713,038               \$686,206                -\$26,832

  Annualized                                                                                                               
  Value                                                                                                                    

                           3                    None                     \$246,770                -\$50,861                \$195,909

                           3                    Projected                \$97,110                 \$24,384                 \$121,494

                           3                    All                      -174,337                 167,742                  -6,595

                           7                    None                     \$251,080                -\$52,527                \$198,552

                           7                    Projected                \$99,452                 \$23,457                 \$122,908

                           7                    All                      -\$173,895               \$167,369                -\$6,527
  ------------ ----------- -------------------- ------------------------ ------------------------ ------------------------ -------------------

*Multi-sector impacts.* For a broader examination of impacts, we map
interactions among the grain, animal, and animal products industries
using a second model.[^1] This model takes into account substitution
among livestock products in response to relative price changes. It
incorporates foreign trade and yields expected price and revenue
effects, but does not allow for computation of welfare changes.

Our results show for the combined livestock, feed, and grain sectors, an
estimated decline in gross revenues with the proposed rule of less than
one percent in 2007. For the beef and cattle sectors, the gross revenue
declines are also less than one percent. The analysis indicates declines
of less than one percent, as well, in cattle and beef prices in 2007.

As expected, these simulated impacts are small because they describe
effects for aggregated commodity groupings (all cattle production and
all beef production are grouped within single categories) and because of
the linkages specified between the livestock production and processing
sectors that allow for greater flexibility in adjusting to supply
shocks. The larger effects reported above for cull cattle/processing
beef are subsumed within a combined beef sector in this multi-sector
model. These results support our expectation that broader impacts of the
proposed rule would be limited.

[Effects for Commodities not Modeled]{.underline}

Commodity categories not modeled that would be affected by the proposed
rule are breeding cattle, vealers and slaughter calves, bison, bovine
casings and small intestine products, and bovine blood and blood
products.

*Breeding cattle*. We do not expect the resumption of dairy and beef
breeding cattle imports from Canada to significantly affect the U.S.
market for these animals. The number that would be imported under the
proposed rule is small in comparison to projected cattle imports from
Canada overall (4 percent) and even smaller in comparison to the number
of replacement breeding heifers supplied on average by U.S. producers
(0.5 percent). Breeding cattle imported from Canada would augment the
U.S. breeding herd very slightly. Demand for these animals, like the
demand for breeding cattle generally, would derive from management
decisions based on herd composition and expected future net returns,
with price variations influencing secondarily the quantity of breeding
cattle purchased.

*Vealers and slaughter calves*. The proposed rule is expected to have a
small effect on the number of vealers and slaughter calves imported from
Canada. A decline in imports is projected in each year of the period of
analysis, compared to quantities that would be imported without the
rule, as Canadian slaughter patterns adjust to reestablished export
opportunities for cull cattle. Over the 5-year period, an average of
11,800 fewer vealers and slaughter calves are projected to be imported
annually with the proposed rule than would be imported without the rule.

For the 10-year period, 1994-2003, slaughter of vealers and calves in
the United States averaged 1.3 million head per year. We expect annual
U.S. vealer and calf slaughter during the period of analysis to be
similar to this earlier average. On this basis, the average annual
decrease in vealer and slaughter calf imports from Canada under the
proposed rule would be equal to less than 1 percent of U.S. vealer and
calf slaughter. Any effect on vealer and slaughter calf prices because
of the smaller number expected to be imported under the proposed rule
would not be significant.

*Bison.* Like the cattle industry, the commercial bison industry is
comprised primarily of cow-calf operations that sell weaned calves to
other operations for finishing and processing. Projected bison imports
from Canada total 4,000 head in 2007, 3,150 head in 2008, and 2,500 head
each year thereafter. Each year, 250 head of breeding bison are
projected to be imported. The remainder would be mainly bison for
immediate slaughter (2,500 head in 2007, 2,400 head in 2008, and 2,000
head in each of the following years), with a lesser number of feeders
(1,250 head in 2007, 500 head in 2008, and 250 head in each year
thereafter).

The 2,500 bison projected to be imported for immediate slaughter in 2007
would represent about 7 percent of the U.S. slaughter total in 2005. We
assume most if not all of these slaughter bison (as well as the 1,250
head projected to be imported in 2007 for feeding) would be slaughtered
at less than 30 months of age, that is, they would be of the same age as
Canadian bison that are currently allowed to be imported. Thus, the only
change in bison imports in 2007, as well as in subsequent years, under
the proposed rule would be imports of 250 head of breeding bison.

Yearly imports from Canada of 250 head of breeding bison would augment
the U.S. bison breeding herd only slightly. They would annually
represent only about two-tenths of one percent of the U.S. bison
breeding herd, assuming the composition of the national bison herd is
similar to that of the national cattle herd, with breeding stock (cows,
replacement heifers, and bulls) constituting about 56 percent of the
animals.

As the market for bison meat becomes better established, the demand for
breeding stock will continue to strengthen. The projected imports of
breeding bison under the proposed rule would help meet this growing
demand. However, they would constitute a very small addition to the U.S.
breeding herd. Any effects on bison prices and the welfare of U.S. bison
producers are expected to be insignificant.

*Bovine casings and small intestine products*. The proposed rule may
affect the supply of bovine casings and small intestine products in the
United States in three ways: by allowing importation of bovine casings
from Canada; by allowing importation of Canadian bovine small
intestines, minus the distal ileum, that are used to make certain
casings and variety meats; and by reducing restrictions on live bovine
imports from Canada and thereby changing the U.S. supply of bovine
products in general, including intestines and other material used to
produce casings and variety meats.

We calculate that with the rule the annual supply of bovine casings and
variety meats produced from small intestines would increase on average
over the period of analysis by about 1.6 percent. The largest increase
would occur in 2007, with production of 2.5 million pounds of additional
small intestine for use as casings and variety meats. These supply
projections presume a ready market for these products.

The proposed rule would allow importation from Canada of bovine small
intestine minus the distal ileum that could then be processed into
casings and variety meats in the United States. APHIS does not have
information on the volume of bovine small intestine that may be imported
from Canada because of the proposed rule. We welcome information that
would enable us to evaluate effects on the U.S. supply of bovine small
intestine of allowing their importation from Canada.

Current regulations prohibit the importation of bovine and other
ruminant casings from BSE minimal-risk regions. The proposed rule would
remove this prohibition, and therefore allow resumption of bovine
casings imports from Canada. The Agency does not have information on
levels of production or consumption of bovine casings in the United
States, and trade data do not distinguish between bovine and ovine
casings; import and export quantities and prices for bovine casings
alone are unavailable from the U.S. Department of Commerce. We welcome
information that the public may provide that would enable us to better
understand the U.S. bovine casings industry and levels of historic trade
in bovine casings between the United States, Canada, and the world.

*Bovine blood and blood products*. The proposed rule would allow
resumption of imports of bovine blood and blood products from BSE
minimal-risk regions, that is, of Canadian origin. The primary
commodities affected would be products used in the manufacture of
vaccines and drugs, of which fetal bovine serum (FBS) is the most
important. It is the most widely used serum in the culturing of cells,
tissues and organs.

Since the detection of BSE in Canada in 2003, imports of FBS from Canada
have been restricted to either research samples of Canadian-origin FBS
(limited to 1 liter per shipment), or FBS that is derived from animals
that originate in the United States, Australia, Mexico, or Central
America and is processed at a designated Canadian facility under USDA
permit.

The proposed rule may affect the supply of FBS in the United States in
two ways: by allowing Canadian-origin FBS imports for commercial
purposes, and by reducing restrictions on bovine imports from Canada and
thereby changing the U.S. supply of pregnant cows presented for
slaughter. We approximate that the proposed rule would allow for the
importation of up to 24,000 liters of FBS derived from Canadian cows.
Had this amount been imported in 2005, it would have represented about
13 percent of U.S. imports of FBS from all sources. In addition, the
increase in pregnant cow slaughter projected with the proposed rule may
provide an additional 23,000 to 32,000 liters. Other than for these
upper-bound approximations, we are unable to project the extent to which
the U.S. supply of FBS may be affected by the proposed rule. The
additional supplies would benefit U.S. establishments that use FBS in
their manufacturing processes.

[Alternative to the Proposed Rule]{.underline}

An alternative to the proposed rule considered by APHIS would be to
allow resumption of live bovine imports from BSE minimal-risk regions
without restriction by date of birth. In other words, Canadian bovines
could be imported for any destination or purpose without regard to their
age.

*Cattle imports from Canada.* In Table VIII, projected imports under the
alternative are compared to projected imports if no regulatory action
were taken (baseline import quantities) and to projected imports under
the proposed rule. The alternative would allow entry of bovines born
before the date specified in the proposed rule as when a
ruminant-to-ruminant feed ban in Canada was effectively enforced: March
1, 1999. For convenience, we refer to these animals as older cull
cattle.

Under the proposed rule, cattle that are 8 years or older prior to March
1, 2007 would be prohibited. Each year thereafter, the prohibited older
cull cattle would comprise a smaller age group: 9 years or older prior
to March 1, 2008, 10 years or older prior to March 1, 2009, and so
forth. Within a few years, the proposed rule's requirement that bovines
be born on or after March 1, 1999, would not limit bovine imports from
Canada; bovine imports allowed under the proposed rule and the
alternative would be the same.

+----+---------------------+-------+-------+-------+-------+-------+
| T  |                     |       |       |       |       |       |
| ab |                     |       |       |       |       |       |
| le |                     |       |       |       |       |       |
| V  |                     |       |       |       |       |       |
| II |                     |       |       |       |       |       |
| I. |                     |       |       |       |       |       |
| P  |                     |       |       |       |       |       |
| ro |                     |       |       |       |       |       |
| je |                     |       |       |       |       |       |
| ct |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| i  |                     |       |       |       |       |       |
| mp |                     |       |       |       |       |       |
| or |                     |       |       |       |       |       |
| ts |                     |       |       |       |       |       |
| of |                     |       |       |       |       |       |
| Ca |                     |       |       |       |       |       |
| na |                     |       |       |       |       |       |
| di |                     |       |       |       |       |       |
| an |                     |       |       |       |       |       |
| fe |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| er |                     |       |       |       |       |       |
| c  |                     |       |       |       |       |       |
| at |                     |       |       |       |       |       |
| tl |                     |       |       |       |       |       |
| e, |                     |       |       |       |       |       |
| f  |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| c  |                     |       |       |       |       |       |
| at |                     |       |       |       |       |       |
| tl |                     |       |       |       |       |       |
| e, |                     |       |       |       |       |       |
| cu |                     |       |       |       |       |       |
| ll |                     |       |       |       |       |       |
| c  |                     |       |       |       |       |       |
| at |                     |       |       |       |       |       |
| tl |                     |       |       |       |       |       |
| e/ |                     |       |       |       |       |       |
| pr |                     |       |       |       |       |       |
| oc |                     |       |       |       |       |       |
| es |                     |       |       |       |       |       |
| si |                     |       |       |       |       |       |
| ng |                     |       |       |       |       |       |
| b  |                     |       |       |       |       |       |
| ee |                     |       |       |       |       |       |
| f, |                     |       |       |       |       |       |
| a  |                     |       |       |       |       |       |
| nd |                     |       |       |       |       |       |
| f  |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| b  |                     |       |       |       |       |       |
| ee |                     |       |       |       |       |       |
| f: |                     |       |       |       |       |       |
| b  |                     |       |       |       |       |       |
| as |                     |       |       |       |       |       |
| el |                     |       |       |       |       |       |
| in |                     |       |       |       |       |       |
| e, |                     |       |       |       |       |       |
| pr |                     |       |       |       |       |       |
| op |                     |       |       |       |       |       |
| os |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| r  |                     |       |       |       |       |       |
| ul |                     |       |       |       |       |       |
| e, |                     |       |       |       |       |       |
| a  |                     |       |       |       |       |       |
| nd |                     |       |       |       |       |       |
| a  |                     |       |       |       |       |       |
| lt |                     |       |       |       |       |       |
| er |                     |       |       |       |       |       |
| na |                     |       |       |       |       |       |
| ti |                     |       |       |       |       |       |
| ve |                     |       |       |       |       |       |
| of |                     |       |       |       |       |       |
| no |                     |       |       |       |       |       |
| r  |                     |       |       |       |       |       |
| es |                     |       |       |       |       |       |
| tr |                     |       |       |       |       |       |
| ic |                     |       |       |       |       |       |
| ti |                     |       |       |       |       |       |
| on |                     |       |       |       |       |       |
| by |                     |       |       |       |       |       |
| da |                     |       |       |       |       |       |
| te |                     |       |       |       |       |       |
| of |                     |       |       |       |       |       |
| b  |                     |       |       |       |       |       |
| ir |                     |       |       |       |       |       |
| th |                     |       |       |       |       |       |
| on |                     |       |       |       |       |       |
| li |                     |       |       |       |       |       |
| ve |                     |       |       |       |       |       |
| bo |                     |       |       |       |       |       |
| vi |                     |       |       |       |       |       |
| ne |                     |       |       |       |       |       |
| im |                     |       |       |       |       |       |
| po |                     |       |       |       |       |       |
| rt |                     |       |       |       |       |       |
| s, |                     |       |       |       |       |       |
| 2  |                     |       |       |       |       |       |
| 00 |                     |       |       |       |       |       |
| 7- |                     |       |       |       |       |       |
| 20 |                     |       |       |       |       |       |
| 11 |                     |       |       |       |       |       |
+----+---------------------+-------+-------+-------+-------+-------+
|    |                     | [20   | [20   | [20   | [20   | [20   |
|    |                     | 07]{. | 08]{. | 09]{. | 10]{. | 11]{. |
|    |                     | under | under | under | under | under |
|    |                     | line} | line} | line} | line} | line} |
+----+---------------------+-------+-------+-------+-------+-------+
| Fe |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| er |                     |       |       |       |       |       |
| ca |                     |       |       |       |       |       |
| tt |                     |       |       |       |       |       |
| le |                     |       |       |       |       |       |
| fr |                     |       |       |       |       |       |
| om |                     |       |       |       |       |       |
| Ca |                     |       |       |       |       |       |
| na |                     |       |       |       |       |       |
| da |                     |       |       |       |       |       |
|    |                     |       |       |       |       |       |
| (  |                     |       |       |       |       |       |
| th |                     |       |       |       |       |       |
| ou |                     |       |       |       |       |       |
| sa |                     |       |       |       |       |       |
| nd |                     |       |       |       |       |       |
| h  |                     |       |       |       |       |       |
| ea |                     |       |       |       |       |       |
| d) |                     |       |       |       |       |       |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Baseline            | 302   | 371   | 425   | 440   | 441   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Proposed Rule       | 189   | 175   | 167   | 178   | 179   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Alternative         | 189   | 175   | 167   | 178   | 179   |
+----+---------------------+-------+-------+-------+-------+-------+
| F  |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| ca |                     |       |       |       |       |       |
| tt |                     |       |       |       |       |       |
| le |                     |       |       |       |       |       |
| fr |                     |       |       |       |       |       |
| om |                     |       |       |       |       |       |
| Ca |                     |       |       |       |       |       |
| na |                     |       |       |       |       |       |
| da |                     |       |       |       |       |       |
| (  |                     |       |       |       |       |       |
| th |                     |       |       |       |       |       |
| ou |                     |       |       |       |       |       |
| sa |                     |       |       |       |       |       |
| nd |                     |       |       |       |       |       |
| h  |                     |       |       |       |       |       |
| ea |                     |       |       |       |       |       |
| d) |                     |       |       |       |       |       |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Baseline            | 742   | 731   | 729   | 755   | 756   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Proposed Rule       | 728   | 673   | 644   | 685   | 688   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Alternative         | 728   | 673   | 644   | 685   | 688   |
+----+---------------------+-------+-------+-------+-------+-------+
| Cu |                     |       |       |       |       |       |
| ll |                     |       |       |       |       |       |
| ca |                     |       |       |       |       |       |
| tt |                     |       |       |       |       |       |
| le |                     |       |       |       |       |       |
| fr |                     |       |       |       |       |       |
| om |                     |       |       |       |       |       |
| C  |                     |       |       |       |       |       |
| an |                     |       |       |       |       |       |
| ad |                     |       |       |       |       |       |
| a, |                     |       |       |       |       |       |
| n  |                     |       |       |       |       |       |
| et |                     |       |       |       |       |       |
| of |                     |       |       |       |       |       |
| i  |                     |       |       |       |       |       |
| mp |                     |       |       |       |       |       |
| or |                     |       |       |       |       |       |
| ts |                     |       |       |       |       |       |
| a  |                     |       |       |       |       |       |
| ss |                     |       |       |       |       |       |
| um |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| to |                     |       |       |       |       |       |
| di |                     |       |       |       |       |       |
| sp |                     |       |       |       |       |       |
| la |                     |       |       |       |       |       |
| ce |                     |       |       |       |       |       |
| pr |                     |       |       |       |       |       |
| oc |                     |       |       |       |       |       |
| es |                     |       |       |       |       |       |
| si |                     |       |       |       |       |       |
| ng |                     |       |       |       |       |       |
| be |                     |       |       |       |       |       |
| ef |                     |       |       |       |       |       |
| i  |                     |       |       |       |       |       |
| mp |                     |       |       |       |       |       |
| or |                     |       |       |       |       |       |
| ts |                     |       |       |       |       |       |
| fr |                     |       |       |       |       |       |
| om |                     |       |       |       |       |       |
| o  |                     |       |       |       |       |       |
| th |                     |       |       |       |       |       |
| er |                     |       |       |       |       |       |
| c  |                     |       |       |       |       |       |
| ou |                     |       |       |       |       |       |
| nt |                     |       |       |       |       |       |
| ri |                     |       |       |       |       |       |
| es |                     |       |       |       |       |       |
| (m |                     |       |       |       |       |       |
| il |                     |       |       |       |       |       |
| li |                     |       |       |       |       |       |
| on |                     |       |       |       |       |       |
| po |                     |       |       |       |       |       |
| un |                     |       |       |       |       |       |
| ds |                     |       |       |       |       |       |
| c  |                     |       |       |       |       |       |
| ar |                     |       |       |       |       |       |
| ca |                     |       |       |       |       |       |
| ss |                     |       |       |       |       |       |
| we |                     |       |       |       |       |       |
| ig |                     |       |       |       |       |       |
| ht |                     |       |       |       |       |       |
| e  |                     |       |       |       |       |       |
| qu |                     |       |       |       |       |       |
| iv |                     |       |       |       |       |       |
| al |                     |       |       |       |       |       |
| en |                     |       |       |       |       |       |
| t) |                     |       |       |       |       |       |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Baseline            | 0     | 0     | 0     | 0     | 0     |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Proposed Rule       | 288   | 254   | 205   | 237   | 240   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Alternative         | 360   | 318   | 205   | 237   | 240   |
+----+---------------------+-------+-------+-------+-------+-------+
| F  |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| be |                     |       |       |       |       |       |
| ef |                     |       |       |       |       |       |
| fr |                     |       |       |       |       |       |
| om |                     |       |       |       |       |       |
| Ca |                     |       |       |       |       |       |
| na |                     |       |       |       |       |       |
| da |                     |       |       |       |       |       |
| (m |                     |       |       |       |       |       |
| il |                     |       |       |       |       |       |
| li |                     |       |       |       |       |       |
| on |                     |       |       |       |       |       |
| po |                     |       |       |       |       |       |
| un |                     |       |       |       |       |       |
| ds |                     |       |       |       |       |       |
| c  |                     |       |       |       |       |       |
| ar |                     |       |       |       |       |       |
| ca |                     |       |       |       |       |       |
| ss |                     |       |       |       |       |       |
| we |                     |       |       |       |       |       |
| ig |                     |       |       |       |       |       |
| ht |                     |       |       |       |       |       |
| e  |                     |       |       |       |       |       |
| qu |                     |       |       |       |       |       |
| iv |                     |       |       |       |       |       |
| al |                     |       |       |       |       |       |
| en |                     |       |       |       |       |       |
| t) |                     |       |       |       |       |       |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Baseline            | 446   | 425   | 420   | 419   | 419   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Proposed Rule       | 371   | 390   | 420   | 419   | 419   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Alternative         | 371   | 390   | 420   | 419   | 419   |
+----+---------------------+-------+-------+-------+-------+-------+

Source: Expert opinion, USDA Economic Research Service, Market and Trade
Economics Division, Animal Products, Grains, and Oil Seeds Branch.

Note: For the cull cattle/processing beef category, cull cattle imports
are converted from thousand head to million pounds carcass weight
equivalent for 2007-2011 by multiplying by the following carcass weights
(pounds) for cows and bulls/stags, respectively: 2007, 576 and 888;
2008, 579 and 893; 2009, 583 and 899; 2010, 586 and 904; and 2011, 590
and 909.

Projected imports of Canadian feeder cattle, fed cattle, and fed beef
are the same under the proposed rule and under the alternative. In both
cases, feeder and fed cattle imports would be fewer than would enter
without the rule, and fed beef imports would be less in the first two
years of the period of analysis. The only difference between imports
under the proposed rule and under the alternative is with respect to
cull cattle imports projected for 2007 and 2008. Under the alternative,
imports of cull cattle are projected in these two years to be one-fourth
greater, net of displaced processing beef imports, than they would be
under the proposed rule. The older cull cattle that would be imported
under the alternative would total 168,000 cows and 20,000 bulls and
stags in 2007, and 147,000 cows and 18,000 bulls and stags in 2008.
These older cull cattle would yield 72 million pounds and 64 million
pounds of processing beef, carcass weight equivalent, for the two years.

Table IX shows the present and annualized values of welfare changes
under the alternative for the cull cattle/processing beef category. The
present value of the welfare changes (2006 dollars, 3 percent discount
rate) would be \$1.4 billion in consumer gains, \$731 million in
producer losses, for a net benefit of about \$667 million. Annualized
values over the five years would be consumer gains of \$305 million,
producer losses of \$160 million, and net benefits of \$146 million.

> Table IX. Alternative of no restriction by date of birth on live
> bovine imports: present and annualized values of welfare changes for
> cull cattle/processing beef, 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare                                

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  \$1,397,680              -\$730,800               \$666,880

                       7%                  \$1,267,061              -\$660,333               \$606,728

  2001 Dollars         3%                  \$1,215,348              -\$635,446               \$579,902

                       7%                  \$1,101,796              -\$574,189               \$527,606

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  \$305,190                -\$159,573               \$145,617

                       7%                  \$309,025                -\$161,049               \$147,976

  2001 Dollars         3%                  \$265,377                -\$138,752               \$126,624

                       7%                  \$268,718                -\$140,039               \$128,678
  -------------------- ------------------- ------------------------ ------------------------ -------------------

> Note: Consumers are U.S. buyers of processing beef at the wholesale
> level; producers are sellers of U.S.-produced processing beef at the
> wholesale level. Cull cattle imports from Canada in thousand head are
> converted to processing beef in million pounds carcass weight
> equivalent by multiplying by the following carcass weights (pounds)
> for cows and bulls/stags, respectively: 2007, 576 and 888; 2008, 579
> and 893; 2009, 583 and 899; 2010, 586 and 904; and 2011, 590 and 909.

To exemplify the differences in welfare effects between the alternative
and the proposed rule for the cull cattle/processing beef category, we
compare in Table X their present and annualized values in 2006 dollars
when discounted at 3 percent. Compared to effects under the proposed
rule, consumer welfare gains under the alternative would be 12.4 percent
larger, producer welfare losses would be 11.3 percent larger, and net
benefits would be 13.7 percent larger. The annual decrease in processing
beef prices under the alternative over the 5-year period, all things
equal, is computed to average \$4.80 per cwt, compared to an average
annual decrease of \$4.00 under the proposed rule.

> Table X. Present and annualized values of welfare changes for cull
> cattle/processing beef, with the alternative and with the proposed
> rule, 3 percent discount rate, 2006 dollars, 2007-2011

  -------------------- --------------- ------------------------ ------------------------ -------------------
                                                                                         

                                       Changes in Welfare                                

                                       [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}

                                       (Thousand Dollars)                                

  Present Value        Alternative     \$1,397,680              -\$730,800               \$666,880

                       Proposed Rule   \$1,243,147              -\$656,540               \$586,607

                       Difference      \$154,533                -\$74,260                \$80,273

                                                                                         

  Annualized Value     Alternative     \$305,190                -\$159,573               \$145,617

                       Proposed Rule   \$271,447                -\$143,358               \$128,089

                       Difference      \$33,743                 -\$16,215                \$17,528

                                                                                         

  Difference as a                      12.4%                    11.3%                    13.7%
  percentage of                                                                          
  welfare changes with                                                                   
  the proposed rule                                                                      
  -------------------- --------------- ------------------------ ------------------------ -------------------

When we compare present and annualized values of combined welfare
changes under the alternative and under the proposed rule, we find that
the net welfare benefits would be 15 to 16 percent larger under the
alternative than would be realized under the proposed rule. For example,
the annualized net benefit (2006 dollars, 3 percent rate of discount)
would be \$140 million under the alternative, compared to \$121 million
under the proposed rule. Impacts under the alternative and under the
proposed rule would also differ for some of the commodities not modeled.
For example, we would expect the supply of bovine casings to be larger
with the alternative, due to larger projected slaughter numbers.

*BSE risk.* As described in the risk assessment for the proposed rule,
transmission of BSE requires that bovines ingest feed that contains the
infectious agent. Feed contamination results from the incorporation of
ingredients that contain certain ruminant protein derived from infected
animals. Standard rendering processes do not completely inactivate the
BSE agent. Therefore, rendered protein such as meat-and-bone meal
derived from infected animals may remain contaminated. Prohibitions on
the use of ruminant protein in ruminant feed are imposed by the Food and
Drug Administration to mitigate the risk of BSE transmission.

The World Organization for Animal Health establishes standards for the
international trade in animals and animal products. It recommends that
cattle be imported from a region that has reported an indigenous case of
BSE only if the cattle selected for export were born after the date from
which a ban on the feeding of ruminants with meat-and-bone meal and
greaves (the residue left after animal fat or tallow has been rendered)
derived from ruminants had been effectively enforced.

On August 4, 1997, Canada issued regulations prohibiting the use of
mammalian protein in ruminant feeds. Implementation of the feed ban was
a gradual process, with producers, feed mills, retailers, and feed
manufacturers given grace periods before they were required to be in
full compliance with the regulations. It is believed that this
implementation period may have lasted six months, making February 1998 a
more realistic date on which the ban can be considered to have gone into
effect.

The likelihood that Canadian cattle born after February 1998 would be
exposed to the BSE agent continues to decrease over time. APHIS
considers that a period of one year following the full implementation of
the feed ban allows sufficient time for the measures taken by Canada to
have their desired effect. Therefore, APHIS concludes that cattle born
on or after March 1, 1999 are unlikely to have been exposed to the BSE
agent via feed and can be imported into the United States for any
purpose with a low risk that they will be infected with the BSE agent.

We do not have a quantitative estimate of the additional risk posed by
importation of Canadian cattle born before March 1, 1999. The importance
of a feed ban as a risk mitigation measure is demonstrated in science
and experience, and is incorporated into the World Organization for
Animal Health feed ban recommendation. As reported in the risk
assessment for the proposed rule, the precipitous decline in BSE cases
in the United Kingdom after 1987 is directly attributable to
implementation of a ban that year on using ruminant meat-and-bone meal
in ruminant feed. We conclude that there may be some degree of increased
risk of BSE introduction under the alternative, compared to the minimal
risk posed by the proposed rule, because of the greater likelihood of
the older cull cattle having been exposed to infectivity. While our
analysis indicates larger net welfare benefits may be realized under the
alternative of no restriction by date of birth on live bovine imports,
the proposed rule is preferable because it would pose a lower risk of
BSE introduction into the United States and would be consistent with
demonstrated science and experience of the World Organization for Animal
Health.

[Expected Impacts Assuming Resumption of Processing Beef Imports from
Canada]{.underline}

Current regulations require that imported Canadian cattle be slaughtered
at less than 30 months of age and that imported Canadian beef come from
cattle slaughtered at less than 30 months of age. Our analysis assumes
no imports of processing beef from Canada. As a second scenario, we
consider effects if imports of Canadian beef from cattle slaughtered at
30 months or older were to resume at the same time that the proposed
rule is finalized.

Importation of ruminant products and byproducts was included in the BSE
minimal-risk regions final rule, and this proposed rule would not change
regulations regarding the importation of beef from Canada. However, in
March 2005, APHIS published amendments to that final rule to delay until
further notice the applicability of provisions of the rule pertaining to
bovine meat, meat byproducts, whole and half carcasses, and certain
other bovine products. This partial delay of applicability of the BSE
minimal-risk regions rule prohibits importing these products when
derived from bovines 30 months of age or older when slaughtered.

As discussed, the United States is a large importer of processing beef,
with Australia, New Zealand, and Uruguay currently our primary
suppliers. Over the period of analysis, total processing beef imports
are projected to provide about 45 percent of U.S. consumption of
processing beef (decreasing from 49 percent in 2007 to 42 percent in
2011). We assume annual imports of Canadian processing beef, 2007-2011,
would average 240 million pounds carcass weight equivalent, of which
about two-thirds would displace processing beef imports from other
countries and about one-third would represent a net increase in U.S.
supply. It is further assumed under this scenario that the Canadian cull
cattle imported would not displace processing beef imports from other
countries. The import quantities and extent of displacement are
projections made by staff of the USDA Economic Research Service (ERS),
Market and Trade Economics Division, Animal Products, Grains, and Oil
Seeds Branch, based on their expert opinion and reference to the "USDA
Agricultural Baseline Projections to 2015," United States Department of
Agriculture, Interagency Agricultural Projections Committee, Baseline
Report OCE-2006-1, February 2006. The net addition of processing beef
from Canada would be equivalent to 2.8 percent of projected baseline
imports (without the rule) over the period of analysis, or 1.3 percent
of U.S. supply. When the processing beef produced from projected cull
cattle imports from Canada is included, the increase in the U.S. supply
of processing beef under this scenario would be equivalent to 4.3
percent of projected imports without the proposed rule.

Projected imports of cull cattle and processing beef from Canada under
this scenario are compared in Table XI to projected imports of cull
cattle alone used to evaluate the proposed rule. Results of the analysis
show the price of processing beef decreasing in 2007 by 6.3 percent
under this scenario, from \$99 to about \$93 per cwt carcass weight
equivalent in 2006 dollars. Over the period of analysis, the annual
decrease in processing beef prices because of the proposed rule, all
things equal, is expected to average about 5 percent, ranging from about
\$6.20 per cwt in 2007, to about \$3.80 per cwt in 2009.

+------------------+-------------------------+-------------------------+
| Table XI.        |                         |                         |
| Scenario         |                         |                         |
| comparison of    |                         |                         |
| quantities of    |                         |                         |
| (i) cull cattle  |                         |                         |
| alone and (ii)   |                         |                         |
| cull cattle and  |                         |                         |
| processing beef  |                         |                         |
| projected to be  |                         |                         |
| imported from    |                         |                         |
| Canada, net of   |                         |                         |
| displaced        |                         |                         |
| processing beef  |                         |                         |
| imports from     |                         |                         |
| other countries, |                         |                         |
| 2007-2011, in    |                         |                         |
| million pounds   |                         |                         |
| of processing    |                         |                         |
| beef, carcass    |                         |                         |
| weight           |                         |                         |
| equivalent       |                         |                         |
+------------------+-------------------------+-------------------------+
| Year             | Cull Cattle Only        | Cull Cattle and         |
|                  |                         | Processing Beef         |
+------------------+-------------------------+-------------------------+
| 2007             | 288                     | 339                     |
+------------------+-------------------------+-------------------------+
| 2008             | 254                     | 299                     |
+------------------+-------------------------+-------------------------+
| 2009             | 205                     | 242                     |
+------------------+-------------------------+-------------------------+
| 2010             | 237                     | 279                     |
+------------------+-------------------------+-------------------------+
| 2011             | 240                     | 282                     |
+------------------+-------------------------+-------------------------+
| Source: Expert   |                         |                         |
| opinion, USDA    |                         |                         |
| Economic         |                         |                         |
| Research         |                         |                         |
| Service, Market  |                         |                         |
| and Trade        |                         |                         |
| Economics        |                         |                         |
| Division, Animal |                         |                         |
| Products,        |                         |                         |
| Grains, and Oil  |                         |                         |
| Seeds Branch.    |                         |                         |
|                  |                         |                         |
| Notes: Cull      |                         |                         |
| cattle are       |                         |                         |
| converted to     |                         |                         |
| processing beef  |                         |                         |
| by multiplying   |                         |                         |
| by the following |                         |                         |
| carcass weights  |                         |                         |
| (pounds) for     |                         |                         |
| cows and         |                         |                         |
| bulls/stags,     |                         |                         |
| respectively:    |                         |                         |
| 2007, 576 and    |                         |                         |
| 888; 2008, 579   |                         |                         |
| and 893; 2009,   |                         |                         |
| 583 and 899;     |                         |                         |
| 2010, 586 and    |                         |                         |
| 904; and 2011,   |                         |                         |
| 590 and 909. All |                         |                         |
| of the           |                         |                         |
| quantities that  |                         |                         |
| follow are       |                         |                         |
| expressed in     |                         |                         |
| million pounds   |                         |                         |
| of processing    |                         |                         |
| beef, carcass    |                         |                         |
| weight           |                         |                         |
| equivalent. For  |                         |                         |
| the cull cattle  |                         |                         |
| imports only     |                         |                         |
| scenario, the    |                         |                         |
| quantities are   |                         |                         |
| based on         |                         |                         |
| projected        |                         |                         |
| imports of       |                         |                         |
| slaughter cows,  |                         |                         |
| bulls, and       |                         |                         |
| stags, and are   |                         |                         |
| equivalent to:   |                         |                         |
| 2007, 458; 2008, |                         |                         |
| 403; 2009, 333;  |                         |                         |
| 2010, 343; and   |                         |                         |
| 2011, 346. These |                         |                         |
| quantities are   |                         |                         |
| reduced by the   |                         |                         |
| following        |                         |                         |
| projected        |                         |                         |
| displaced        |                         |                         |
| processing beef  |                         |                         |
| imports from     |                         |                         |
| other countries: |                         |                         |
| 2007, 170; 2008, |                         |                         |
| 149; 2009, 128;  |                         |                         |
| 2010, 106; and   |                         |                         |
| 2011, 106. For   |                         |                         |
| the scenario     |                         |                         |
| that assumes     |                         |                         |
| importation from |                         |                         |
| Canada of both   |                         |                         |
| cull cattle and  |                         |                         |
| processing beef, |                         |                         |
| quantities of    |                         |                         |
| cull cattle      |                         |                         |
| imported are:    |                         |                         |
| 2007, 214; 2008, |                         |                         |
| 199; 2009, 192;  |                         |                         |
| 2010, 204; and   |                         |                         |
| 2011, 207.       |                         |                         |
| Projected        |                         |                         |
| processing beef  |                         |                         |
| imports are:     |                         |                         |
| 2007, 325; 2008, |                         |                         |
| 275; 2009, 200;  |                         |                         |
| 2010, 200; and   |                         |                         |
| 2011, 200.       |                         |                         |
| Combined cull    |                         |                         |
| cattle and       |                         |                         |
| processing beef  |                         |                         |
| imports are      |                         |                         |
| 2007, 539; 2008, |                         |                         |
| 474; 2009, 392;  |                         |                         |
| 2010, 404; and   |                         |                         |
| 2011, 407. These |                         |                         |
| quantities are   |                         |                         |
| reduced by the   |                         |                         |
| following        |                         |                         |
| projected        |                         |                         |
| displaced        |                         |                         |
| processing beef  |                         |                         |
| imports from     |                         |                         |
| other countries: |                         |                         |
| 2007, 200; 2008, |                         |                         |
| 175; 2009, 150;  |                         |                         |
| 2010, 125; and   |                         |                         |
| 2011, 125.       |                         |                         |
+------------------+-------------------------+-------------------------+

As shown in Table XII, the present value of the welfare changes in 2006
dollars when using a 3 percent discount rate would be \$1.47 billion in
consumer gains, \$770 million in producer losses, for a net benefit of
about \$695 million. Annualized values over the five years, in 2006
dollars when using a 3 percent discount rate, would be consumer gains of
\$320 million, producer losses of \$168 million, and net benefits of
\$152 million.

> Table XII. Cull cattle/processing beef: present and annualized values
> of welfare changes assuming cull cattle imports and processing beef
> imports from Canada would resume at the same time, 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare                                

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  \$1,465,829              -\$770,389               \$695,440

                       7%                  \$1,321,580              -\$692,393               \$629,187

  2001 Dollars         3%                  \$1,274,467              -\$669,797               \$604,670

                       7%                  \$1,149,081              -\$602,002               \$547,078

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  \$320,071                -\$168,218               \$151,853

                       7%                  \$322,321                -\$168,868               \$153,453

  2001 Dollars         3%                  \$278,286                -\$146,253               \$132,033

                       7%                  \$280,250                -\$146,823               \$133,427
  -------------------- ------------------- ------------------------ ------------------------ -------------------

Compared to impacts for the cull cattle/processing beef category when
only cull cattle would enter, this scenario would result in consumer
welfare gains larger by 17.9 percent, producer welfare losses larger by
17.3 percent, and net benefits larger by 18.6 percent.

Combined effects under this scenario for cull cattle/processing beef,
feeder cattle, fed cattle, and fed beef are shown in Table XIII.

> Table XIII. Present and annualized values of combined welfare changes
> for the modeled commodities, assuming cull cattle imports and
> processing beef imports from Canada would resume at the same time,
> 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare                                

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  \$669,191                \$2,387                  \$671,578

                       7%                  \$610,108                -\$2,145                 \$607,963

  2001 Dollars         3%                  \$581,395                \$2,519                  \$583,917

                       7%                  \$529,956                -\$1,342                 \$528,614

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  \$146,122                \$523                    \$146,643

                       7%                  \$148,808                -\$513                   \$148,294

  2001 Dollars         3%                  \$126,951                \$551                    \$127,501

                       7%                  \$129,252                -\$327                   \$128,923
  -------------------- ------------------- ------------------------ ------------------------ -------------------

Removal of the delay of applicability, thereby allowing importation of
Canadian beef from cattle slaughtered at 30 months or older, is a
decision that will be taken at the discretion of the Secretary of the
U.S. Department of Agriculture.

[Expected Impacts for Small Entities]{.underline}

We have prepared an initial regulatory flexibility analysis that
indicates that industries expected to be affected by the proposed rule
are composed largely of small entities. Industries that may be affected,
as categorized by the North American Industry Classification System, are
Beef Cattle Ranching and Farming (NAICS 112111), Dairy Cattle and Milk
Production (NAICS 112120), All Other Animal Production (NAICS 112990),
Cattle Feedlots (NAICS 112112), Animal (except Poultry) Slaughtering
(NAICS 311611), Meat Processed from Carcasses (NAICS 311612), Meat and
Meat Product Merchant Wholesalers (NAICS 424470), Supermarkets and Other
Grocery (except Convenience) Stores (NAICS 445110), Meat Markets (NAICS
445210), In-Vitro Diagnostic Substance Manufacturing (NAICS 325413), and
Biological Product (except Diagnostic) Manufacturing (NAICS 325414).

Average effects for small entities would be small. As examples, we
approximate that gross receipts for small-entity beef and dairy
operations would increase, respectively, by \$160 (0.6 percent of annual
revenue) and \$133 (less than 0.1 percent of annual revenue), due to the
rule's projected impact on feeder cattle prices. We approximate that
small-entity feedlots may incur a revenue loss of about \$5,040 (less
than 0.3 percent of annual revenue), due to the rule's expected effects
on feeder cattle and fed cattle prices. Small-entity meat packing and
processing establishments may benefit marginally with the rule, with
estimated price increases for fed beef in 2007 and 2008 representing an
increase in annual revenue of less than 0.2 percent. Effects of the
proposed rule for packers and processors that utilize processing beef
would be larger, due to the resumption of cull cattle imports from
Canada. Annual prices of processing beef are expected to fall by an
average of \$4 per cwt over the period of analysis. The price declines
would benefit establishments that use processing beef to produce ground
beef for the wholesale market. Conversely, establishments that sell
processing beef would be negatively affected by the expected price
declines.

Currently, bovines imported from Canada are restricted to animals that
are slaughtered at less than 30 months of age. Bovines not imported for
immediate slaughter must be moved from the port of entry to a feedlot in
a sealed means of conveyance and from the feedlot to a recognized
slaughtering establishment again in a sealed means of conveyance. The
animals may not be moved to more than one feedlot. Under the proposed
rule, these movement restrictions would no longer be imposed. Canadian
bovines imported other than for immediate slaughter could be moved any
number of times to any destinations in unsealed means of conveyance.

Under the proposed rule, feeder bovines imported from BSE minimal-risk
regions would not need to be accompanied by APHIS Form VS 17-130, which
currently is used to identify the feedlot of destination. (The
individual responsible for the movement of an imported animal and the
individual identification of the animal would still be required
information on the accompanying health certificate.) Also under the
proposed rule, bovines of Canadian origin moved from a U.S. feedlot to a
slaughtering establishment would not need to be accompanied by APHIS
Form VS 1-27.

Removal of these movement and paperwork requirements would benefit
buyers and sellers of Canadian-origin bovines. Many of the beneficiaries
are likely to be small entities, given their predominance among cattle
and dairy operations and feedlot establishments. Affected businesses
would be able to take advantage of a broader range of transactional
opportunities than under current regulations. For example, the sale of a
young steer first for backgrounding, then for confined feeding at one or
more facilities, and finally for slaughter may enable the original and
subsequent owners of the animal to better maximize returns compared to
current marketing possibilities. While we are not able to quantify
impacts of removing current movement restrictions on Canadian cattle
imports, we expect their removal would benefit the cattle industry
across-the-board.

The Agency has found no significant alternatives to the proposed rule
that would continue to protect against the introduction and
dissemination of BSE into the United States while removing unnecessary
prohibitions on the importation of certain commodities from Canada.
Without the proposed rule, restrictions on U.S. importation of certain
Canadian bovine commodities that are without scientific merit would
continue. With the proposed rule, importation of these Canadian
commodities would be allowed to resume under certain conditions and the
risk of introduction of BSE into the United States would remain minimal.

**Contents**

1\. Introduction 1

The Proposed Rule and this Analysis

Organization of this Document

The U.S. and Canadian Markets for Cull Cattle/Processing Beef

2\. Analytical Approach, Baselines, and Projected Imports 8

The BAS Model

Baselines for the Modeled Commodities

Primary Commodity: Cull Cattle/Processing Beef

Secondary Commodities: Feeder Cattle, Fed Cattle, and Fed Beef

Projected Imports from Canada for the Modeled Commodities

Commodities not Modeled

Breeding cattle

Vealers and slaughter calves

Bison

Bovine casings and small intestine products

Bovine blood and blood products

3\. Expected Impacts of the Proposed Rule for the Modeled Commodities 21

Price and Quantity Effects

Cull cattle/processing beef

Feeder cattle, fed cattle, and fed beef

Welfare Effects

Cull cattle/processing beef

Feeder cattle, fed cattle, and fed beef

Combined effects

Displacement of Processing Beef Imports from Other Countries

Multi-sector Impacts

4\. Expected Impacts for Commodities not Modeled 38

Breeding Cattle

Vealers and Slaughter Calves

Bison

Bovine Casings and Small Intestine Products

> U.S. supply of bovine small intestines

Bovine casings from Canada

Bovine Blood and Blood Products

5\. Expected Impacts of an Alternative to the Rule 56

Cattle Imports from Canada

BSE Risk

6\. Expected Impacts Assuming Resumption of Processing Beef Imports from
Canada 64

Price and Welfare Effects for Cull Cattle/Processing Beef

Combined Welfare Effects for the Modeled Commodities

7\. Initial Regulatory Flexibility Analysis 69

Reasons for the Action

Objectives and Legal Basis

Small Entities that May Be Affected

Beef and dairy producers

Bison producers

Feedlot establishments

Slaughtering establishments

Meat packing and processing establishments

> Meat importers, exporters, and wholesalers

Grocery stores and meat markets

Manufacturers of substances that use bovine blood and blood products

Reporting, Recordkeeping and Other Compliance Requirements

Duplicating, Overlapping or Conflicting Federal Rules

Alternatives that would accomplish the Stated Objectives and Minimize
Any

Significant Economic Impact on Small Entities

Appendixes 84

> **Preliminary Regulatory Impact Analysis and**
>
> **Initial Regulatory Flexibility Analysis**
>
> **Proposed Rule**
>
> **Bovine Spongiform Encephalopathy; Minimal-Risk Regions; Importation
> of Live Bovines and Products Derived from Bovines**
>
> **(Docket No. APHIS 2006-0041)**
>
> **October 27, 2006**

1\. Introduction

Bovine spongiform encephalopathy (BSE) is a progressive, fatal
neurological disorder of cattle, bison, and certain other bovidae. It is
spread through bovine consumption of feed that contains the infective
agent. There is no treatment or vaccine available for BSE. Included in
Title 9 of the Code of Federal Regulations (CFR), Parts 93-96, are
regulations that prohibit the importation of ruminants and most ruminant
products (meat and certain other products and byproducts) from regions
where BSE exists and regions that present an undue risk of introducing
BSE into the United States because of import requirements less
restrictive than those that would be acceptable for import into the
United States or because of inadequate surveillance.

On January 4, 2005, the United States Department of Agriculture, Animal
and Plant Health Inspection Service (USDA APHIS or the Agency) published
a final rule entitled "Bovine Spongiform Encephalopathy; Minimal-Risk
Regions and Importation of Commodities," referred to as the BSE
minimal-risk regions rule.[^2] It established a category of regions that
present a minimal risk of introducing BSE into the United States through
importation, under certain conditions, of live ruminants and ruminant
products and byproducts from such regions, and named Canada as a BSE
minimal-risk region.[^3] This proposed rule would amend the BSE
minimal-risk regions rule.

[The Proposed Rule and this Analysis]{.underline}

The purpose of the proposed rule is to remove certain restrictions on
the importation of certain bovine commodities from BSE minimal-risk
regions. APHIS has determined that the restrictions are not warranted by
scientific research and evidence, and that they are unnecessary to
prevent the introduction and dissemination of BSE into the United States
from such regions. We are proposing to allow the following commodities
to be imported from Canada under specified conditions (in addition to
commodities currently allowed to be imported from BSE minimal-risk
regions):

• Live bovines that were born on or after March 1, 1999;

• Bovine small intestines, minus the distal ileum;

• Bovine casings; and

• Bovine blood and blood products.

The risk assessment for the proposed rule analyzes the likelihood that
importing these commodities from Canada would introduce and disseminate
BSE into the U.S. cattle population.[^4] The likelihood of release
(introduction of the disease agent), the likelihood of exposure for
susceptible animals given release, and the magnitude of consequences
given release and exposure are evaluated either quantitatively or
qualitatively. The risk estimation that combines these components
concludes that the BSE risk posed by the proposed rule would be
negligible.

This preliminary regulatory impact analysis addresses expected economic
effects of allowing resumption of imports from Canada of the above
commodities. Expected benefits and costs are examined in accordance with
Executive Order 12866.[^5] Expected economic impacts for small entities
are also considered, as required by the Regulatory Flexibility Act.[^6]
We expect benefits to exceed costs overall. Effects for Canadian and
other foreign entities are not addressed in this analysis. However, the
Agency expects reestablished access to U.S. markets to benefit Canadian
producers and suppliers of commodities included in the proposed rule
and, for at least one commodity category, cull cattle/processing beef,
result in partial displacement of processing beef imports from other
sources.

[Organization of this Document]{.underline}

Six sections follow in this preliminary analysis of expected economic
impacts of the rule. In section 2, we describe our approach to the
analysis and identify the primary and secondary commodities that would
be affected, including certain commodities that are currently allowed
entry from Canada. We discuss the methods used to analyze expected
impacts of the rule. For commodities that are quantitatively modeled
(cull cattle/processing beef, feeder cattle, fed cattle, and fed beef),
we describe the model and baseline parameters, and set forth projected
quantities that would be imported from Canada with and without the
proposed rule. For other commodities (breeding cattle, vealers and
slaughter calves, bison, bovine casings and small intestine products,
and bovine blood and blood products), we explain why the impacts are
evaluated less rigorously.

In section 3, we present expected price and quantity effects and welfare
impacts of the proposed rule for the modeled commodities. For cull
cattle/processing beef, we consider effects under different assumptions
regarding the extent to which cull cattle imports from Canada may
displace processing beef imports from other countries.

We address in section 4 the expected effects of the proposed rule for
the commodities not modeled. The discussion of likely impacts is largely
qualitative using available data.

In section 5, as an alternative to the proposed rule, we consider
effects of allowing importation of Canadian bovines with no restriction
by date of birth. In other words, they could be imported for any
destination or purpose without regard to age.

In section 6, we examine expected impacts assuming processing beef
imports from Canada would resume at the same time that this rule is
finalized. We compare the estimated effects to those that would occur if
only cull cattle imports from Canada were reestablished.

An initial regulatory flexibility analysis is presented in section 7. We
address expected impacts of the proposed rule for small entities,
including effects of proposed changes in compliance requirements.

We conclude this Introduction with an overview of the U.S. and Canadian
markets for cull cattle and processing beef.

[The U.S. and Canadian Markets for Cull Cattle/Processing
Beef]{.underline}

The cattle and beef industries in the United States and Canada have a
long history of trade. In 2002, prior to the discovery of BSE in Canada,
the United States imported 1.7 million live bovine from Canada, valued
at more than \$1.1 billion and accounting for more than 67 percent of
U.S. total bovine imports. That same year, the United States imported
from Canada 382,110 MT of bovine meat, also valued at \$1.1 billion,
which comprised about 44 percent of bovine meat imports from all
sources.[^7] The trade in live bovine is principally characterized by
the slaughter (and to a lesser extent, feeding) of Canadian cattle at
U.S. facilities.

The primary impact of this rule would be the resumption of U.S. imports
of Canadian cull cattle, that is, cows, bulls, and stags sold for
slaughter. Their supply prior to May 2003 was relatively small compared
to feeder cattle and fed cattle imports, representing about 25 percent
of all cattle imports from Canada, 1998 through 2002. Nonetheless, the
importation of Canadian cull cattle that would be allowed by this rule
would help to meet the strong U.S. demand for processing beef.

The demand for cull cattle is derived from the demand for processing
beef, and only a small portion of the U.S. supply of processing beef
would come from imported Canadian cull cattle. Therefore, cull cattle
and processing beef are combined into a single commodity category.
Processing beef refers to lean, boneless beef that is mixed with
trimmings from grain-fed cattle to produce ground beef, thereby
complementing the domestic production of fed beef.[^8] Demand for
processing beef is high, as reflected in robust ground beef sales.
Despite higher domestic cull cattle slaughter in past months in response
to drought conditions, U.S. production of processing beef is trending
low because the industry is in the early stages of the expansion phase
of the cattle cycle.

The United States is a large importer of processing beef, with
Australia, New Zealand, and Uruguay our major sources. Over the five
years, 1998 through 2002, the United States annually imported an average
of 3 billion pounds of all types of beef and veal, with processing beef
accounting for approximately two-thirds of that total, and domestic
production of processing beef averaged about 3.75 billion pounds. During
this same period, cull cattle imports from Canada, when converted to
their processing beef equivalent, totaled about 185 million pounds,[^9]
or about 8 percent of average annual U.S. imports and about 3 percent of
average annual supply.

U.S.-Canadian cattle and beef trade changed dramatically following
Canada's May 2003 BSE discovery. Canada's cattle population increased
rapidly following the loss of export markets for its cattle and beef.
There was a record total of over 14.6 million head of Canadian cattle on
January 1, 2004, which was exceeded by a new record of 15.1 million head
on January 1, 2005.[^10] The previous peak in Canadian cattle
inventories had occurred in 1975. The Canadian cattle population remains
the second largest on record, despite the partial reestablishment of
export markets for cattle and beef.

On January 1, 2006, the Canadian cattle inventory was 14.8 million head,
a decline of about 2 percent from the previous year. However, Canada's
cow population remained essentially the same during this period,
decreasing only marginally from a record 6.36 million head on January 1,
2005, to 6.33 million head on January 1, 2006. Canadian cow slaughter
has increased with the resumption of U.S. imports of cattle for
slaughter at less than 30 months of age, but the cow population remains
large. On July 1, 2006, Canada's producers were holding 690,300 cull
cows, or 11 percent of the cow inventory.

Canadian slaughter capacity increased following the opening of the U.S.
market to beef from cattle slaughtered at less than 30 months of age.
Resumption in July 2005 of imports of Canadian feeder and fed cattle for
slaughter at less than 30 months of age resulted in underutilization of
the expanded slaughter capacity. Some of the Canadian plants shifted to
cow slaughter, others reduced hours of operation or closed. In the
second half of 2005, Canadian cow slaughter began to increase and
continued to do so in 2006. This trend of expanding cow slaughter would
likely continue in 2007, if the United States were to remain closed to
imports of Canadian cull cattle.

In the United States, the cattle inventory was 97.1 million head on
January 1, 2006, up 2 percent from a year earlier.[^11] This is the
second year of the current expansion for the nation's herd. The last
cyclical peak of 103.5 million head was recorded on January 1, 1996.
Notwithstanding cyclical expansion, cow slaughter has been large in 2006
due to an extended drought. If weather and forage conditions return to
normal in 2007, cow slaughter is expected to return to the cyclical low
levels of 2004 and 2005.

Relative prices highlight the different situations for the Canadian and
U.S. cull cow markets. The September 2006 price of Cutter and Utility
slaughter cows in Ontario, Canada, averaged \$35.19 per cwt, compared to
an average of \$50.25 per cwt for Utility cows in Sioux Falls, South
Dakota.[^12] Under the proposed rule, U.S. packers would likely outbid
Canadian packers, and the cattle trade would again include slaughter of
Canadian cull cattle at U.S. plants. However, Canadian plants would
compete strongly for a declining supply, with the rise in Canadian
prices toward U.S. levels slowing the movement of cull cattle to the
United States. Canadian cattle inventories are expected to return to
pre-May 2003 levels over the next couple of years under the proposed
rule. Canada's excess cow population and the strong U.S. demand for cull
cattle/processing beef underlie projected imports of Canadian cull
cattle under the proposed rule.

2\. Analytical Approach, Baselines, and Projected Imports

The proposed rule would impact U.S. markets for several bovine
commodities. Ideally, the rule's various effects would be considered as
a whole by examining linkages among commodities and between the cattle
and livestock industries and the rest of the U.S. economy in a general
equilibrium framework. This approach would require economy-wide
production, consumption, and price information, plus the capability to
compute the proposed rule's various simultaneous effects---knowledge and
resource requirements beyond those available to APHIS.

As a next-best course, we follow two methodologies: First, using a
partial equilibrium model, we compute expected impacts for those
commodities for which U.S. baselines and quantities that would be
supplied by Canada have been projected. Second, for commodities for
which baseline and import data are not projected or for which the
effects of the rule clearly would be insignificant, we qualitatively
assess likely impacts using available information.

We begin this section with a description of the model used to examine
price, quantity, and welfare impacts of the proposed rule. We then
present the baselines for the principal commodity that would be affected
by the rule, cull cattle/processing beef, and for the commodities
expected to be affected secondarily, feeder cattle, fed cattle, and fed
beef. Projected changes in imports from Canada for the four commodities
are set forth. The section concludes with a discussion of certain other
commodities expected to be affected by the rule that are not modeled.

[The BAS Model]{.underline}

A model called the Baseline Analysis System (BAS) model is used to
compute principal welfare and price impacts of the proposed rule.[^13]
Beginning with baseline quantities and prices (conditions without the
proposed rule), we use the model to derive price and welfare effects of
the proposed rule, based on projected changes in imports from Canada
(conditions with the proposed rule).

The BAS economic model was designed to meet a number of analytical
needs. First, it was designed to provide estimates of the efficiency
impacts of alternative policies, measured by changes in net social
surplus (welfare impacts). Second, it was designed to provide estimates
of the distributional effects of proposed policies; i.e., the effects on
consumers, producers, and producer subgroups. Third, it was designed to
utilize readily available data and parameters commonly presented in
economic literature. And, finally, it was designed to be capable of
producing results in a timely manner.

The BAS model is a net trade, non-spatial partial equilibrium model. Net
trade is defined as the absolute value of the difference between exports
and imports. Non-spatial means that price and quantity effects resulting
from differences in market locations are not specified. Price and
quantity effects derived using the model are assumed to be the average
of effects across geographically separated markets. Partial equilibrium
means that the model results are based on maintaining a commodity-price
equilibrium in a limited portion of an overall economy. Commodities or
economic sectors not explicitly included in the model are assumed to
have a negligible influence on the results.

Welfare impacts refer to gains and losses to society as measured by
changes in consumer and producer surplus. Consumer surplus is the
difference between what a consumer pays for a unit of a good and the
maximum amount that the consumer would be willing to pay for that unit.
Producer surplus is the difference between the amount a producer is paid
for a unit of a good and the minimum amount that the producer would
accept to supply that unit.

The consumer and producer surplus equations in the model are derived
based on the assumption that demand and supply functions are
approximately linear near the initial equilibrium point. For small
shifts, this assumption will result in reasonably accurate estimates of
consumer and producer surplus change. Parallel shifts in the demand and
supply functions are assumed. In addition to domestic demand and supply
functions, an excess supply function is included in the model to
evaluate changes in imports.

In this analysis, we compute effects of the expected changes in imports
from Canada due to the proposed rule for the four modeled commodities:
cull cattle/processing beef, feeder cattle, fed cattle, and fed beef.
The resumption of cull cattle imports is expected to affect the
slaughter mix in Canada. As part of this adjustment, we expect for
example, that more cattle would remain in Canada for feeding and fewer
feeder cattle would be imported under the proposed rule than under
baseline conditions, that is, without the proposed rule. Importation of
fewer feeder cattle from Canada, all things equal, would cause the price
of feeder cattle in the United States to rise. The BAS model is used to
compute the expected increase in price because of the proposed rule, and
because of the price rise, the decrease in the quantity of feeder cattle
demanded by U.S. feedlots and the increase in the quantity of feeder
cattle supplied by U.S. producers. The model yields welfare changes, in
this example in terms of expected losses for U.S. buyers and expected
gains for U.S. sellers of cattle for feeding. In section 3, we report
expected impacts for the modeled commodities, individually and combined,
recognizing that the combined effects are simply a summation of the
separate partial equilibrium results and do not take into account
possible market dynamics.

The BAS economic model is based on methodology described in the
following studies: Ebel, E.D., R.H. Hornbaker, and C.H. Nelson,
\"Welfare Effects of the National Pseudorabies Eradication Program.\"
*Amer. J. Agr. Econ.* 74(August 1992):638-45; Forsythe, K.W., and B.A.
Corso, \"Welfare Effects of the National Pseudorabies Eradication
Program: Comment.\" *Amer. J. Agr. Econ.* 76(November 1994):968-71; and
Lichtenberg, E., D. D. Parker, and D. Zilberman, \"Marginal Analysis of
Welfare Cost of Environmental Policies: The Case of Pesticide
Regulation.\" *Amer. J. Agr. Econ.* 70(November 1988):867-74.

A complete description of the model is provided in: Forsythe, K.W. \"An
Economic Model for Routine Analysis of the Welfare Effects of Regulatory
Changes.\" V3.00. U.S. Department of Agriculture, Animal and Plant
Health Inspection Service, Veterinary Services, Centers for Epidemiology
and Animal Health. April 20, 2005 (draft).[^14] The model is currently
undergoing peer review. The peer review plan is available at
<http://www.aphis.usda.gov/peer_review/content/printable_version/PeerReviewPlanBAS_Model122006.pdf>

Consistent with requirements of the Office of Management and Budget for
benefit-cost analysis as described in Circular A-4, Regulatory
Analysis,[^15] we use the BAS model to examine benefits and costs over a
5-year period, 2007-2011. The benefits and costs are computed as present
and annualized values discounted at 3 and 7 percent. Results of the
analysis are reported in 2006 and 2001 dollars. Circular A-4 provides
guidance for agencies on the analysis of economically significant
rulemakings as defined by Executive Order 12866.

[Baselines for the Modeled Commodities]{.underline}

The BAS model requires specification of U.S. baseline quantities
(production, consumption, imports, and exports), baseline prices, and
own-price elasticities of supply and demand for each year of the period
of analysis, 2007-2011. Consumption is assumed to equal production plus
imports minus exports (net of beginning and ending cold storage stocks
for processing and fed beef). Baseline quantities and prices have been
projected by staff of the USDA Economic Research Service (ERS), Market
and Trade Economics Division, Animal Products, Grains, and Oil Seeds
Branch, based on their expert opinion and reference to the "USDA
Agricultural Baseline Projections to 2015," United States Department of
Agriculture, Interagency Agricultural Projections Committee, Baseline
Report OCE-2006-1, February 2006.
<http://www.usda.gov/oce/commodity/ag_baseline.htm>. The price
elasticities are based on consultation with Animal Products, Grains, and
Oil Seeds Branch staff.

Four categories of commodities are formally modeled: the commodity
category expected to be principally impacted by the proposed rule, cull
cattle/processing beef; and commodities for which we expect there to be
secondary effects, feeder cattle, fed cattle, and fed beef. Cull cattle
are cows, bulls, and stags sold for slaughter. They are generally
breeding stock for which the present slaughter value exceeds their
expected future net value as breeding animals (plus future slaughter
value), and are the source of processing beef. Feeder cattle are weaned
steers and heifers (about 9 months of age) and yearlings (mostly 12 to
15 months of age) that are fed at a feedlot for several months before
slaughter. This category also includes cattle called stockers that are
grazed (backgrounded) on pasture for several months before being
transported for confined feeding. Fed cattle are steers and heifers that
have been grain-fed at feedlots, with most ready for slaughter at
between 16 and 24 months of age. Fed beef refers to meat derived from
fed cattle.

*Primary Commodity: Cull Cattle/Processing Beef.* Cull cattle and
processing beef are combined into a single commodity category, with
quantities expressed in million pounds of processing beef, carcass
weight equivalent. The demand for cull cattle is derived from the demand
for processing beef, and only a small portion of the U.S. supply of
processing beef would come from imported Canadian cull cattle. Canada
historically has been our only foreign source of cull cattle, and the
expected imports under the proposed rule would impact the U.S. market
for processing beef. The United States imports nearly half of its supply
of processing beef, which is mainly used in the production of ground
beef. Some of the cull cattle that would be imported from Canada under
this rule would substitute for processing beef that otherwise would be
imported from other countries; the rest of the imported cull cattle
would represent a net increase in the nation's processing beef supplies.
The quantity of additional processing beef that would be supplied by the
projected cull cattle imports from Canada is expected to be small
relative to our global imports of this commodity.

Table 1 shows the baseline quantities, prices, and elasticities for cull
cattle/processing beef. No cull cattle or processing beef are imports
from Canada are included in the baseline. As indicated, U.S. processing
beef imports are significant, but are expected to decline over the
period of analysis, from 49 percent of consumption in 2007, to 42
percent in 2011.

  ------------------------ -------------------- -------------------- -------------------- -------------------- --------------------
  Table 1. Baseline data                                                                                       
  for cull                                                                                                     
  cattle/processing beef,                                                                                      
  2007-2011, with                                                                                              
  quantities in million                                                                                        
  pounds carcass weight                                                                                        
  equivalent                                                                                                   

                           [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}

  Consumption              6,539                6,667                6,780                6,804                6,774

  Production               3,314                3,509                3,728                3,898                3,943

  Imports                  3,225                3,157                3,052                2,906                2,831

  Exports                  0                    0                    0                    0                    0

  Price (\$ per cwt in     \$99                 \$94                 \$91                 \$92                 \$91
  2006 dollars)                                                                                                

  Price elasticity of      0.84                 0.84                 0.84                 0.84                 0.84
  supply                                                                                                       

  Price elasticity of      -0.40                -0.40                -0.40                -0.40                -0.40
  demand                                                                                                       
  ------------------------ -------------------- -------------------- -------------------- -------------------- --------------------

> Source: Expert opinion, USDA Economic Research Service, Market and
> Trade Economics Division, Animal Products, Grains, and Oil Seeds
> Branch. Based on "USDA Agricultural Baseline Projections to 2015,"
> United States Department of Agriculture, Interagency Agricultural
> Projections Committee, Baseline Report OCE-2006-1, February 2006.
> <http://www.usda.gov/oce/commodity/ag_baseline.htm>
>
> Notes: Consumption is defined as processing beef purchased by U.S.
> entities at the wholesale level. Production is defined as
> U.S.-produced processing beef sold at the wholesale level. Quantities
> of U.S.-produced processing beef are based on cull cow, bull, and stag
> slaughter projections, as shown in Appendix Table 2. Imports and
> exports are quantities of processing beef imported and exported by the
> United States. Projected processing beef prices in this table are real
> prices expressed in 2006 dollars per cwt. They are nominal processing
> beef prices that have been deflated using Consumer Price Index
> projections (Appendix Table 1). The nominal prices are based on
> \[notes to Table 1, continued\] 90 percent lean prices derived by
> multiplying projected Boning Utility Cow, Sioux Falls, prices per cwt
> (2007, \$53.61; 2008, \$52.52; 2009, \$52.22; 2010, \$53.65; and 2011,
> \$54.76) by a factor of 2.56 (ERS Livestock, Dairy, and Poultry
> Outlook/Agricultural Marketing Service). The 90 percent lean prices
> are converted to carcass weight equivalent prices by dividing by a
> factor of 1.36.

*Secondary Commodities: Feeder Cattle, Fed Cattle, and Fed Beef.*
Resumption of cull cattle imports from Canada would affect other cattle
imports by influencing the number of younger cattle fed and slaughtered
in Canada. Feeding and slaughter of fed cattle can be expected to
increase in Canada, and quantities of Canadian feeder cattle, fed
cattle, and fed beef imported by the United States would decline. The
baselines shown in Tables 2, 3, and 4 are used in the analysis to
evaluate the impact of these decreased imports.

The baseline for feeder cattle includes imports from Canada of 302,000
in 2007, 371,000 in 2008, 425,000 in 2009, 440,000 in 2010, and 441,000
in 2011 (Appendix Table 3). The baseline for fed cattle includes imports
from Canada of 742,000 in 2007, 731,000 in 2008, 729,000 in 2009,
755,000 in 2010, and 756,000 in 2011 (Appendix Table 3). The baseline
for fed beef includes imports from Canada, in million pounds carcass
weight equivalent, of 446 in 2007, 425 in 2008, 420 in 2009, 419 in
2010, and 419 in 2011 (Appendix Table 4).

  ------------------------ -------------------- -------------------- -------------------- -------------------- --------------------
  Table 2. Baseline data                                                                                       
  for feeder cattle,                                                                                           
  2007-2011, with                                                                                              
  quantities in thousand                                                                                       
  head                                                                                                         

                           [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}

  Consumption              29,546               29,828               29,362               29,309               29,564

  Production               28,421               28,650               28,139               28,068               28,279

  Imports                  1,375                1,428                1,473                1,491                1,535

  Exports                  250                  250                  250                  250                  250

  Price (\$ per head in    \$733                \$687                \$652                \$646                \$634
  2006 dollars)                                                                                                

  Price elasticity of      0.40                 0.40                 0.40                 0.40                 0.40
  supply                                                                                                       

  Price elasticity of      -0.88                -0.88                -0.88                -0.88                -0.88
  demand                                                                                                       
  ------------------------ -------------------- -------------------- -------------------- -------------------- --------------------

> Source: Expert opinion, USDA Economic Research Service, Market and
> Trade Economics Division, Animal Products, Grains, and Oil Seeds
> Branch. Based on "USDA Agricultural Baseline Projections to 2015,"
> United States Department of Agriculture, Interagency Agricultural
> Projections Committee, Baseline Report OCE-2006-1, February 2006.
> <http://www.usda.gov/oce/commodity/ag_baseline.htm>
>
> Notes: Consumption is defined as cattle purchased for U.S. feedlot
> feeding. Production is defined as U.S.-raised cattle sold for U.S.
> feedlot feeding. Imports and exports are quantities of cattle imported
> and exported by the United States for feedlot feeding. Imports include
> stockers from Mexico, although they are not considered direct
> substitutes for feeder cattle imported from Canada. Projected feeder
> cattle prices in this table are real prices expressed in 2006 dollars.
> They are nominal feeder cattle prices that have been deflated using
> Consumer Price Index projections (Appendix Table 1). The nominal
> prices are based on a 750-pound animal and the following projections
> of Oklahoma City prices per cwt for 750-800 pound steers: 2007,
> \$100.09; 2008, \$96.16; 2009, \$93.31; 2010, \$94.86; and 2011,
> \$95.77 (ERS Livestock, Dairy, and Poultry Outlook/Agricultural
> Marketing Service).

  ------------------------ -------------------- -------------------- -------------------- -------------------- --------------------
  Table 3. Baseline data                                                                                       
  for fed cattle,                                                                                              
  2007-2011, with                                                                                              
  quantities in thousand                                                                                       
  head                                                                                                         

                           [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}

  Consumption              27,848               28,306               28,943               28,857               28,874

  Production               27,106               27,575               28,214               28,102               28,118

  Imports                  742                  731                  729                  755                  756

  Exports                  0                    0                    0                    0                    0

  Price (\$ per head in    \$945                \$910                \$899                \$898                \$887
  2006 dollars)                                                                                                

  Price elasticity of      0.62                 0.62                 0.62                 0.62                 0.62
  supply                                                                                                       

  Price elasticity of      -0.76                -0.76                -0.76                -0.76                -0.76
  demand                                                                                                       
  ------------------------ -------------------- -------------------- -------------------- -------------------- --------------------

> Source: Expert opinion, USDA Economic Research Service, Market and
> Trade Economics Division, Animal Products, Grains, and Oil Seeds
> Branch. Based on "USDA Agricultural Baseline Projections to 2015,"
> United States Department of Agriculture, Interagency Agricultural
> Projections Committee, Baseline Report OCE-2006-1, February 2006.
> <http://www.usda.gov/oce/commodity/ag_baseline.htm>
>
> Notes: Consumption is defined as fed cattle purchased for U.S.
> slaughter. Production is defined as U.S.-sourced fed cattle sold for
> U.S. slaughter. Imports and exports are quantities of fed cattle
> imported and exported by the United States for slaughter. Projected
> fed cattle prices in this table are real prices expressed in 2006
> dollars. They are nominal fed cattle prices that have been deflated
> using Consumer Price Index projections (Appendix Table 1). The nominal
> prices are based on projected average carcass weights (pounds) for the
> five years of 777, 781, 791, 795, and 800, divided by an average
> dressing percentage of 0.63, and multiplied by the following
> projections of Nebraska, Direct, 1100-1300 pounds fed steer prices per
> cwt: 2007, \$78.50; 2008, \$77.06; 2009, \$76.91; 2010, \$78.32; and
> 2011, \$79.10 (ERS Livestock, Dairy, and Poultry Outlook/Agricultural
> Marketing Service).

  ------------------------ -------------------- -------------------- -------------------- -------------------- --------------------
  Table 4. Baseline data                                                                                       
  for fed beef, 2007-2011,                                                                                     
  with quantities in                                                                                           
  million pounds carcass                                                                                       
  weight equivalent                                                                                            

                           [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}

  Consumption              21,220               21,624               22,346               22,248               22,238

  Production               21,573               22,080               22,894               22,941               23,099

  Imports                  446                  425                  420                  419                  419

  Exports                  800                  880                  968                  1113                 1280

  Price (\$ per cwt in     \$142                \$135                \$131                \$133                \$132
  2006 dollars)                                                                                                

  Price elasticity of      0.84                 0.84                 0.84                 0.84                 0.84
  supply                                                                                                       

  Price elasticity of      -0.60                -0.60                -0.60                -0.60                -0.60
  demand                                                                                                       
  ------------------------ -------------------- -------------------- -------------------- -------------------- --------------------

> Source: Expert opinion, USDA Economic Research Service, Market and
> Trade Economics Division, Animal Products, Grains, and Oil Seeds
> Branch. Based on "USDA Agricultural Baseline Projections to 2015,"
> United States Department of Agriculture, Interagency Agricultural
> Projections Committee, Baseline Report OCE-2006-1, February 2006.
> <http://www.usda.gov/oce/commodity/ag_baseline.htm>
>
> Notes: Consumption is defined as fed beef purchased by U.S. entities
> at the wholesale level. Production is defined as U.S.-produced fed
> beef sold at the wholesale level. Quantities of fed beef produced are
> equal to quantities of fed cattle consumed (Table 2), converted from
> thousand head to million pounds carcass weight equivalent by
> multiplying by the following yield ratios: 2007, 0.777; 2008, 0.781;
> 2009, 0.791; 2010, 0.795; and 2011, 0.800. Imports and exports are
> quantities of fed beef imported and exported by the United States.
> Projected \[notes to Table 4, continued\] fed beef prices in this
> table are real prices expressed in 2006 dollars per cwt. They are
> nominal fed beef prices that have been deflated using Consumer Price
> Index projections (Appendix Table 1). The nominal prices are based on
> projected choice boxed beef prices per cwt carcass weight equivalent
> (ERS Livestock, Dairy, and Poultry Outlook/Agricultural Marketing
> Service).

[Projected Imports from Canada for the Modeled Commodities]{.underline}

Expected changes in the supply from Canada (imports with the rule minus
imports without the rule) for the modeled commodities are shown in Table
5. These quantities are based on import projections for live cattle as
shown in Appendix Table 3. The projected changes in cattle imports with
the proposed rule are expected to vary over the period of analysis and
from one type of cattle to the next. The projected changes in beef
imports are found in Appendix Table 4. As shown, imports of processing
beef from other countries would decline because of displacement by a
share of the cull cattle imported from Canada. We convert cull cattle
imports from Canada in thousand head to processing beef in million
pounds carcass weight equivalent, using projected carcass weights for
cows and bulls/stags as described in the notes to Table 5.

Feeder cattle and fed cattle imports are expected to decrease, that is,
there would be fewer feeder and slaughter steers and heifers imported
with the rule than without the rule. Declines in feeder and fed cattle
imports are projected because of the changes in the slaughter mix and
export options that the proposed rule would provide to Canadian
producers. Resumption of cull cattle exports to the United States would
result in increased Canadian slaughter of younger, fed cattle, and the
retention and diversion to Canadian establishments of cattle that would
otherwise be sold for U.S. feeding.

The changes in imports from Canada projected under the proposed rule,
with imports of cull cattle resuming and imports of feeder cattle, fed
cattle, and fed beef declining, underscore the expectation that some
industries and even entities may both benefit and be harmed by the
proposed rule. An increase in a commodity's price because of the
proposed rule may cause a welfare loss for a buying entity (for example,
an increase in the price of feeder cattle purchased by a feedlot
operator), while a price increase for a different commodity may be a
source of gain for that same entity (an increase in the price of fed
steers and heifers sold by the feedlot operator). We evaluate these
impacts in section 3, separately and combined.

+--------------------------+------+---------+-------+-------+-------+
| Table 5. Changes in      |      |         |       |       |       |
| imports of feeder        |      |         |       |       |       |
| cattle, fed cattle, cull |      |         |       |       |       |
| cattle/processing beef,  |      |         |       |       |       |
| and fed beef projected   |      |         |       |       |       |
| with the proposed rule,  |      |         |       |       |       |
| 2007-2011                |      |         |       |       |       |
+--------------------------+------+---------+-------+-------+-------+
|                          | [2   | [200    | [20   | [20   | [20   |
|                          | 007] | 8]{.und | 09]{. | 10]{. | 11]{. |
|                          | {.un | erline} | under | under | under |
|                          | derl |         | line} | line} | line} |
|                          | ine} |         |       |       |       |
+--------------------------+------+---------+-------+-------+-------+
| Feeder cattle from       | -113 | -196    | -258  | -262  | -262  |
| Canada                   |      |         |       |       |       |
|                          |      |         |       |       |       |
| (thousand head)          |      |         |       |       |       |
+--------------------------+------+---------+-------+-------+-------+
| Fed cattle from Canada   | -14  | -58     | -85   | -70   | -68   |
| (thousand head)          |      |         |       |       |       |
+--------------------------+------+---------+-------+-------+-------+
| Cull cattle/processing   |      |         |       |       |       |
| beef (million pounds     |      |         |       |       |       |
| carcass weight           |      |         |       |       |       |
| equivalent)              |      |         |       |       |       |
+--------------------------+------+---------+-------+-------+-------+
| From Canada              | 458  | 403     | 333   | 343   | 346   |
+--------------------------+------+---------+-------+-------+-------+
| From Other Countries     | -170 | -149    | -128  | -106  | -106  |
+--------------------------+------+---------+-------+-------+-------+
| Net                      | 288  | 254     | 205   | 237   | 240   |
+--------------------------+------+---------+-------+-------+-------+
| Fed beef from Canada     | -75  | -35     | 0     | 0     | 0     |
| (million pounds carcass  |      |         |       |       |       |
| weight equivalent)       |      |         |       |       |       |
+--------------------------+------+---------+-------+-------+-------+

Source: USDA Economic Research Service, Market and Trade Economics
Division, Animal Products, Grains, and Oil Seeds Branch, based on
quantities shown in Appendix Tables 3 and 4.

Notes: Changes in feeder cattle imports from Canada are taken from
Appendix Table 3. Changes in fed cattle imports from Canada are composed
of slaughter steers and heifers (Appendix Table 3). Changes in cull
cattle/processing beef imports from Canada are based on imports of
slaughter cows, bulls, and stags (Appendix Table 3), converted from
thousand head to million pounds carcass weight equivalent by multiplying
by the following carcass weights (pounds) for cows and bulls/stags,
respectively: 2007, 576 and 888; 2008, 579 and 893; 2009, 583 and 899;
2010, 586 and 904; and 2011, 590 and 909. Changes in processing beef
imports from other countries are taken from Appendix Table 4. Changes in
fed beef imports from Canada are taken from Appendix Table 4.

[Commodities not Modeled]{.underline}

Five other commodity categories are not modeled: breeding cattle,
vealers and slaughter calves, bison, bovine casings and small intestine
products, and bovine blood and blood products. Breeding cattle include
dairy and beef heifers, cows, and bulls. Vealers and slaughter calves
include cattle from less than 1 month old up to 8 months, with most
between 4 and 5 months of age. Bison refers to both breeding and
slaughter bison. Bovine casings are intestines, stomachs, esophagi, and
urinary bladders from cattle and possibly other bovines that are used to
encase processed meats in foods such as sausage. Bovine blood and blood
products comprise a number of commodities that include ones used in the
preparation of vaccines and drugs, the most important of which is fetal
bovine serum.

We use available data to describe expected effects of the proposed rule
for these commodities that are not modeled. For bovine casings, small
intestine products, and blood and blood products, in particular, our
findings are constrained by a scarcity of information. We acknowledge
these data deficiencies and invite the public to submit comments that
would enable us to more fully evaluate impacts in the regulatory impact
analysis for the final rule.

We do not quantitatively model expected effects for breeding cattle,
vealers and slaughter calves, bison, bovine casings and small intestine
products, and bovine blood and blood products. Changes in import
quantities projected under the proposed rule for breeding cattle,
vealers and slaughter calves, and bison are very small, suggesting that
impacts for U.S. entities would not be significant. For bovine casings
and small intestine products and bovine blood and blood products,
insufficient information about the commodities and quantities that would
be imported and levels of U.S. production and consumption prevents us
from modeling expected effects of the rule.

*Breeding cattle.* To illustrate the relatively small number of breeding
cattle that would be imported from Canada, we compare the projected
imports to past imports and recent U.S. beef and dairy replacement
numbers. We also note that the decision to purchase a breeding animal is
largely influenced by the animal's expected productivity and the herd's
breeding requirements.

*Vealers and slaughter calves.* We expect market effects of the proposed
rule for vealers and slaughter calves to be insignificant, given the
small change in the number projected to be imported from Canada with the
rule.

*Bison.* The net effect of the proposed rule for bison would be to allow
importation of Canadian breeding bison to resume, since bison destined
for feeding or slaughter (and slaughtered at less than 30 months of age)
may already be imported under the BSE minimal-risk regions rule. We
compare the small number of Canadian breeding bison projected to be
imported to an approximation of the U.S. breeding bison population.

*Bovine casings and small intestine products.* The proposed rule may
affect the U.S. supply of bovine casings and small intestine products
directly through resumption of imports from Canada, and indirectly,
through changes in U.S. cattle slaughter numbers and the reestablished
importation of Canadian bovine small intestines, minus the distal ileum.
We present our incomplete understanding of the U.S. market for bovine
casings, and request public input in order to improve the analysis of
this commodity category for the final rule.

*Bovine blood and blood products.* Fetal bovine serum is the most
important blood product that would be affected by the proposed rule, and
the only one for which we have production, consumption, and trade data.
This information is much generalized, and we again invite public comment
that would enable us to conduct a more complete analysis for the final
rule.

3\. Expected Impacts of the Proposed Rule for the Modeled Commodities

In this section, we report the results of the analysis for cull
cattle/processing beef, feeder cattle, fed cattle, and fed beef. We
describe first the price and quantity effects for each of the
commodities in terms of average yearly changes over the period of
analysis. We then present the welfare impacts, separately and combined.
We compare impacts when the displacement of processing beef imports from
other countries is assumed to be larger or smaller than the projected
levels. Lastly, we consider effects of the rule on the grain production,
animal production, and animal products processing industries using a
multi-sector model.

[Price and Quantity Effects]{.underline}

*Cull cattle/processing beef.* Results of the analysis show the price of
processing beef decreasing in 2007 by 5.3 percent as a result of the
proposed rule, from \$99 to about \$94 per cwt (hundredweight, or 100
pounds) carcass weight equivalent in 2006 dollars (Table 1 and Appendix
Table 5). Over the period of analysis, the annual decrease in the price
of processing beef, all things equal, is expected to average about 4.3
percent, ranging from declines of \$5 per cwt in 2007, to \$3 per cwt in
2009.

In response to this price effect, wholesale demand for processing beef
would increase by an average of about 114 million pounds per year over
the period of analysis, and domestic supply would decrease by an annual
average of about 131 million pounds.

*Feeder cattle, fed cattle, and fed beef.* With the proposed rule, we
estimate that the price of feeder cattle would increase in 2007 by about
0.3 percent, from \$733 to about \$735 per head in 2006 dollars (Table 2
and Appendix Table 6). Over the 5-year period of analysis, the annual
increase in feeder cattle prices attributable to the proposed rule, all
things equal, is expected to average about 0.6 percent, ranging from
about \$2.20 per head in 2007, to about \$4.60 per head in 2010. In
response to these price increases, there would be an average annual
decrease in the demand for feeder cattle of about 152 thousand head over
the period of analysis, and an average annual increase in domestic
supply of about 66 thousand head.

For fed cattle, our analysis indicates that the price would increase by
less than 0.1 percent in 2007 (Appendix Table 7). Over the 5-year
period, the annual increase in fed cattle prices attributable to the
proposed rule, all things equal, is expected to average less than 0.2
percent, ranging in 2006 dollars from 35 cents per head in 2007, to
about \$1.90 per head in 2009. We estimate that these small changes in
price would cause the demand for fed cattle to decrease by an average of
about 33,000 head per year and the domestic supply of fed cattle to
increase by an average of 26,000 head per year.

Impacts of the proposed rule for fed beef are expected to be very small,
with the price increasing in 2007 by less than 0.3 percent, or about 36
cents per cwt carcass weight equivalent from a base price of \$142
(Table 4 and Appendix Table 8). Over the 5-year period of analysis, the
increase in fed beef prices, all things equal, is expected to average
less than 0.1 percent, with no effect projected for the last three
years.

Clearly, the largest price effects would result from the resumption of
cull cattle imports, an expected outcome matched by estimated welfare
impacts.

[Welfare Effects]{.underline}

Present and annualized values of welfare gains and losses for the 5-year
period, 2007-2011, are computed using 3 percent and 7 percent discount
rates. The present and annualized values are expressed in 2006 and 2001
dollars. As indicated in the notes to Tables 1, 2, 3, and 4, consumption
and production have commodity-specific definitions that differ from
their commonly understood meanings. These same definitions hold for the
changes in consumer and producer welfare for the separate commodity
categories. As reference, we repeat the definitions in Table 6, since
they are central to interpreting the changes in welfare. As mentioned,
these consumer and producer definitions imply that the proposed rule may
have mixed effects for at least some entities in the affected
industries.

  ----------------------- -------------------------- -------------------------
  Table 6. Definitions of                            
  consumers and producers                            
  for the modeled                                    
  commodity categories                               

  [Commodity              [Consumers]{.underline}    [Producers]{.underline}
  Category]{.underline}                              

  Feeder cattle           Buyers of cattle for       Sellers of U.S.-raised
                          feedlot feeding in the     cattle for feedlot
                          United States              feeding in the United
                                                     States

  Fed cattle              Buyers of fed cattle for   Sellers of U.S.-sourced
                          slaughter in the United    fed cattle for slaughter
                          States                     in the United States

  Cull cattle/processing  U.S. buyers of processing  Sellers of U.S.-produced
  beef                    beef at the wholesale      processing beef at the
                          level                      wholesale level

  Fed beef                U.S. buyers of fed beef at Sellers of U.S.-produced
                          the wholesale level        fed beef at the wholesale
                                                     level
  ----------------------- -------------------------- -------------------------

*Cull cattle/processing beef.* Projected cull cattle imports from Canada
are converted to their processing beef equivalent using projected
carcass weights for cows, bulls, and stags, as shown in the notes to
Table 7. Consumers (buyers of processing beef at the wholesale level)
can be expected to benefit from welfare gains and producers (sellers of
processing beef at the wholesale level) can be expected to bear welfare
losses due to the cull cattle imports. The present value of the welfare
changes in 2006 dollars when using a 3 percent discount rate would be
\$1.24 billion in consumer gains, \$657 million in producer losses, for
a net benefit of about \$587 million. Annualized values over the five
years, in 2006 dollars when using a 3 percent discount rate, would be
consumer gains of \$271 million, producer losses of \$143 million, and
net benefits of \$128 million.

> Table 7. Cull cattle/processing beef: present and annualized values of
> welfare changes with the proposed rule, 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare                                

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  \$1,243,147              -\$656,540               \$586,607

                       7%                  \$1,120,778              -\$590,070               \$530,708

  2001 Dollars         3%                  \$1,080,856              -\$570,814               \$510,043

                       7%                  \$974,488                -\$513,038               \$461,450

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  \$271,447                -\$143,358               \$128,089

                       7%                  \$273,347                -\$143,912               \$129,435

  2001 Dollars         3%                  \$236,010                -\$124,640               \$111,370

                       7%                  \$237,669                -\$125,125               \$112,544
  -------------------- ------------------- ------------------------ ------------------------ -------------------

Note: The present and annualized values are taken from Appendix Table 5.
Consumers are U.S. buyers of processing beef at the wholesale level;
producers are sellers of U.S.-produced processing beef at the wholesale
level. Cull cattle imports from Canada in thousand head (quantities of
slaughter cows, bulls, and stags in Appendix Table 3) are converted to
processing beef in million pounds carcass weight equivalent by
multiplying by the following carcass weights (pounds) for cows and
bulls/stags, respectively: 2007, 576 and 888; 2008, 579 and 893; 2009,
583 and 899; 2010, 586 and 904; and 2011, 590 and 909 (Source: Expert
opinion, USDA Economic Research Service, Market and Trade Economics
Division, Animal Products, Grains, and Oil Seeds Branch).

Welfare changes for the cull cattle/processing beef category dominate
the modeled effects. The relatively large impacts are not unexpected,
given that this is the one modeled commodity category for which imports
from Canada would be newly reestablished. As shown in Appendix Table 3,
the numbers of cull cattle that would be imported with the rule,
projected to average 545,000 cows and 66,000 bulls and stags per year,
2007-2011, are much larger than the projected average annual declines in
feeder cattle (218,000 head) and fed cattle (59,000 head). Another
reason the welfare effects computed for the cull cattle/processing beef
category are large is because of the inelastic demand (-0.40), compared
to the price elasticities of demand for the other modeled commodities
(feeder cattle, -0.88; fed cattle, -0.76; fed beef, -0.60). We evaluate
the significance of processing beef's more inelastic demand by
considering welfare changes for the cull cattle/processing beef category
when a price elasticity of demand of -0.60 is used, that is, the same
elasticity as for fed beef. The welfare effects, in 2006 dollars, are
shown in Appendix Table 9. All impacts---consumer gains, producer
losses, net benefits, and price declines---are reduced by nearly
one-fifth when a price elasticity of demand of -0.60 is used in place of
-0.40. The more inelastic demand, that is, buyers' lower responsiveness
to changes in price, is an important determinant of the magnitude of
welfare and price changes for the cull cattle/processing beef
category.[^16] We welcome information that the public may provide that
would either support or challenge the elasticities used in analyzing
effects for the modeled commodity categories.

*Feeder cattle, fed cattle, and fed beef.* The welfare changes for
feeder cattle are shown in Table 8. Fewer feeder cattle are projected to
be imported from Canada with the rule than would enter without the rule,
so the model indicates gains in producer welfare (higher prices and less
competition from Canadian suppliers) and losses in consumer welfare
(higher prices and fewer feeder cattle available for purchase).

The feeder cattle analysis tells us that the present value of the
welfare changes in 2006 dollars when using a 3 percent discount rate,
for example, would be \$494 million in producer gains, \$518 million in
consumer losses, for a net loss of \$24 million. Annualized values over
the five years, in 2006 dollars when using a 3 percent discount rate,
would be producer gains of \$108 million, consumer losses of \$113
million, and net losses of \$5 million.

> Table 8. Feeder cattle: present and annualized values of welfare
> changes with the proposed rule, 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare                                

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  -\$518,352               \$494,483                -\$23,870

                       7%                  -\$458,949               \$437,840                -\$21,109

  2001 Dollars         3%                  -\$450,706               \$429,954                -\$20,752

                       7%                  -\$450,706               \$429,954                -\$20,752

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  \--113,184               \$107,973                -\$5,212

                       7%                  -\$111,933               \$106,785                -\$5,148

  2001 Dollars         3%                  -\$98,414                \$93,883                 -\$4,531

                       7%                  -\$97,349                \$92,873                 -\$4,477
  -------------------- ------------------- ------------------------ ------------------------ -------------------

> Note: The present and annualized values are taken from Appendix Table
> 6. Consumers are buyers of cattle for feedlot feeding in the United
> States; producers are sellers of U.S.-raised cattle for feedlot
> feeding in the United States.

Welfare changes expected for fed cattle are shown in Table 9. As with
feeder cattle, fewer animals are expected to be imported with the
proposed rule than without the rule. Once again producers (sellers of
fed cattle for slaughter) would benefit from welfare gains and consumers
(buyers of fed cattle for slaughter) would bear welfare losses.

The fed cattle analysis indicates that the present value of the welfare
changes in 2006 dollars when using a 3 percent discount rate would be
\$172 million in producer gains, \$176 million in consumer losses, for a
net loss of \$4 million. Annualized values over the five years, in 2006
dollars when using a 3 percent discount rate, would be producer gains of
\$37 million, consumer losses of \$38 million, and net losses of \$1
million.

> Table 9. Fed cattle: present and annualized values of welfare changes
> with the proposed rule, 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare                                

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  -\$176,136               \$171,791                -\$4,345

                       7%                  -\$155,180               \$151,352                -\$3,828

  2001 Dollars         3%                  -\$153,131               \$149,353                -\$3,777

                       7%                  -\$134,939               \$131,610                -\$3,328

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  -\$38,460                \$37,512                 -\$948

                       7%                  -\$37,839                \$36,923                 -\$917

  2001 Dollars         3%                  -\$33,437                \$32,612                 -\$825

                       7%                  -\$32,910                \$32,099                 -\$812
  -------------------- ------------------- ------------------------ ------------------------ -------------------

> Notes to Table 9: The present and annualized values are taken from
> Appendix Table 7. Consumers are buyers of fed cattle for slaughter in
> the United States; producers are sellers of U.S.-sourced fed cattle
> for slaughter in the United States.

In Table 10, the welfare changes for fed beef are shown. The proposed
rule is projected to result in decreased imports of Canadian fed beef in
2007 and 2008, and then have no effect on fed beef imports in the last
three years of the period of analysis. The present value of the welfare
changes in 2006 dollars when using a 3 percent discount rate, for
example, would be \$102 million in producer gains, \$104 million in
consumer losses, for a net loss of \$2 million. Annualized values over
the five years, in 2006 dollars when using a 3 percent discount rate,
would be producer gains of \$22 million, consumer losses of less than
\$23 million, and net losses of less than \$500,000.

> Table 10. Fed beef: present and annualized values of welfare changes
> with the proposed rule, 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare                                

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  -\$103,919               \$101,928                -\$1,991

                       7%                  -\$98,909                \$97,014                 -\$1,895

  2001 Dollars         3%                  -\$90,773                \$89,033                 -\$1,739

                       7%                  -\$86,396                \$84,740                 -\$1,656

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  -\$22,691                \$22,257                 -\$435

                       7%                  -\$24,123                \$23,661                 -\$462

  2001 Dollars         3%                  -\$19,820                \$19,441                 -\$380

                       7%                  -\$21,071                \$20,667                 -\$404
  -------------------- ------------------- ------------------------ ------------------------ -------------------

> Note: The present and annualized values are taken from Appendix Table
> 8. Consumers are U.S. buyers of fed beef at the wholesale level;
> producers are sellers of U.S.-produced fed beef at the wholesale
> level.

*Combined effects*. Effects of the proposed rule for cull
cattle/processing beef, feeder cattle, fed cattle, and fed beef are
summed in Table 11.

> Table 11. Present and annualized values of combined welfare changes
> for the modeled commodities with the proposed rule, 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare^1^                             

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  \$444,740                \$111,662                \$556,401

                       7%                  \$407,740                \$96,136                 \$503,876

  2001 Dollars         3%                  \$386,246                \$97,526                 \$483,775

                       7%                  \$302,447                \$133,266                \$435,714

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  \$97,110                 \$24,384                 \$121,494

                       7%                  \$99,452                 \$23,457                 \$122,908

  2001 Dollars         3%                  \$84,339                 \$21,296                 \$105,634

                       7%                  \$86,339                 \$20,514                 \$106,851
  -------------------- ------------------- ------------------------ ------------------------ -------------------

^1^ Combined welfare changes for feeder cattle, fed cattle, cull
cattle/processing beef, and fed beef.

> Note: The present and annualized values are taken from Appendix Table
> 10.

The analysis tells us that the present value of the welfare changes in
2006 dollars when using a 3 percent discount rate, for example, would be
\$445 million in consumer gains, \$112 million in producer gains, for a
total welfare benefit of \$556 million. Annualized values over the five
years, in 2006 dollars when using a 3 percent discount rate, would be
consumer gains of \$97 million and producer gains of \$24 million,
yielding benefits of over \$121 million.

By far, the largest effects of the proposed rule would be due to
resumption of Canadian cull cattle imports, which would be largest in
2007 and then diminish in subsequent years (Appendix Table 3). As shown
in Table 12, the present value of consumer welfare gains for the cull
cattle/processing beef category outweighs the combined consumer welfare
losses for the other three categories (\$1.24 billion in consumer
benefits, compared to \$798 million in combined consumer losses, in 2006
dollars and discounted at 3 percent). Producer welfare losses
attributable to resumption of cull cattle/processing beef imports are
smaller in magnitude than the combined producer welfare gains for the
other three categories (\$657 million in producer losses, compared to
over \$768 million in combined producer gains).

  ------------------- -------------------- --------------------- ------------ ------------------- ------------------------
  Table 12. Present                                                                               
  values of separate                                                                              
  and combined                                                                                    
  welfare changes                                                                                 
  with the proposed                                                                               
  rule for cull                                                                                   
  cattle/processing                                                                               
  beef, feeder                                                                                    
  cattle, fed cattle,                                                                             
  and fed beef, in                                                                                
  2006 dollars and                                                                                
  discounted at 3                                                                                 
  percent, 2007-2011                                                                              

                      Cull Cattle/         [Feeder               Fed cattle   [Fed                [Combined]{.underline}
                      Processing           Cattle]{.underline}                Beef]{.underline}   
                      [Beef]{.underline}                                                          

                      (Thousand Dollars)                                                          

  Change in consumer  \$1,243,147          -\$518,352            -\$176,136   -\$103,919          \$444,740
  welfare                                                                                         

  Change in producer  -\$656,540           \$494,483             \$171,791    \$101,928           \$111,662
  welfare                                                                                         

  Net change          \$586,607            -\$23,870             -\$4,345     -\$1,991            \$556,401

  Note: Welfare                                                                                   
  effects are taken                                                                               
  from Tables 5, 6,                                                                               
  7, and 8.                                                                                       

                                                                                                  
  ------------------- -------------------- --------------------- ------------ ------------------- ------------------------

We invite public comment on these estimates of welfare changes. In
particular, we welcome informed opinion regarding the price elasticities
we use in the analysis for cull cattle/processing beef (price elasticity
of supply, 0.84; price elasticity of demand, -0.40) that result in the
welfare gains for buyers of processing beef being so much larger than
the welfare losses for sellers of processing beef.

Appendix Table 10 indicates that producer welfare changes would be
negative in 2007 and positive in each of the following four years,
2008-2011. In 2007, producer welfare losses for the cull
cattle/processing beef category would be larger than the combined
producer welfare gains for the other three commodity categories. For the
years 2008-2011, the opposite would occur. Table 11 shows positive
changes in producer welfare because welfare gains in 2008-2011 would
exceed welfare losses in 2007.

[Displacement of Processing Beef Imports from Other
Countries]{.underline}

The net impact of cull cattle imports from Canada would depend upon the
extent to which they would displace (substitute for) processing beef
imports from other countries. About 35 percent of cull cattle imports
from Canada over the period of analysis are projected to displace
processing imports from other countries and the remainder are projected
to contribute to an increase in the U.S. supply of processing beef
(respectively, 5-year averages of 132 million pounds and 245 million
pounds carcass weight equivalent, Table 5). These projections are based
on the expert opinion of staff of the USDA Economic Research Service ,
Market and Trade Economics Division, Animal Products, Grains, and Oil
Seeds Branch. We consider here the effects of extreme displacement
possibilities, that is, if either none or all of the Canadian cull
cattle imports were to displace processing beef imports from other
countries.

Projected imports of cull cattle from Canada are shown in Table 13,
together with changes in the U.S. supply of processing beef under the
three displacement scenarios: none of the Canadian imports displacing
imports from other countries, projected displacement, or all of the
Canadian imports displacing imports from other countries. In the third
scenario, we assume that the cull cattle imports from Canada would have
no impact on the U.S. supply of processing beef.

Table 14 compares the present and annualized values of welfare changes
and average annual price changes for the cull cattle/processing beef
category under the three displacement scenarios, in 2006 dollars.
Discounting at 3 percent, the present value of net welfare benefits for
the cull cattle/processing beef category would be about \$927 million
when no displacement is assumed to occur, compared to net benefits of
about \$587 million when projected levels of displacement occur, and
zero benefits or costs when we assume all imported Canadian processing
beef would displace imports from other countries. Annualized net values
for the three scenarios, discounted at 3 percent, range from \$203
million, to \$128 million, to no impact. Over the 5-year period, annual
declines in prices would average about \$6 per cwt if no displacement
were to occur, about \$4 per cwt with projected levels of displacement,
and there would be no price effect if all processing beef imports from
Canada were to displace imports from other countries.

  ---------------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Table 13. Projected imports                                                                                      
  of cull cattle from Canada                                                                                       
  with the proposed rule and                                                                                       
  changes in the U.S. supply                                                                                       
  of processing beef if (i)                                                                                        
  none of the cull cattle                                                                                          
  imported from Canada                                                                                             
  displace processing beef                                                                                         
  imported from other                                                                                              
  countries, (ii) projected                                                                                        
  displacement occurs, or                                                                                          
  (iii) all of the cull cattle                                                                                     
  imported from Canada                                                                                             
  displace processing beef                                                                                         
  imports from other                                                                                               
  countries, 2007-2011, in                                                                                         
  million pounds carcass                                                                                           
  weight equivalent                                                                                                

                               [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}

  Projected cull cattle        458                  403                  333                  343                  346
  imports from Canada                                                                                              

  Projected processing beef    0                    0                    0                    0                    0
  imports from Canada                                                                                              

  Projected displacement of    170                  149                  128                  106                  106
  processing beef imports from                                                                                     
  other countries by                                                                                               
  processing beef imports from                                                                                     
  Canada                                                                                                           

  Change in U.S. supply if     458                  403                  333                  343                  346
  none of the processing beef                                                                                      
  imports from Canada displace                                                                                     
  imports from other countries                                                                                     

  Change in U.S. supply of     288                  254                  205                  237                  240
  processing beef if projected                                                                                     
  displacement occurs                                                                                              

  Change in U.S. supply if all 0                    0                    0                    0                    0
  of the processing beef                                                                                           
  imports from Canada displace                                                                                     
  imports from other countries                                                                                     

  Note: Projected imports of                                                                                       
  cull cattle are shown in                                                                                         
  Appendix Table 3. Cull                                                                                           
  cattle (slaughter cows,                                                                                          
  bulls, and stags) are                                                                                            
  converted from thousand head                                                                                     
  to million pounds carcass                                                                                        
  weight equivalent by                                                                                             
  multiplying by the following                                                                                     
  carcass weights (pounds) for                                                                                     
  cows and bulls/stags,                                                                                            
  respectively: 2007, 576 and                                                                                      
  888; 2008, 579 and 893;                                                                                          
  2009, 583 and 899; 2010, 586                                                                                     
  and 904; and 2011, 590 and                                                                                       
  909 (Source: Expert opinion,                                                                                     
  USDA Economic Research                                                                                           
  Service, Market and Trade                                                                                        
  Economics Division, Animal                                                                                       
  Products, Grains, and Oil                                                                                        
  Seeds Branch).                                                                                                   
  ---------------------------- -------------------- -------------------- -------------------- -------------------- --------------------

Table 14. Present and annualized values of welfare changes and average
annual price changes for cull cattle/processing beef if (i) none of the
cull cattle imported from Canada displaces processing beef imported from
other countries, (ii) projected displacement occurs, or (iii) all of the
cull cattle imported from Canada displace processing beef imports from
other countries, in 2006 dollars, 2007-2011

  ------------ ----------- -------------------- ---------------------------- ------------------------ ------------------------ -------------------
                           Discount             Amount of Imports from       Changes in Welfare                                
                           [Rate]{.underline}   Canada assumed to Displace                                                     
                                                Imports from Other                                                             
                                                [Countries]{.underline}^1^                                                     

               (Percent)                                                     (Thousand Dollars)                                

                                                                             [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}

  Present                                                                                                                      
  Value                                                                                                                        

                           3                    None                         \$1,928,548              -\$1,001,140             \$927,408

                           3                    Projected                    \$1,243,147              -\$656,540               \$586,607

                           3                    All                          \$0                      \$0                      \$0

                           7                    None                         \$1,742,482              -\$901,619               \$840,864

                           7                    Projected                    \$1,120,778              -\$590,070               \$530,708

                           7                    All                          \$0                      \$0                      \$0

  Annualized                                                                                                                   
  Value                                                                                                                        

                           3                    None                         \$421,107                -\$218,603               \$202,504

                           3                    Projected                    \$271,447                -\$143,358               \$128,089

                           3                    All                          \$0                      \$0                      \$0

                           7                    None                         \$424,975                -\$219,896               \$205,079

                           7                    Projected                    \$273,347                -\$143,912               \$129,435

                           7                    All                          \$0                      \$0                      \$0

  Average                                                                                                                      
  Annual Price                                                                                                                 
  Change and                                                                                                                   
  Percentage                                                                                                                   
  Price Change                                                                                                                 

                                                                             (Dollars per cwt)        (Percentage)             

                                                None                         -\$6.00                  -6.57%                   

                                                Projected                    -\$4.00                  -4.26%                   

                                                All                          -\$0                     0%                       
  ------------ ----------- -------------------- ---------------------------- ------------------------ ------------------------ -------------------

Note: Annual welfare and price changes for the first two displacement
scenarios are shown in Appendix Tables 5 and 11. Prices are in carcass
weight equivalent.

^1^Projected displacement quantities for the five years, 2007-2011, in
million pounds carcass weight equivalent, are 170, 149, 128, 106, and
106. Displaced quantities for the five years, if all cull cattle
imported from Canada were to displace processing beef imports from other
countries, would be 458, 403, 333, 343, and 346 (Expert opinion, USDA
Economic Research Service, Market and Trade Economics Division, Animal
Products, Grains, and Oil Seeds Branch).

It is evident that the extent of import displacement would influence
impacts of the proposed rule for the cull cattle/processing beef
category. Table 15 shows the significance of the displacement assumption
for the combined welfare effects. The larger the quantity of processing
beef imports from other countries that would be displaced, the smaller
the net benefits. The difference between consumer gains and producer
losses would exceed \$897 million (discounted at 3 percent) if no
displacement of processing beef imports from other countries were to
occur. The present value of net benefits would be about \$556 million
with projected displacement, and about a net welfare loss of \$30
million if all of the imported Canadian cull cattle were to displace
imports from other countries. In the third scenario, the modeled effects
of the rule would be due to changes in the supply of Canadian feeder
cattle, fed cattle, and fed beef as a result of the cull cattle imports
affecting the slaughter mix in Canada. In this case, consumer welfare
losses for these commodities would exceed producer welfare gains,
resulting in a net decline in welfare.

Table 15. Present and annualized values of combined welfare changes for
the modeled commodities if (i) none of the processing beef imports from
Canada displace imports from other countries, (ii) projected
displacement occurs, or (iii) all of the processing beef imports from
Canada displace imports from other countries, in 2006 dollars, 2007-2011

  ------------ ----------- -------------------- ------------------------ ------------------------ ------------------------ -------------------
                           Discount             Amount of Imports from   Changes in Welfare                                
                           [Rate]{.underline}   Canada assumed to                                                          
                                                Displace Imports from                                                      
                                                [Other                                                                     
                                                Countries]{.underline}                                                     

               (Percent)                                                 (Thousand Dollars)                                

                                                                         [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}

  Present                                                                                                                  
  Value                                                                                                                    

                           3                    None                     \$1,130,141              -\$232,938               \$897,202

                           3                    Projected                \$444,740                \$111,662                \$556,401

                           3                    All                      -\$798,407               \$768,202                -\$30,206

                           7                    None                     \$1,029,444              -\$215,413               \$814,032

                           7                    Projected                \$407,740                \$96,136                 \$503,876

                           7                    All                      -\$713,038               \$686,206                -\$26,832

  Annualized                                                                                                               
  Value                                                                                                                    

                           3                    None                     \$246,770                -\$50,861                \$195,909

                           3                    Projected                \$97,110                 \$24,384                 \$121,494

                           3                    All                      -174,337                 167,742                  -6,595

                           7                    None                     \$251,080                -\$52,527                \$198,552

                           7                    Projected                \$99,452                 \$23,457                 \$122,908

                           7                    All                      -\$173,895               \$167,369                -\$6,527
  ------------ ----------- -------------------- ------------------------ ------------------------ ------------------------ -------------------

Note: Values are computed by substituting the welfare effects for the
cull cattle/processing beef category shown in Table 14 for the effects
shown in Table 7, and then recalculating the combined effects shown in
Table 11.

[Multi-sector Impacts]{.underline}

Our simple use of the BAS model (without delineation of commodity inputs
and substitutes) is appropriate because effects of the rule are expected
to be largely commodity-specific. Nonetheless, we present here
multi-sector impacts computed using a second partial equilibrium
model.[^17] Like the BAS model, it incorporates foreign trade and yields
expected price effects. This model also simulates changes in revenue.
Unlike the BAS model, it does not allow for computation of welfare
changes.

The multi-sector model maps interactions among the grain, animal, and
animal products industries. Its mathematical relationships describe the
use of feeds to produce cattle, swine, sheep, and poultry, and the
subsequent production of beef, milk, pork, lamb meat, poultry meat, and
eggs. Five crops, wheat, coarse grains, soybeans, rice, and forage, are
included in the model. The model takes into account substitution among
livestock products in response to relative price changes. Effects of
changes in the supply or demand for the inputs or products of a
particular sector can be traced to the other sectors.

Our results show for the combined livestock, feed, and grain sectors, an
estimated decline in gross revenues with the proposed rule of less than
one percent in 2007. For the beef and cattle sectors, the gross revenue
declines are also less than one percent. The analysis indicates declines
of less than one percent, as well, in cattle and beef prices in 2007.

As expected, these simulated impacts are small because they describe
effects for aggregated commodity groupings (all cattle production and
all beef production are grouped within single categories) and because of
the linkages specified between the livestock production and processing
sectors that allow for greater flexibility in adjusting to supply
shocks. The larger effects for cull cattle/processing beef computed
using the BAS model are subsumed within a combined beef sector in this
multi-sector model. These results support our expectation that broader
impacts of the proposed rule would be limited.

4\. Expected Impacts for Commodities not Modeled

In this section we evaluate expected effects of the rule for the
commodity categories not modeled: breeding cattle, vealers and slaughter
calves, bison, bovine casings and small intestine products, and bovine
blood and blood products.

[Breeding Cattle]{.underline}

Breeding cattle are expected to comprise only about 4 percent of the
cattle imported from Canada under the proposed rule (Table 16). In
contrast to the feeder and slaughter cattle markets, the demand for
breeding cattle depends on considerations of herd composition and future
productivity. While variations in the price of breeding stock influence
the quantity demanded, their purchase is ultimately an investment
decision based on expected net returns over several years. In turn, an
individual cow-calf producer's prospects are related to whether herds in
general are expanding or contracting as reflected by the nation's cattle
cycle. A dairy farmer needing a replacement heifer is unlikely to wait
long for a more favorable price before making the purchase.

  ------------------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------
  Table 16. Average annual cattle                                                                                                                                         
  imports from Canada, 1992-2002, and                                                                                                                                     
  projected with the rule, 2007-2011                                                                                                                                      

                                        Average Annual Imports    Percentage of Imports     Percentage of Breeding    Projected Average Annual  Projected Percentage of   Projected Percentage of
                                        1992-[2002]{.underline}   [1992-2002]{.underline}   Cattle Imports            Imports                   Imports                   Breeding Cattle Imports
                                                                                            [1992-2002]{.underline}   [2007-2011]{.underline}   [2007-2011]{.underline}   [2007-2011]{.underline}

                                        (Head)                                                                        (Head)                                              

  Breeding                                                                                                                                                                

  Dairy Heifers/Cows                    44,500                    3.6%                      86.4%                     46,800                    3.6%                      85.7%

  Beef Heifers/Cows                     4,300                     0.3%                      8.3%                      4,800                     0.4%                      8.8%

  Bulls                                 2,800                     0.2%                      5.3%                      3,000                     0.2%                      5.5%

  Breeding Total                        51,600                    4.1%                      100.0%                    54,600                    4.2%                      100.0%

  Slaughter                             1,028,400                 82.2%                                               1,053,200                 81.9%                     

  Stocker/Feeder                        171,000                   13.7%                                               177,600                   13.8%                     

  Total                                 1,251,000                 100.0%                                              1,285,400                 100.0%                     

  Sources: For 1992-2002 averages,                                                                                                                                        
  Department of Commerce, U.S. Census                                                                                                                                     
  Bureau, Foreign Trade Statistics.                                                                                                                                       
  <http://www.fas.usda.gov/ustrade/>.                                                                                                                                     
  For 2007-2011 projected averages,                                                                                                                                       
  Expert opinion, USDA Economic                                                                                                                                           
  Research Service, Market and Trade                                                                                                                                      
  Economics Division, Animal Products,                                                                                                                                    
  Grains, and Oil Seeds Branch.                                                                                                                                           
  ------------------------------------- ------------------------- ------------------------- ------------------------- ------------------------- ------------------------- -------------------------

Projected imports of breeding cattle from Canada over the 5-year period,
2007-2011, closely match historic levels, as shown in Table 16. About 86
percent of the breeding cattle that would be imported under the proposed
rule are expected to be dairy cows and heifers. (Between 1992 and 2002,
dairy cows and heifers comprised from 78 to 92 percent of annual
breeding cattle imports from Canada.) About 9 percent of breeding cattle
imports are expected to be beef cows and heifers, and bulls (dairy and
beef) would comprise the remaining 5 percent.

Breeding cattle imports in 2007 are projected to number 58,000 head
(Appendix Table 3). This quantity would be about 10 percent more than in
subsequent years of the analysis, with the larger number in 2007
attributable to the inventory build-up since May 2003. The lowest level
of breeding cattle imports is projected to occur in 2009 (51,000 head).
Once the U.S. and Canadian livestock markets return to historic trading
patterns, we expect imports of Canadian breeding stock to generally
range between 54,000 and 56,000 head per year for the foreseeable
future.

From 1992 to 2002, U.S. producers annually raised about 5.9 million beef
replacement heifers and about 4.1 million dairy replacement heifers
(Table 17). The average number of Canadian breeding cattle imported
during that period (including bulls) totaled only 0.5 percent of these
combined quantities, a percentage that would be even smaller if domestic
cows and bulls that were purchased as replacement animals were included
in the comparison. The breeding cattle imports from Canada during this
period represented about 0.8 percent of dairy heifer replacements and
0.1 percent of beef heifer replacements.

In sum, we do not expect the resumption of breeding cattle imports from
Canada to significantly affect the U.S. market for these animals. The
number that would be imported under the proposed rule is small in
comparison to projected cattle imports from Canada overall (4 percent)
and even smaller in comparison to the number of replacement breeding
heifers supplied

  ------------------------------------- ---------------------- ---------------------------- ----------------------------
  Table 17. Breeding cattle: average                                                        
  annual imports from Canada and                                                            
  average annual U.S. heifer                                                                
  replacements, 1992-2002                                                                   

                                        Average Annual Imports Average Annual U.S. Heifer   Imports from Canada as a
                                        from                   [Replacements]{.underline}   Percentage of U.S. Heifer
                                        [Canada]{.underline}                                [Replacements]{.underline}

                                        (Head)                 (Head)                       

                                                                                            

  Dairy Heifers/Cows                    44,500                 5,886,000                    0.8%

  Beef Heifers/Cows                     4,300                  4,079,000                    0.1%

  Bulls                                 2,800                  N/A                          

  Total                                 51,600                 9,965,000                    0.5%

  Sources: Department of Commerce, U.S.                                                     
  Census Bureau, Foreign Trade                                                              
  Statistics.                                                                               
  <http://www.fas.usda.gov/ustrade/>;                                                       
  and National Agricultural Statistics                                                      
  Service (NASS), United States                                                             
  Department of Agriculture, U.S. and                                                       
  All States Data -- Cattle and Calves.                                                     
  <http://www.nass.usda.gov/>                                                               
  ------------------------------------- ---------------------- ---------------------------- ----------------------------

on average by U.S. producers (0.5 percent). Breeding cattle imported
from Canada would augment the U.S. breeding herd very slightly. Demand
for these animals, like the demand for breeding cattle generally, would
derive from management decisions based on herd composition and expected
future returns, with price variations influencing secondarily the
quantity of breeding cattle purchased. Our expectation that impacts for
U.S. entities of resumption of breeding cattle imports from Canada would
be minor is supported by a recent study that concluded that prior to the
May 2003 discovery of BSE in Canada, imports of Canadian dairy cattle
had insignificant effects on the U.S. cow herd, dairy heifer prices, and
milk prices.[^18]

[Vealers and Slaughter Calves]{.underline}

Young cattle sold for meat are divided into vealers and slaughter
calves, based on their type of feeding and age.[^19] Vealers that have
subsisted largely on milk usually are less than three months of age.
Animals that have been raised on milk replacer rations are usually
older. Calves are usually between 3 and 8 months of age, have subsisted
partially or entirely on feeds other than milk or milk replacers for a
substantial period of time, and have developed the physical
characteristics associated with maturity beyond the vealer stage.

The proposed rule is expected to have a small effect on the number of
vealers and slaughter calves imported from Canada. A decline in imports
is projected in each year of the period of analysis, when compared to
quantities that would be imported without the rule (Appendix Table 3),
as Canadian slaughter patterns adjust to reestablished export
opportunities for cull cattle. These annual declines with the proposed
rule range from a decrease of 4,000 head projected for 2007, to declines
of 15,000 head projected for 2009 and 2010. Over the 5-year period of
analysis, an average of 11,800 fewer vealers and slaughter calves are
projected to be imported annually with the proposed rule than would be
imported without the rule.

For the 10-year period, 1994-2003, slaughter of vealers and calves in
the United States averaged 1,297,000 head per year.[^20] We expect
annual U.S. vealer and calf slaughter during the period of analysis to
be similar. On this basis, the average annual decrease in vealer and
slaughter calf imports from Canada under the proposed rule would be
equal to less than 1 percent of U.S. vealer and calf slaughter
(11,800/1,297,000 = 0.009). Any effect on vealer and slaughter calf
prices because of the smaller number expected to be imported would not
be significant.

[Bison]{.underline}

The current bison industry in North America has a relatively young
history, emerging in the 1960s and expanding rapidly in the 1980s and
1990s.[^21] In the late 1990s, prices for bison climbed rapidly as new
operations competed for breeding stock to build their herds. By 1998,
bison prices had reached such levels that many producers could not
afford new stock. At the same time, there was an imbalance in demand for
bison meat; the more expensive tenderloins and strip steaks were in
demand by restaurants, but there was relatively little demand for the
less expensive roasts and ground meat. In 1999, the industry entered a
4-year decline, with bison prices falling dramatically at the same time
that producers faced a sustained period of drought. Beginning in 2003,
the industry has once again entered a period of growth and
profitability.

Like the cattle industry, the commercial bison industry is comprised
primarily of cow-calf operations that sell weaned calves to other
operations for finishing and processing. A smaller number of producers
specialize in raising breeding stock. The 2002 Census of Agriculture
reported a total of 4,132 bison producers in the United States, who
owned 231,950 head of bison. The 2002 Census also reported that 1,734
producers (42 percent) sold 57,210 head of bison (25 percent of
inventory). There are approximately 230,000 bison on 1,900 farms in
Canada.[^22]

Bison are raised in every state, with production concentrated in the
High Plains. South Dakota and North Dakota have the largest bison
populations, with 40,168 and 30,856 head, respectively, in 2002. Besides
the Dakotas, Colorado, Minnesota, Montana, Nebraska, Oklahoma, and
Wyoming each contained bison populations of more than 12,000 animals in
2002. North Dakota also boasts the largest bison slaughter plant in the
country.[^23]

U.S. bison imports from Canada, 1996-2005, are shown in Table 18. Annual
imports increased from 1,149 head in 1996 to 4,490 head in 1999,
reflecting the industry's expansion during that time. Imports fell to an
average of 2,400 per year in 2001 and 2002, and were then prohibited due
to the May 2003 BSE discovery. In 2002, bison imports from Canada
represented about 1 percent of the U.S. bison inventory.

In July 2005, promulgation of the BSE minimal-risk regions rule lifted
restrictions on bison imported and slaughtered at less than 30 months of
age. There were 3,513 bison imported from Canada by the end of 2005.
This increase in 2005 imports over recent annual import levels (and
higher-than-average monthly imports in 2006) are at least partly
attributable to the accumulation of slaughter bison in Canada during the
U.S. ban on ruminant imports.

Annual data on U.S. bison slaughter are only available since 2000. As
shown in Table 18, the number of bison slaughtered doubled between 2000
and 2005, and has averaged about 33,500 head for the past three years.

We expect imports of Canadian bison to continue to be high in 2007 and
2008, as producers draw down additional inventory of slaughter bison.
Projected imports total 4,000 head in 2007, 3,150 head in 2008, and
2,500 head each year thereafter. Each year, 250 head of breeding bison
are projected to be imported. The remainder would be mainly bison for
immediate slaughter (2,500 head in 2007, 2,400 head in 2008, and 2,000
head in each of the following years), with a lesser number of feeders
(1,250 head in 2007, 500 head in 2008, and 250 head in each year
thereafter).

> Table 18. Bison imports from Canada, 1996-2005, U.S. bison inventory,
> 2002,
>
> and U.S. bison slaughter, 2000-2005, number of head

  -------------------- ---------------------- ------------------------- -------------------------
  [Year]{.underline}   Imports from           U.S. Bison                U.S. Bison
                       [Canada]{.underline}   [Inventory]{.underline}   [Slaughter]{.underline}

                                                                        

  1996                 1,149                  \-\--                     \-\--

  1997                 2,011                  \-\--                     \-\--

  1998                 2,737                  \-\--                     \-\--

  1999                 4,490                  \-\--                     \-\--

  2000                 3,913                  \-\--                     17,674

  2001                 2,485                  \-\--                     19,483

  2002                 2,306                  231,950                   25,340

  2003                 991                    \-\--                     34,804

  2004                 0                      \-\--                     30,135

  2005                 3,513                  \-\--                     35,649
  -------------------- ---------------------- ------------------------- -------------------------

> Sources: Imports from Canada: U.S. Bureau of the Census; U.S.
> inventory: USDA NASS 2002
>
> Census of Agriculture; U.S. federally inspected slaughter: USDA NASS,
> "Livestock Slaughter,"
>
> annual summary issues.

The 2,500 bison projected to be imported for immediate slaughter in 2007
would represent about 7 percent of the U.S. bison slaughter total in
2005. We assume most if not all of these slaughter bison (as well as the
1,250 head projected to be imported in 2007 for feeding) would be
slaughtered at less than 30 months of age, that is, they would be of the
same age as Canadian bison that are currently allowed to be imported.
Thus, the only change in bison imports in 2007, as well as in subsequent
years, under the proposed rule would be imports of 250 head of breeding
bison.

Yearly imports from Canada of 250 head of breeding bison would augment
the U.S. bison breeding herd only slightly. They would annually
represent only about two-tenths of one percent of U.S. breeding bison,
assuming the composition of the national bison herd is similar to that
of the national cattle herd, with breeding stock (cows, replacement
heifers, and bulls) constituting about 56 percent of the animals.[^24]

As the market for bison meat becomes better established, the demand for
breeding stock will continue to strengthen. The projected imports of
breeding bison under the proposed rule would help meet this growing
demand. However, they would constitute a very small addition to the U.S.
breeding herd. Any effects on bison prices and the welfare of U.S. bison
producers are expected to be insignificant.

[Bovine Casings and Small Intestine Products]{.underline}

The proposed rule may affect the U.S. supply of bovine casings and small
intestine products in three ways: by allowing importation of bovine
casings from Canada; by allowing importation of Canadian bovine small
intestines, minus the distal ileum, that are used to make certain
casings and variety meats; and by reducing restrictions on live bovine
imports from Canada and thereby changing the U.S. supply of bovine
products in general, including intestines and other material used to
produce casings and variety meats.[^25] We have been unable to acquire
much of the information that would be necessary to assess expected
effects of the proposed rule on the U.S. casings and variety meats
industries. Our intent in this section is to present our current
understanding of possible impacts of the rule, identify data gaps, and
request that knowledgeable parties submit information in comment on the
proposed rule that would enable us to prepare a more complete analysis
for the final rule.

*U.S. supply of bovine small intestines.* Animal casings are defined in
the CFR as intestines, stomachs, esophagi, and urinary bladders from
cattle, sheep, swine, or goats that are used to encase processed meats
in foods such as sausage.[^26] The three most widely used types of
bovine casings are beef bung caps, beef rounds, and beef middles.[^27]
They come from different parts of the animal's intestinal tract and,
because of differing diameters and perhaps other characteristics, are
used in the production of different types of sausages.

Beef rounds are derived from the small intestine and their name refers
to the intestine's round or ring shape. The bovine small intestine is
also used in the preparation of certain variety meats. For most of 2004
and 2005, U.S. supplies of beef rounds and small intestine-derived
variety meats were constrained by BSE-related restrictions on the use of
the small intestine for human food, as described here.

Following detection of BSE in an imported dairy cow in Washington State
in December 2003, the Secretaries of USDA and Health and Human Services
announced a series of regulatory actions and policy changes to
strengthen protections against the spread of BSE in U.S. cattle and
against human exposure to the BSE agent. On January 12, 2004, USDA's
Food Safety and Inspection Service (FSIS) issued three interim final
rules, one of which was aimed at minimizing human exposure to BSE
specified risk materials (SRMs). This rule designated certain materials
from cattle as SRMs, declared that SRMs are inedible, and prohibited the
use of these materials for human food.[^28] Among the materials
identified as SRMs was the distal ileum of the small intestine. To
ensure effective removal of the distal ileum, FSIS required that the
entire small intestine be removed and disposed of as inedible.

On July 14, 2004, the Food and Drug Administration (FDA) issued an
interim final rule that extended the FSIS measures to FDA-regulated
human food and cosmetics.[^29] FDA designated the distal ileum of the
small intestine from cattle as an SRM, and, as had FSIS, prohibited the
use of the entire small intestine for human food.

In September 2005, FSIS and FDA published amendments to their interim
final rules that became effective October 7, 2005. The FSIS amendment
permits beef small intestine, excluding the distal ileum, to be used for
human food. The FDA amendment permits the manufacture and use of beef
casings derived from beef small intestine, excluding the distal ileum,
for human food and cosmetics.[^30]

One source of information on the supply of small intestine for U.S.
bovine casings and variety meats production is the Preliminary
Regulatory Impact Analysis (PRIA) that was prepared for the interim
final rules issued by FSIS on January 12, 2004.[^31] FSIS determined
that the quantity of bovine small intestine produced in the United
States in 2002 (and that would have been excluded by the interim final
rule from the human food supply) was about 160 million pounds, including
the distal ileum.[^32] The PRIA approximated that of the 160 million
pounds of small intestine, about 102 million pounds were used to produce
casings and about 58 million pounds were used in the production of
variety meats. In fact, these numbers were overstated by about 15
percent because of tissue condemnations for disease and
contamination.[^33] In addition, the distal ileum comprises about 10
percent of the small intestine, according to industry sources.[^34]
Adjusting for the condemnations and removal of the distal ileum, about
76.5 million pounds and 43.5 million pounds of bovine small intestine,
respectively, are approximated to have been used in 2002 to produce beef
rounds and variety meats in the United States, or about 120 million
pounds total.

To approximate the change in the U.S. supply of bovine small intestine
used for casings and variety meats production under the proposed rule,
we assume the relationship between the quantity of bovine small
intestine used and the number of cattle slaughtered over the period of
analysis, 2007-2011, would be similar to the relationship described in
the PRIA for 2002. In 2002, there were 35,735,000 head of cattle
slaughtered in the United States.[^35] The 120 million pounds of bovine
small intestine minus the distal ileum approximated as having been used
that year to produce casings and variety meats yields a ratio of 3.4
pounds per head of cattle slaughtered (including cattle from which the
small intestine was not used).

Increases in U.S. slaughter projected with the proposed rule are shown
in Table 19. Using the ratio 3.4 pounds per animal slaughtered, we
calculate that with the rule the annual supply of bovine casings and
variety meats produced from small intestines would increase on average
over the period of analysis by about 1.6 percent. The largest increase
would occur in 2007, with production of 2.5 million pounds of additional
small intestine for use as casings and variety meats. These supply
projections presume a ready market for these products.

With the rule, the supply of bovine bladders and of other parts of the
bovine intestinal tract may increase by similarly small percentages. We
do not have a basis for approximating the additional quantities of bung
caps and middles that may be produced, but as with the supply of beef
rounds and small intestine-derived variety meats, we expect that the
amounts would be relatively small.

+----+---------+------------+--------+-----------------+-------------+
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| ll |         |            |        |                 |             |
| i  |         |            |        |                 |             |
| nt |         |            |        |                 |             |
| es |         |            |        |                 |             |
| ti |         |            |        |                 |             |
| ne |         |            |        |                 |             |
| us |         |            |        |                 |             |
| ed |         |            |        |                 |             |
| to |         |            |        |                 |             |
| p  |         |            |        |                 |             |
| ro |         |            |        |                 |             |
| du |         |            |        |                 |             |
| ce |         |            |        |                 |             |
| c  |         |            |        |                 |             |
| as |         |            |        |                 |             |
| in |         |            |        |                 |             |
| gs |         |            |        |                 |             |
| a  |         |            |        |                 |             |
| nd |         |            |        |                 |             |
| v  |         |            |        |                 |             |
| ar |         |            |        |                 |             |
| ie |         |            |        |                 |             |
| ty |         |            |        |                 |             |
| me |         |            |        |                 |             |
| at |         |            |        |                 |             |
| s, |         |            |        |                 |             |
| 20 |         |            |        |                 |             |
| 07 |         |            |        |                 |             |
| -2 |         |            |        |                 |             |
| 01 |         |            |        |                 |             |
| 1, |         |            |        |                 |             |
| b  |         |            |        |                 |             |
| as |         |            |        |                 |             |
| ed |         |            |        |                 |             |
| on |         |            |        |                 |             |
| c  |         |            |        |                 |             |
| ha |         |            |        |                 |             |
| ng |         |            |        |                 |             |
| es |         |            |        |                 |             |
| in |         |            |        |                 |             |
| f  |         |            |        |                 |             |
| ed |         |            |        |                 |             |
| a  |         |            |        |                 |             |
| nd |         |            |        |                 |             |
| cu |         |            |        |                 |             |
| ll |         |            |        |                 |             |
| ca |         |            |        |                 |             |
| tt |         |            |        |                 |             |
| le |         |            |        |                 |             |
| i  |         |            |        |                 |             |
| mp |         |            |        |                 |             |
| or |         |            |        |                 |             |
| ts |         |            |        |                 |             |
| p  |         |            |        |                 |             |
| ro |         |            |        |                 |             |
| je |         |            |        |                 |             |
| ct |         |            |        |                 |             |
| ed |         |            |        |                 |             |
| u  |         |            |        |                 |             |
| nd |         |            |        |                 |             |
| er |         |            |        |                 |             |
| t  |         |            |        |                 |             |
| he |         |            |        |                 |             |
| pr |         |            |        |                 |             |
| op |         |            |        |                 |             |
| os |         |            |        |                 |             |
| ed |         |            |        |                 |             |
| ru |         |            |        |                 |             |
| le |         |            |        |                 |             |
+----+---------+------------+--------+-----------------+-------------+
|    |         |            |        | Approximated    | Percentage  |
|    |         |            |        | Increase in the | Increase in |
|    |         |            |        | Supply          | the Supply  |
|    |         |            |        |                 | of Small    |
|    |         |            |        | of Small        | Intestine   |
|    |         |            |        | Intestine Used  | Used for    |
|    |         |            |        | for Casings and | Casings and |
|    |         |            |        | [Variety        | [Variety    |
|    |         |            |        | Mea             | Meats]{     |
|    |         |            |        | ts]{.underline} | .underline} |
+----+---------+------------+--------+-----------------+-------------+
|    |         |            |        |                 |             |
+----+---------+------------+--------+-----------------+-------------+
|    | Cattle  |            |        |                 |             |
|    | Sl      |            |        |                 |             |
|    | aughter |            |        |                 |             |
+----+---------+------------+--------+-----------------+-------------+
|    | (T      |            |        |                 |             |
|    | housand |            |        |                 |             |
|    | Head)   |            |        |                 |             |
+----+---------+------------+--------+-----------------+-------------+
| [Y | [       | [With the  | [C     |                 |             |
| ea | Baselin | Rule]{.    | hange] |                 |             |
| r] | e]{.und | underline} | {.unde |                 |             |
| {. | erline} |            | rline} |                 |             |
| un |         |            |        |                 |             |
| de |         |            |        |                 |             |
| rl |         |            |        |                 |             |
| in |         |            |        |                 |             |
| e} |         |            |        |                 |             |
+----+---------+------------+--------+-----------------+-------------+
|    |         |            |        | (pounds)        |             |
+----+---------+------------+--------+-----------------+-------------+
| 20 | 33,315  | 34,052     | 737    | 2,505,800       | 2.2%        |
| 07 |         |            |        |                 |             |
+----+---------+------------+--------+-----------------+-------------+
| 20 | 34,069  | 34,668     | 599    | 2,036,600       | 1.8%        |
| 08 |         |            |        |                 |             |
+----+---------+------------+--------+-----------------+-------------+
| 20 | 35,022  | 35,477     | 455    | 1,547,000       | 1.3%        |
| 09 |         |            |        |                 |             |
+----+---------+------------+--------+-----------------+-------------+
| 20 | 35,184  | 35,668     | 484    | 1,645,600       | 1.4%        |
| 10 |         |            |        |                 |             |
+----+---------+------------+--------+-----------------+-------------+
| 20 | 35,228  | 35,714     | 486    | 1,652,400       | 1.4%        |
| 11 |         |            |        |                 |             |
+----+---------+------------+--------+-----------------+-------------+
| No |         |            |        |                 |             |
| te |         |            |        |                 |             |
| s: |         |            |        |                 |             |
| Ca |         |            |        |                 |             |
| tt |         |            |        |                 |             |
| le |         |            |        |                 |             |
| s  |         |            |        |                 |             |
| la |         |            |        |                 |             |
| ug |         |            |        |                 |             |
| ht |         |            |        |                 |             |
| er |         |            |        |                 |             |
| ba |         |            |        |                 |             |
| se |         |            |        |                 |             |
| li |         |            |        |                 |             |
| ne |         |            |        |                 |             |
| n  |         |            |        |                 |             |
| um |         |            |        |                 |             |
| be |         |            |        |                 |             |
| rs |         |            |        |                 |             |
| a  |         |            |        |                 |             |
| re |         |            |        |                 |             |
| t  |         |            |        |                 |             |
| ak |         |            |        |                 |             |
| en |         |            |        |                 |             |
| fr |         |            |        |                 |             |
| om |         |            |        |                 |             |
| T  |         |            |        |                 |             |
| ab |         |            |        |                 |             |
| le |         |            |        |                 |             |
| 2  |         |            |        |                 |             |
| f  |         |            |        |                 |             |
| or |         |            |        |                 |             |
| f  |         |            |        |                 |             |
| ed |         |            |        |                 |             |
| ca |         |            |        |                 |             |
| tt |         |            |        |                 |             |
| le |         |            |        |                 |             |
| a  |         |            |        |                 |             |
| nd |         |            |        |                 |             |
| fr |         |            |        |                 |             |
| om |         |            |        |                 |             |
| Ap |         |            |        |                 |             |
| pe |         |            |        |                 |             |
| nd |         |            |        |                 |             |
| ix |         |            |        |                 |             |
| T  |         |            |        |                 |             |
| ab |         |            |        |                 |             |
| le |         |            |        |                 |             |
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| f  |         |            |        |                 |             |
| or |         |            |        |                 |             |
| cu |         |            |        |                 |             |
| ll |         |            |        |                 |             |
| c  |         |            |        |                 |             |
| at |         |            |        |                 |             |
| tl |         |            |        |                 |             |
| e. |         |            |        |                 |             |
| Ca |         |            |        |                 |             |
| tt |         |            |        |                 |             |
| le |         |            |        |                 |             |
| s  |         |            |        |                 |             |
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| er |         |            |        |                 |             |
| ed |         |            |        |                 |             |
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| th |         |            |        |                 |             |
| t  |         |            |        |                 |             |
| he |         |            |        |                 |             |
| ru |         |            |        |                 |             |
| le |         |            |        |                 |             |
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| nc |         |            |        |                 |             |
| lu |         |            |        |                 |             |
| de |         |            |        |                 |             |
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| ge |         |            |        |                 |             |
| in |         |            |        |                 |             |
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| ts |         |            |        |                 |             |
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| Ca |         |            |        |                 |             |
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| da |         |            |        |                 |             |
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| xc |         |            |        |                 |             |
| lu |         |            |        |                 |             |
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| nd |         |            |        |                 |             |
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| ), |         |            |        |                 |             |
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| ho |         |            |        |                 |             |
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| Th |         |            |        |                 |             |
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| S. |         |            |        |                 |             |
| -s |         |            |        |                 |             |
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| ed |         |            |        |                 |             |
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| as |         |            |        |                 |             |
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| on |         |            |        |                 |             |
| 20 |         |            |        |                 |             |
| 02 |         |            |        |                 |             |
| da |         |            |        |                 |             |
| ta |         |            |        |                 |             |
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| mp |         |            |        |                 |             |
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| t  |         |            |        |                 |             |
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| ie |         |            |        |                 |             |
| ty |         |            |        |                 |             |
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| la |         |            |        |                 |             |
| ug |         |            |        |                 |             |
| ht |         |            |        |                 |             |
| er |         |            |        |                 |             |
| ed |         |            |        |                 |             |
| yi |         |            |        |                 |             |
| el |         |            |        |                 |             |
| ds |         |            |        |                 |             |
| 3  |         |            |        |                 |             |
| .4 |         |            |        |                 |             |
| po |         |            |        |                 |             |
| un |         |            |        |                 |             |
| ds |         |            |        |                 |             |
| of |         |            |        |                 |             |
| s  |         |            |        |                 |             |
| ma |         |            |        |                 |             |
| ll |         |            |        |                 |             |
| i  |         |            |        |                 |             |
| nt |         |            |        |                 |             |
| es |         |            |        |                 |             |
| ti |         |            |        |                 |             |
| ne |         |            |        |                 |             |
| m  |         |            |        |                 |             |
| in |         |            |        |                 |             |
| us |         |            |        |                 |             |
| t  |         |            |        |                 |             |
| he |         |            |        |                 |             |
| di |         |            |        |                 |             |
| st |         |            |        |                 |             |
| al |         |            |        |                 |             |
| i  |         |            |        |                 |             |
| le |         |            |        |                 |             |
| um |         |            |        |                 |             |
| p  |         |            |        |                 |             |
| er |         |            |        |                 |             |
| an |         |            |        |                 |             |
| im |         |            |        |                 |             |
| al |         |            |        |                 |             |
| sl |         |            |        |                 |             |
| au |         |            |        |                 |             |
| gh |         |            |        |                 |             |
| te |         |            |        |                 |             |
| re |         |            |        |                 |             |
| d. |         |            |        |                 |             |
| We |         |            |        |                 |             |
| as |         |            |        |                 |             |
| su |         |            |        |                 |             |
| me |         |            |        |                 |             |
| th |         |            |        |                 |             |
| at |         |            |        |                 |             |
| th |         |            |        |                 |             |
| is |         |            |        |                 |             |
| sa |         |            |        |                 |             |
| me |         |            |        |                 |             |
| r  |         |            |        |                 |             |
| at |         |            |        |                 |             |
| io |         |            |        |                 |             |
| w  |         |            |        |                 |             |
| ou |         |            |        |                 |             |
| ld |         |            |        |                 |             |
| ho |         |            |        |                 |             |
| ld |         |            |        |                 |             |
| du |         |            |        |                 |             |
| ri |         |            |        |                 |             |
| ng |         |            |        |                 |             |
| t  |         |            |        |                 |             |
| he |         |            |        |                 |             |
| pe |         |            |        |                 |             |
| ri |         |            |        |                 |             |
| od |         |            |        |                 |             |
| of |         |            |        |                 |             |
| a  |         |            |        |                 |             |
| na |         |            |        |                 |             |
| ly |         |            |        |                 |             |
| si |         |            |        |                 |             |
| s. |         |            |        |                 |             |
+----+---------+------------+--------+-----------------+-------------+

Finally, the U.S. supply of bovine intestines used to produce casings
and variety meats may be affected by the importation of Canadian bovine
small intestines under the proposed rule. Among commodities currently
allowed to be imported from Canada, as a region presenting a minimal
risk of introducing BSE into the United States, are bovine meat, meat
byproducts, and meat food products that meet certain conditions.[^36]
One of the import conditions is the requirement that the SRMs and small
intestine be removed at slaughter.[^37] The proposed rule would allow
importation of bovine small intestine minus the distal ileum that could
then be processed into casings and variety meats in the United States.
APHIS does not have information on the potential volume of bovine small
intestine for making casings and variety meats that may be imported from
Canada because of the proposed rule. We welcome information that would
enable us to evaluate effects on the U.S. supply of bovine small
intestine of allowing their importation from Canada.

*Bovine casings from Canada.* The importation of bovine and other
ruminant casings, except stomachs, is prohibited if the casings
originated in or were processed in any region listed in 9 CFR
94.18(a).[^38] The proposed rule would allow the importation of bovine
casings from minimal-risk regions, and would therefore allow their entry
from Canada to resume.[^39]

The Agency does not have information on levels of production or
consumption of bovine casings in the United States, and trade data for
bovine and ovine casings cannot be disaggregated. U.S. imports and
exports of bovine casings are classified in the Harmonized Tariff
Schedule under HS 0504.00.0040, as non-hog guts, bladders, and stomachs
of animals prepared for use as sausage casings. The trade data do not
distinguish between bovine and ovine casings; import and export
quantities and prices for bovine casings alone are not available.[^40]

Considering the combined trade in bovine and ovine casings, we find that
over the 10-year period, 1995-2004, U.S. annual imports ranged from
approximately 3,160 MT to 4,240 MT (average: about 3,500 MT), with
values ranging from \$18.5 million to \$33.5 million (average: \$24
million). U.S. imports from Canada of bovine and ovine casings over the
4-year period, 1995-1998, averaged 231 MT, and were valued at about
\$1.7 million (7 percent of U.S. imports of bovine and ovine casings for
that period). Over the following four years, 1999-2002, there was a
significant decline in non-hog casings imports from Canada. The annual
quantity averaged about 99 MT (3 percent of U.S. imports of bovine and
ovine casings) and had an average value of about \$220,000 (1 percent of
U.S. imports of bovine and ovine casings). With the BSE discoveries,
bovine and ovine casings imports from Canada declined further, to 22 MT
in 2003 and only 2 MT in 2004. In 2005, there were no reported imports
of non-hog casings from Canada.

With regard to bovine and ovine exports by the United States, annual
quantities over the 10-year period, 1995-2004, ranged from about 2,630
MT to about 7,470 MT (average: about 4,360 MT), with annual values
ranging from \$14.8 million to \$29.6 million (average: \$22.8 million).
Over this same 10-year period, U.S. bovine and ovine casings exports to
Canada averaged about 478 MT (11 percent of exports of bovine and ovine
casings), valued at \$4.9 million (21 percent of exports of bovine and
ovine casings). In 2005, non-hog casings exports to Canada totaled 258
MT and were valued at \$2.7 million.

We reiterate that we do not have information on the quantities of bovine
casings produced and consumed in the United States. Nor do we have
information on the bovine share of U.S. trade in bovine and ovine
casings. We welcome information that the public may provide that would
enable us to better understand the U.S. bovine casings industry and
levels of historic trade in bovine casings between the United States,
Canada, and the world.

In summary, the rule is expected to have an impact on the U.S. casings
and variety meats industries by affecting the supply of bovine
intestines used to make these products and, for the casings industry, by
allowing resumption of imports of bovine casings from Canada. We expect
the change in the supply of bovine intestines to be small. With the
rule, we approximate that the annual increase in the supply of bovine
small intestines from U.S. slaughter used to make beef rounds and small
intestine-derived variety meats would range between 0.6 and 1.0 percent
over the 5-year period of analysis, that is, between approximately
740,000 pounds and 1.1 million pounds. We are prevented from conducting
a more complete analysis by the lack of specific information on U.S.
production, consumption, and trade of bovine casings.

[Bovine Blood and Blood Products]{.underline}

Imports of bovine blood and blood products from Canada were prohibited
following the May 2003 BSE discovery. The proposed rule would allow
these imports to resume. The primary commodities affected would be
products used in the manufacture of vaccines and drugs.

We have been unable to acquire much of the information that would be
necessary to assess effects of the proposed rule for U.S. drug and
vaccine manufacturers. As with the discussion of effects for bovine
casings, we present our limited understanding of possible impacts of the
proposed rule and request public comment that would enable us to prepare
a more complete analysis for the final rule.

Blood and blood products can be divided into two main groups: whole
blood and products derived from blood that are composed of cells; and
plasma-derived products including serum, clotting factors,
immunoglobulins and albumin.[^41] Plasma is the cell-free portion of the
blood. Serum is plasma with fibrinogen and clotting factors removed.

A range of blood products theoretically could be used in preparing drugs
and vaccines, but only fetal bovine serum (FBS), derived from blood
plasma from bovine fetuses, and bovine serum albumin derived from adult
and calf serum are used in significant amounts.[^42] Fetal bovine serum
and sometimes bovine serum albumin are used in tissue culture media and
to produce pharmaceuticals and biologics. FBS is the most important
blood-derived material in human and animal vaccine and drug manufacture,
and is therefore our focus.

Since the detection of BSE in Canada in 2003, imports of FBS from Canada
have been restricted to either research samples of Canadian-origin FBS
(limited to 1 liter per shipment), or FBS that is derived from animals
that originate in the United States, Australia, Mexico, or Central
America and is processed at a designated Canadian facility under USDA
permit. Research samples are restricted to in vitro testing and
evaluation, and must be destroyed following such work.

Demand for FBS continues to expand. While exact numbers are not
available, one source using industry information placed world production
and consumption of FBS at 500,000 liters in 1994, and at 700,000 liters
in 2004. This same source indicated that in 2004 the United States and
Canada combined produced 300,000 liters and consumed 425,000
liters.[^43]

U.S. imports of FBS have grown considerably in the last five years. In
2005, the United States imported approximately 180,000 liters of FBS
valued at \$46.8 million. This is down from \$63.2 million in 2004, but
up from \$16.8 million in 2001. More than 78 percent of FBS imports in
2005 were from Australia, Mexico and New Zealand (Table 20).

The proposed rule may affect the supply of FBS in the United States in
two ways: by allowing the importation of Canadian-origin FBS for
commercial purposes, and by reducing restrictions on bovine imports from
Canada and thereby changing the U.S. supply of pregnant cows presented
for slaughter.

  ---------------------- -------------------- -------------------- -------------------- -------------------- --------------------
  Table 20. Source and                                                                                       
  value of U.S. imports                                                                                      
  of fetal bovine serum,                                                                                     
  2001-2005                                                                                                  

  [Source]{.underline}   [2001]{.underline}   [2002]{.underline}   [2003]{.underline}   [2004]{.underline}   [2005]{.underline}

                         (Million Dollars)                                                                   

  Australia              9.1                  8.2                  13.9                 37.6                 25.9

  Mexico                 0.1                  3.9                  6.6                  11.1                 7.5

  Canada                 3.7                  1.9                  1.3                  5.4                  6.3

  Central America        2                    3.4                  4.3                  4.5                  3.8

  New Zealand            1.1                  3                    7.3                  4.5                  3.2

  Other                  0.8                  0.5                  0.1                  0.2                  0.1

  TOTAL                  16.8                 20.9                 33.5                 63.2                 46.8
  ---------------------- -------------------- -------------------- -------------------- -------------------- --------------------

> Source: Department of Commerce, U.S. Census Bureau, Foreign Trade
> Statistics, as reported by Global Trade Information Services.

From 1996 through 2005, cow slaughter averaged 5.8 million head in the
United States, and 0.5 million head in Canada.[^44] Based on combined
U.S. and Canadian FBS production of 300,000 liters and assuming a
consistent relationship between FBS production and cow slaughter yields
an annual level of Canadian FBS production of about 24,000 liters.[^45]
This amount represents potential imports of FBS derived from Canadian
cows. Had this amount been imported in 2005, it would have represented
about 13 percent of U.S. imports of FBS from all sources.[^46]

In addition, because the proposed rule is projected to increase annual
U.S. cow slaughter by between 481,000 and 670,000 head over the period
of analysis (see Appendix Table 3), we expect that FBS production in the
United States would also increase. Again assuming a consistent
relationship between cow slaughter and FBS production, an increase in
annual domestic production of FBS of between 23,000 and 32,000 liters
may occur.[^47]

Other than for these upper-bound approximations, we are unable to
project the extent to which the U.S. supply of FBS may be affected by
the proposed rule. FBS quality varies, and is defined in relation to the
performance of the specific cell line being cultured.[^48] A given
source may provide FBS useful for one purpose and not another.
Nonetheless, resumption of FBS imports from Canada, directly as serum
and indirectly through increased U.S. pregnant cow slaughter, is
expected to benefit FBS users.

5\. Expected Impacts of an Alternative to the Rule

An alternative to the proposed rule considered by APHIS would be to
allow resumption of live bovine imports from BSE minimal-risk regions
with no restriction by date of birth. In other words, Canadian bovines
could be imported for any destination or purpose without regard to their
age. Regulations governing their importation would be similar to those
that existed prior to Canada's May 2003 BSE discovery, but with the
addition of current and proposed BSE-related requirements other than a
maximum age restriction. These regulations include requirements that
imported cattle be permanently marked as to country of origin and that
they be individually identified to allow an animal to be traced back to
its premises of origin.

[Cattle Imports from Canada]{.underline}

In Table 21, projected imports under the alternative are compared to
projected imports if no regulatory action were taken (baseline import
quantities) and to projected imports under the proposed rule.[^49] The
alternative would allow entry of bovines born before the date specified
in the proposed rule as when a ruminant-to-ruminant feed ban in Canada
was effectively enforced: March 1, 1999. For convenience, we refer to
these animals as older cull cattle.

Under the proposed rule, cattle that are 8 years or older prior to March
1, 2007 would be prohibited. Each year thereafter, the prohibited older
cull cattle would comprise a smaller age group: 9 years or older prior
to March 1, 2008, 10 years or older prior to March 1, 2009, and so
forth. Within a few years, the proposed rule's requirement that bovines
be born on or after March 1, 1999, would not limit bovine imports from
Canada; bovine imports allowed under the proposed rule and the
alternative would be the same.

+----+---------------------+-------+-------+-------+-------+-------+
| T  |                     |       |       |       |       |       |
| ab |                     |       |       |       |       |       |
| le |                     |       |       |       |       |       |
| 2  |                     |       |       |       |       |       |
| 1. |                     |       |       |       |       |       |
| P  |                     |       |       |       |       |       |
| ro |                     |       |       |       |       |       |
| je |                     |       |       |       |       |       |
| ct |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| i  |                     |       |       |       |       |       |
| mp |                     |       |       |       |       |       |
| or |                     |       |       |       |       |       |
| ts |                     |       |       |       |       |       |
| of |                     |       |       |       |       |       |
| Ca |                     |       |       |       |       |       |
| na |                     |       |       |       |       |       |
| di |                     |       |       |       |       |       |
| an |                     |       |       |       |       |       |
| fe |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| er |                     |       |       |       |       |       |
| c  |                     |       |       |       |       |       |
| at |                     |       |       |       |       |       |
| tl |                     |       |       |       |       |       |
| e, |                     |       |       |       |       |       |
| f  |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| c  |                     |       |       |       |       |       |
| at |                     |       |       |       |       |       |
| tl |                     |       |       |       |       |       |
| e, |                     |       |       |       |       |       |
| cu |                     |       |       |       |       |       |
| ll |                     |       |       |       |       |       |
| c  |                     |       |       |       |       |       |
| at |                     |       |       |       |       |       |
| tl |                     |       |       |       |       |       |
| e/ |                     |       |       |       |       |       |
| pr |                     |       |       |       |       |       |
| oc |                     |       |       |       |       |       |
| es |                     |       |       |       |       |       |
| si |                     |       |       |       |       |       |
| ng |                     |       |       |       |       |       |
| b  |                     |       |       |       |       |       |
| ee |                     |       |       |       |       |       |
| f, |                     |       |       |       |       |       |
| a  |                     |       |       |       |       |       |
| nd |                     |       |       |       |       |       |
| f  |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| b  |                     |       |       |       |       |       |
| ee |                     |       |       |       |       |       |
| f: |                     |       |       |       |       |       |
| b  |                     |       |       |       |       |       |
| as |                     |       |       |       |       |       |
| el |                     |       |       |       |       |       |
| in |                     |       |       |       |       |       |
| e, |                     |       |       |       |       |       |
| pr |                     |       |       |       |       |       |
| op |                     |       |       |       |       |       |
| os |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| r  |                     |       |       |       |       |       |
| ul |                     |       |       |       |       |       |
| e, |                     |       |       |       |       |       |
| a  |                     |       |       |       |       |       |
| nd |                     |       |       |       |       |       |
| a  |                     |       |       |       |       |       |
| lt |                     |       |       |       |       |       |
| er |                     |       |       |       |       |       |
| na |                     |       |       |       |       |       |
| ti |                     |       |       |       |       |       |
| ve |                     |       |       |       |       |       |
| of |                     |       |       |       |       |       |
| no |                     |       |       |       |       |       |
| r  |                     |       |       |       |       |       |
| es |                     |       |       |       |       |       |
| tr |                     |       |       |       |       |       |
| ic |                     |       |       |       |       |       |
| ti |                     |       |       |       |       |       |
| on |                     |       |       |       |       |       |
| by |                     |       |       |       |       |       |
| da |                     |       |       |       |       |       |
| te |                     |       |       |       |       |       |
| of |                     |       |       |       |       |       |
| b  |                     |       |       |       |       |       |
| ir |                     |       |       |       |       |       |
| th |                     |       |       |       |       |       |
| on |                     |       |       |       |       |       |
| li |                     |       |       |       |       |       |
| ve |                     |       |       |       |       |       |
| bo |                     |       |       |       |       |       |
| vi |                     |       |       |       |       |       |
| ne |                     |       |       |       |       |       |
| im |                     |       |       |       |       |       |
| po |                     |       |       |       |       |       |
| rt |                     |       |       |       |       |       |
| s, |                     |       |       |       |       |       |
| 2  |                     |       |       |       |       |       |
| 00 |                     |       |       |       |       |       |
| 7- |                     |       |       |       |       |       |
| 20 |                     |       |       |       |       |       |
| 11 |                     |       |       |       |       |       |
+----+---------------------+-------+-------+-------+-------+-------+
|    |                     | [20   | [20   | [20   | [20   | [20   |
|    |                     | 07]{. | 08]{. | 09]{. | 10]{. | 11]{. |
|    |                     | under | under | under | under | under |
|    |                     | line} | line} | line} | line} | line} |
+----+---------------------+-------+-------+-------+-------+-------+
| Fe |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| er |                     |       |       |       |       |       |
| ca |                     |       |       |       |       |       |
| tt |                     |       |       |       |       |       |
| le |                     |       |       |       |       |       |
| fr |                     |       |       |       |       |       |
| om |                     |       |       |       |       |       |
| Ca |                     |       |       |       |       |       |
| na |                     |       |       |       |       |       |
| da |                     |       |       |       |       |       |
|    |                     |       |       |       |       |       |
| (  |                     |       |       |       |       |       |
| th |                     |       |       |       |       |       |
| ou |                     |       |       |       |       |       |
| sa |                     |       |       |       |       |       |
| nd |                     |       |       |       |       |       |
| h  |                     |       |       |       |       |       |
| ea |                     |       |       |       |       |       |
| d) |                     |       |       |       |       |       |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Baseline            | 302   | 371   | 425   | 440   | 441   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Proposed Rule       | 189   | 175   | 167   | 178   | 179   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Alternative         | 189   | 175   | 167   | 178   | 179   |
+----+---------------------+-------+-------+-------+-------+-------+
| F  |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| ca |                     |       |       |       |       |       |
| tt |                     |       |       |       |       |       |
| le |                     |       |       |       |       |       |
| fr |                     |       |       |       |       |       |
| om |                     |       |       |       |       |       |
| Ca |                     |       |       |       |       |       |
| na |                     |       |       |       |       |       |
| da |                     |       |       |       |       |       |
| (  |                     |       |       |       |       |       |
| th |                     |       |       |       |       |       |
| ou |                     |       |       |       |       |       |
| sa |                     |       |       |       |       |       |
| nd |                     |       |       |       |       |       |
| h  |                     |       |       |       |       |       |
| ea |                     |       |       |       |       |       |
| d) |                     |       |       |       |       |       |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Baseline            | 742   | 731   | 729   | 755   | 756   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Proposed Rule       | 728   | 673   | 644   | 685   | 688   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Alternative         | 728   | 673   | 644   | 685   | 688   |
+----+---------------------+-------+-------+-------+-------+-------+
| Cu |                     |       |       |       |       |       |
| ll |                     |       |       |       |       |       |
| ca |                     |       |       |       |       |       |
| tt |                     |       |       |       |       |       |
| le |                     |       |       |       |       |       |
| fr |                     |       |       |       |       |       |
| om |                     |       |       |       |       |       |
| C  |                     |       |       |       |       |       |
| an |                     |       |       |       |       |       |
| ad |                     |       |       |       |       |       |
| a, |                     |       |       |       |       |       |
| n  |                     |       |       |       |       |       |
| et |                     |       |       |       |       |       |
| of |                     |       |       |       |       |       |
| i  |                     |       |       |       |       |       |
| mp |                     |       |       |       |       |       |
| or |                     |       |       |       |       |       |
| ts |                     |       |       |       |       |       |
| a  |                     |       |       |       |       |       |
| ss |                     |       |       |       |       |       |
| um |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| to |                     |       |       |       |       |       |
| di |                     |       |       |       |       |       |
| sp |                     |       |       |       |       |       |
| la |                     |       |       |       |       |       |
| ce |                     |       |       |       |       |       |
| pr |                     |       |       |       |       |       |
| oc |                     |       |       |       |       |       |
| es |                     |       |       |       |       |       |
| si |                     |       |       |       |       |       |
| ng |                     |       |       |       |       |       |
| be |                     |       |       |       |       |       |
| ef |                     |       |       |       |       |       |
| i  |                     |       |       |       |       |       |
| mp |                     |       |       |       |       |       |
| or |                     |       |       |       |       |       |
| ts |                     |       |       |       |       |       |
| fr |                     |       |       |       |       |       |
| om |                     |       |       |       |       |       |
| o  |                     |       |       |       |       |       |
| th |                     |       |       |       |       |       |
| er |                     |       |       |       |       |       |
| c  |                     |       |       |       |       |       |
| ou |                     |       |       |       |       |       |
| nt |                     |       |       |       |       |       |
| ri |                     |       |       |       |       |       |
| es |                     |       |       |       |       |       |
| (m |                     |       |       |       |       |       |
| il |                     |       |       |       |       |       |
| li |                     |       |       |       |       |       |
| on |                     |       |       |       |       |       |
| po |                     |       |       |       |       |       |
| un |                     |       |       |       |       |       |
| ds |                     |       |       |       |       |       |
| c  |                     |       |       |       |       |       |
| ar |                     |       |       |       |       |       |
| ca |                     |       |       |       |       |       |
| ss |                     |       |       |       |       |       |
| we |                     |       |       |       |       |       |
| ig |                     |       |       |       |       |       |
| ht |                     |       |       |       |       |       |
| e  |                     |       |       |       |       |       |
| qu |                     |       |       |       |       |       |
| iv |                     |       |       |       |       |       |
| al |                     |       |       |       |       |       |
| en |                     |       |       |       |       |       |
| t) |                     |       |       |       |       |       |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Baseline            | 0     | 0     | 0     | 0     | 0     |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Proposed Rule       | 288   | 254   | 205   | 237   | 240   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Alternative         | 360   | 318   | 205   | 237   | 240   |
+----+---------------------+-------+-------+-------+-------+-------+
| F  |                     |       |       |       |       |       |
| ed |                     |       |       |       |       |       |
| be |                     |       |       |       |       |       |
| ef |                     |       |       |       |       |       |
| fr |                     |       |       |       |       |       |
| om |                     |       |       |       |       |       |
| Ca |                     |       |       |       |       |       |
| na |                     |       |       |       |       |       |
| da |                     |       |       |       |       |       |
| (m |                     |       |       |       |       |       |
| il |                     |       |       |       |       |       |
| li |                     |       |       |       |       |       |
| on |                     |       |       |       |       |       |
| po |                     |       |       |       |       |       |
| un |                     |       |       |       |       |       |
| ds |                     |       |       |       |       |       |
| c  |                     |       |       |       |       |       |
| ar |                     |       |       |       |       |       |
| ca |                     |       |       |       |       |       |
| ss |                     |       |       |       |       |       |
| we |                     |       |       |       |       |       |
| ig |                     |       |       |       |       |       |
| ht |                     |       |       |       |       |       |
| e  |                     |       |       |       |       |       |
| qu |                     |       |       |       |       |       |
| iv |                     |       |       |       |       |       |
| al |                     |       |       |       |       |       |
| en |                     |       |       |       |       |       |
| t) |                     |       |       |       |       |       |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Baseline            | 446   | 425   | 420   | 419   | 419   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Proposed Rule       | 371   | 390   | 420   | 419   | 419   |
+----+---------------------+-------+-------+-------+-------+-------+
|    | Alternative         | 371   | 390   | 420   | 419   | 419   |
+----+---------------------+-------+-------+-------+-------+-------+

Source: Expert opinion, USDA Economic Research Service, Market and Trade
Economics Division, Animal Products, Grains, and Oil Seeds Branch.

Note: For the cull cattle/processing beef category, cull cattle imports
are converted from thousand head to million pounds carcass weight
equivalent for 2007-2011 by multiplying by the following carcass weights
(pounds) for cows and bulls/stags, respectively: 2007, 576 and 888;
2008, 579 and 893; 2009, 583 and 899; 2010, 586 and 904; and 2011, 590
and 909.

Projected imports of Canadian feeder cattle, fed cattle, and fed beef
are the same under the proposed rule and under the alternative. In both
cases, feeder and fed cattle imports would be fewer than would enter
without the rule, and fed beef imports would be less in the first two
years of the period of analysis. The only difference between imports
under the proposed rule and under the alternative is with respect to
cull cattle imports projected for 2007 and 2008. Under the alternative,
imports of cull cattle are projected in these two years to be one-fourth
greater, net of displaced processing beef imports, than they would be
under the proposed rule. The older cull cattle that would be imported
under the alternative would total 168,000 cows and 20,000 bulls and
stags in 2007, and 147,000 cows and 18,000 bulls and stags in 2008.
These older cull cattle would yield 72 million pounds and 64 million
pounds of processing beef, carcass weight equivalent, for the two years.

Price and welfare effects under the alternative would differ from
effects under the proposed rule only for the cull cattle/processing beef
category. These effects, assuming projected displacement of processing
beef imports from other countries by cull cattle imports from Canada as
shown in Table 5, are presented in Appendix Table 12.

Table 22 shows the present and annualized values of welfare changes
under the alternative for the cull cattle/processing beef category. The
present value of the welfare changes (2006 dollars, 3 percent discount
rate) would be \$1.4 billion in consumer gains, \$731 million in
producer losses, for a net benefit of about \$667 million. Annualized
values over the five years would be consumer gains of \$305 million,
producer losses of \$160 million, and net benefits of \$146 million.

> Table 22. Alternative of no restriction by date of birth on live
> bovine imports: present and annualized values of welfare changes for
> cull cattle/processing beef, 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare                                

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  \$1,397,680              -\$730,800               \$666,880

                       7%                  \$1,267,061              -\$660,333               \$606,728

  2001 Dollars         3%                  \$1,215,348              -\$635,446               \$579,902

                       7%                  \$1,101,796              -\$574,189               \$527,606

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  \$305,190                -\$159,573               \$145,617

                       7%                  \$309,025                -\$161,049               \$147,976

  2001 Dollars         3%                  \$265,377                -\$138,752               \$126,624

                       7%                  \$268,718                -\$140,039               \$128,678
  -------------------- ------------------- ------------------------ ------------------------ -------------------

> Note: The present and annualized values are taken from Appendix Table
> 12. Consumers are U.S. buyers of processing beef at the wholesale
> level; producers are sellers of U.S.-produced processing beef at the
> wholesale level. Cull cattle imports from Canada in thousand head
> (slaughter cows, bulls, and stags quantities in Appendix Table 3) are
> converted to processing beef in million pounds carcass weight
> equivalent by multiplying by the following carcass weights (pounds)
> for cows and bulls/stags, respectively: 2007, 576 and 888; 2008, 579
> and 893; 2009, 583 and 899; 2010, 586 and 904; and 2011, 590 and 909.

To exemplify the differences in welfare effects between the alternative
and the proposed rule for the cull cattle/processing beef category, we
compare in Table 23 their present and annualized values in 2006 dollars
when discounted at 3 percent. Compared to effects under the proposed
rule, consumer welfare gains under the alternative would be 12.4 percent
larger, producer welfare losses would be 11.3 percent larger, and net
benefits would be 13.7 percent larger. We note also small differences in
price effects. The annual decrease in processing beef prices under the
alternative over the 5-year period, all things equal, is computed to
average \$4.80 per cwt, compared to an average annual decrease of \$4.00
under the proposed rule (Appendix Tables 5 and 12).

Combined welfare effects under the alternative for the modeled commodity
categories are shown in Appendix Table 13. The present value of the
welfare changes in 2006 dollars when using a 3 percent discount rate,
for example, would be \$601 million in consumer gains, \$42 million in
producer gains, for a combined welfare benefit of \$643 million.
Annualized values over the five years, in 2006 dollars when using a 3
percent discount rate, would be consumer gains of \$131 million,
producer gains of \$9 million, and net benefits of \$140 million.

> Table 23. Present and annualized values of welfare changes for cull
> cattle/processing beef, with the alternative and with the proposed
> rule, 3 percent discount rate, 2006 dollars, 2007-2011

  -------------------- --------------- ------------------------ ------------------------ -------------------
                                                                                         

                                       Changes in Welfare                                

                                       [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}

                                       (Thousand Dollars)                                

  Present Value        Alternative     \$1,397,680              -\$730,800               \$666,880

                       Proposed Rule   \$1,243,147              -\$656,540               \$586,607

                       Difference      \$154,533                -\$74,260                \$80,273

                                                                                         

  Annualized Value     Alternative     \$305,190                -\$159,573               \$145,617

                       Proposed Rule   \$271,447                -\$143,358               \$128,089

                       Difference      \$33,743                 -\$16,215                \$17,528

                                                                                         

  Difference as a                      12.4%                    11.3%                    13.7%
  percentage of                                                                          
  welfare changes with                                                                   
  the proposed rule                                                                      
  -------------------- --------------- ------------------------ ------------------------ -------------------

> Note: The present and annualized values are taken from Tables 7 and
> 22.

In Table 24, we compare present and annualized values of combined
welfare changes under the alternative and under the proposed rule. Net
welfare benefits would be 15 to 16 percent larger under the alternative
than would be realized under the proposed rule. For example, the
annualized net benefit (2006 dollars, 3 percent rate of discount) would
be \$140 million under the alternative, compared to \$121 million under
the proposed rule.

> Table 24. Present and annualized values of combined welfare changes
> for the modeled commodities, with the alternative and with the
> proposed rule, 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ --------------- ------------------- -----------
                                                                                                                                 

                                           Changes in Welfare                                                                    

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}                   [Net]{.underline}   
  Value]{.underline}   Rate]{.underline}                                                                                         

                                           (Thousand Dollars)                                                                    

  *2006 Dollars*                                                                                                                 

  Alternative rule     3%                  \$601,042                                         \$41,976                            \$643,018

  Proposed rule        3%                  \$444,740                                         \$111,662                           \$556,401

  Difference           3%                  \$156,302                                         -\$69,686                           \$86,617

  Alternative rule     7%                  \$555,589                                         \$29,915                            \$585,504

  Proposed rule        7%                  \$407,740                                         \$96,136                            \$503,876

  Difference           7%                  \$147,849                                         -\$66,221                           \$81,628

                                                                                                                                 

  *2001 Dollars*                                                                                                                 

  Alternative rule     3%                  \$522,276                                         \$36,870                            \$559,149

  Proposed rule        3%                  \$386,246                                         \$97,526                            \$483,775

  Difference           3%                  \$136,030                                         -\$60,656                           \$75,374

  Alternative rule     7%                  \$482,671                                         \$26,471                            \$509,142

  Proposed rule        7%                  \$302,447                                         \$133,266                           \$435,714

  Difference           7%                  \$180,224                                         -\$106,795                          \$73,428

  [Annualized                                                                                                                    
  Value]{.underline}                                                                                                             

  *2006 Dollars*                                                                                                                 

  Alternative rule     3%                  \$131,241                                         \$9,168                             \$140,407

  Proposed rule        3%                  \$97,110                                          \$24,384                            \$121,494

  Difference           3%                  \$34,131                                          -\$15,216                           \$18,913

  Alternative rule     7%                  \$135,512                                         \$7,306                             \$142,817

  Proposed rule        7%                  \$99,452                                          \$23,457                            \$122,908

  Difference           7%                  \$36,060                                          -\$16,151                           \$19,909

                                                                                                                                 

  *2001 Dollars*                                                                                                                 

  Alternative rule     3%                  \$114,042                                         \$8,052                             \$122,092

  Proposed rule        3%                  \$84,339                                          \$21,296                            \$105,634

  Difference           3%                  \$29,703                                          -\$13,244                           \$16,458

  Alternative rule     7%                  \$117,720                                         \$6,457                             \$124,174

  Proposed rule        7%                  \$86,339                                          \$20,514                            \$106,851

  Difference           7%                  \$31,381                                          -\$14,057                           \$17,323
  -------------------- ------------------- ------------------------ ------------------------ --------------- ------------------- -----------

> Note: The present and annualized values for the proposed rule are
> taken from Appendix Table 10 and for the alternative to the rule from
> Appendix Table 13.

Impacts under the alternative and under the proposed rule would also
differ for some of the commodities not modeled. For example, we would
expect the supply of bovine casings to be larger with the alternative,
due to larger projected slaughter numbers.

[BSE Risk]{.underline}

As described in the risk assessment for the proposed rule, transmission
of BSE requires that bovines ingest feed that contains the infectious
agent.[^50] Feed contamination results from the incorporation of
ingredients that contain certain ruminant protein derived from infected
animals. Standard rendering processes do not completely inactivate the
BSE agent. Therefore, rendered protein such as meat-and-bone meal
derived from infected animals may remain contaminated. Prohibitions on
the use of ruminant protein in ruminant feed are imposed by the Food and
Drug Administration to mitigate the risk of BSE transmission.

The World Organization for Animal Health establishes standards for the
international trade in animals and animal products. It recommends that
cattle be imported from a region that has reported an indigenous case of
BSE only if the cattle selected for export were born after the date from
which a ban on the feeding of ruminants with meat-and-bone meal and
greaves (the residue left after animal fat or tallow has been rendered)
derived from ruminants had been effectively enforced.[^51]

On August 4, 1997, Canada issued regulations prohibiting the use of
mammalian protein in ruminant feeds.[^52] Implementation of the feed ban
was a gradual process, with producers, feed mills, retailers, and feed
manufacturers given grace periods before they were required to be in
full compliance with the regulations. It is believed that this
implementation period may have lasted six months, making February 1998 a
more realistic date on which the ban can be considered to have gone into
effect.

The likelihood that Canadian cattle born after February 1998 would be
exposed to the BSE agent continues to decrease over time. APHIS
considers that a period of one year following the full implementation of
the feed ban allows sufficient time for the measures taken by Canada to
have their desired effect. Therefore, APHIS concludes that cattle born
on or after March 1, 1999 are unlikely to have been exposed to the BSE
agent via feed and can be imported into the United States for any
purpose with a low risk that they will be infected with the BSE agent.

We do not have a quantitative estimate of the additional risk posed by
importation of Canadian cattle born before March 1, 1999. The importance
of a feed ban as a risk mitigation measure is demonstrated in science
and experience, and is incorporated into the World Organization for
Animal Health feed ban recommendation. As reported in the risk
assessment for the proposed rule, the precipitous decline in BSE cases
in the United Kingdom after 1987 is directly attributable to
implementation of a ban that year on using ruminant meat-and-bone meal
in ruminant feed. We conclude that there may be some degree of increased
risk of BSE introduction under the alternative, compared to the minimal
risk posed by the proposed rule, because of the greater likelihood of
the older cull cattle having been exposed to infectivity. While our
analysis indicates larger net welfare benefits may be realized under the
alternative of no restriction by date of birth on live bovine imports,
the proposed rule is preferable because it would pose a lower risk of
BSE introduction into the United States and would be consistent with
demonstrated science and experience of the World Organization for Animal
Health.

6\. Expected Impacts Assuming Resumption of Processing Beef Imports from
Canada

Current regulations require that imported Canadian cattle be slaughtered
at less than 30 months of age and that imported Canadian beef come from
cattle slaughtered at less than 30 months of age. Our analysis assumes
no imports of processing beef from Canada. In this section, we consider
effects if imports of Canadian beef from cattle slaughtered at 30 months
or older were to resume at the same time that the proposed rule is
finalized.

Importation of ruminant products and byproducts was included in the BSE
minimal-risk regions final rule, and this proposed rule would not change
regulations regarding the importation of beef from Canada.[^53] However,
in March 2005, APHIS published amendments to that final rule to delay
until further notice the applicability of provisions of the rule
pertaining to bovine meat, meat byproducts, whole and half carcasses,
and certain other bovine products.[^54] This partial delay of
applicability of the BSE minimal-risk regions rule prohibits importing
these products when derived from bovines 30 months of age or older when
slaughtered.

Canadian boneless beef and certain other products derived from bovines
slaughtered at less than 30 months of age had been allowed to be
imported by permit since August 2003. In July 2005, the scope of allowed
imports was broadened to include additional bovine meat and meat
byproducts when the Ninth Circuit Court of Appeals reversed a
preliminary injunction issued by the District Court for Montana that had
prohibited implementation of the BSE minimal-risk regions rule.[^55]
However, bovine commodities that are imported must still come only from
Canadian animals slaughtered at less than 30 months of age, and they
must be accompanied by certification that the age requirement is
satisfied.

As discussed, the United States is a large importer of processing beef,
with Australia, New Zealand, and Uruguay currently our primary
suppliers. Over the period of analysis, total processing beef imports
are projected to provide about 45 percent of U.S. consumption of
processing beef (decreasing from 49 percent in 2007 to 42 percent in
2011). In this section, we assume annual imports of Canadian processing
beef, 2007-2011, would average 240 million pounds carcass weight
equivalent, of which about two-thirds would displace processing beef
imports from other countries and about one-third would represent a net
increase in U.S. supply. It is further assumed under this scenario that
the Canadian cull cattle imported would not displace processing beef
imports from other countries.

The import quantities and extent of displacement are projections made by
staff of the USDA Economic Research Service (ERS), Market and Trade
Economics Division, Animal Products, Grains, and Oil Seeds Branch, based
on their expert opinion and reference to the "USDA Agricultural Baseline
Projections to 2015," United States Department of Agriculture,
Interagency Agricultural Projections Committee, Baseline Report
OCE-2006-1, February 2006.

The net addition of processing beef from Canada would be equivalent to
2.8 percent of projected baseline imports (without the rule) over the
period of analysis, or 1.3 percent of U.S. supply. When the processing
beef produced from projected cull cattle imports from Canada is
included, the increase in the U.S. supply of processing beef under this
scenario would be equivalent to 4.3 percent of projected imports without
the proposed rule.

[Price and Welfare Effects for Cull Cattle/Processing Beef]{.underline}

Projected imports of cull cattle and processing beef from Canada under
this scenario are compared in Table 25 to projected imports of cull
cattle alone used to evaluate the proposed rule.

+------------------+-------------------------+-------------------------+
| Table 25.        |                         |                         |
| Scenario         |                         |                         |
| comparison of    |                         |                         |
| quantities of    |                         |                         |
| (i) cull cattle  |                         |                         |
| alone and (ii)   |                         |                         |
| cull cattle and  |                         |                         |
| processing beef  |                         |                         |
| projected to be  |                         |                         |
| imported from    |                         |                         |
| Canada, net of   |                         |                         |
| displaced        |                         |                         |
| processing beef  |                         |                         |
| imports from     |                         |                         |
| other countries, |                         |                         |
| 2007-2011, in    |                         |                         |
| million pounds   |                         |                         |
| of processing    |                         |                         |
| beef, carcass    |                         |                         |
| weight           |                         |                         |
| equivalent       |                         |                         |
+------------------+-------------------------+-------------------------+
| Year             | Cull Cattle Only        | Cull Cattle and         |
|                  |                         | Processing Beef         |
+------------------+-------------------------+-------------------------+
| 2007             | 288                     | 339                     |
+------------------+-------------------------+-------------------------+
| 2008             | 254                     | 299                     |
+------------------+-------------------------+-------------------------+
| 2009             | 205                     | 242                     |
+------------------+-------------------------+-------------------------+
| 2010             | 237                     | 279                     |
+------------------+-------------------------+-------------------------+
| 2011             | 240                     | 282                     |
+------------------+-------------------------+-------------------------+
| Source: Expert   |                         |                         |
| opinion, USDA    |                         |                         |
| Economic         |                         |                         |
| Research         |                         |                         |
| Service, Market  |                         |                         |
| and Trade        |                         |                         |
| Economics        |                         |                         |
| Division, Animal |                         |                         |
| Products,        |                         |                         |
| Grains, and Oil  |                         |                         |
| Seeds Branch.    |                         |                         |
|                  |                         |                         |
| Notes: Cull      |                         |                         |
| cattle are       |                         |                         |
| converted to     |                         |                         |
| processing beef  |                         |                         |
| by multiplying   |                         |                         |
| by the following |                         |                         |
| carcass weights  |                         |                         |
| (pounds) for     |                         |                         |
| cows and         |                         |                         |
| bulls/stags,     |                         |                         |
| respectively:    |                         |                         |
| 2007, 576 and    |                         |                         |
| 888; 2008, 579   |                         |                         |
| and 893; 2009,   |                         |                         |
| 583 and 899;     |                         |                         |
| 2010, 586 and    |                         |                         |
| 904; and 2011,   |                         |                         |
| 590 and 909. All |                         |                         |
| of the           |                         |                         |
| quantities that  |                         |                         |
| follow are       |                         |                         |
| expressed in     |                         |                         |
| million pounds   |                         |                         |
| of processing    |                         |                         |
| beef, carcass    |                         |                         |
| weight           |                         |                         |
| equivalent. For  |                         |                         |
| the cull cattle  |                         |                         |
| imports only     |                         |                         |
| scenario, the    |                         |                         |
| quantities are   |                         |                         |
| based on         |                         |                         |
| projected        |                         |                         |
| imports of       |                         |                         |
| slaughter cows,  |                         |                         |
| bulls, and stags |                         |                         |
| as shown in      |                         |                         |
| Appendix Table   |                         |                         |
| 3, and are       |                         |                         |
| equivalent to:   |                         |                         |
| 2007, 458; 2008, |                         |                         |
| 403; 2009, 333;  |                         |                         |
| 2010, 343; and   |                         |                         |
| 2011, 346. These |                         |                         |
| quantities are   |                         |                         |
| reduced by the   |                         |                         |
| following        |                         |                         |
| projected        |                         |                         |
| displaced        |                         |                         |
| processing beef  |                         |                         |
| imports from     |                         |                         |
| other countries: |                         |                         |
| 2007, 170; 2008, |                         |                         |
| 149; 2009, 128;  |                         |                         |
| 2010, 106; and   |                         |                         |
| 2011, 106. For   |                         |                         |
| the scenario     |                         |                         |
| that assumes     |                         |                         |
| importation from |                         |                         |
| Canada of both   |                         |                         |
| cull cattle and  |                         |                         |
| processing beef, |                         |                         |
| quantities of    |                         |                         |
| cull cattle      |                         |                         |
| imported are:    |                         |                         |
| 2007, 214; 2008, |                         |                         |
| 199; 2009, 192;  |                         |                         |
| 2010, 204; and   |                         |                         |
| 2011, 207.       |                         |                         |
| Projected        |                         |                         |
| processing beef  |                         |                         |
| imports are:     |                         |                         |
| 2007, 325; 2008, |                         |                         |
| 275; 2009, 200;  |                         |                         |
| 2010, 200; and   |                         |                         |
| 2011, 200.       |                         |                         |
| Combined cull    |                         |                         |
| cattle and       |                         |                         |
| processing beef  |                         |                         |
| imports are      |                         |                         |
| 2007, 539; 2008, |                         |                         |
| 474; 2009, 392;  |                         |                         |
| 2010, 404; and   |                         |                         |
| 2011, 407. These |                         |                         |
| quantities are   |                         |                         |
| reduced by the   |                         |                         |
| following        |                         |                         |
| projected        |                         |                         |
| displaced        |                         |                         |
| processing beef  |                         |                         |
| imports from     |                         |                         |
| other countries: |                         |                         |
| 2007, 200; 2008, |                         |                         |
| 175; 2009, 150;  |                         |                         |
| 2010, 125; and   |                         |                         |
| 2011, 125.       |                         |                         |
+------------------+-------------------------+-------------------------+

Results of the analysis show the price of processing beef decreasing in
2007 by 6.3 percent under this scenario, from \$99 to about \$93 per cwt
carcass weight equivalent in 2006 dollars (Table 1 and Appendix Table
14). Over the period of analysis, the annual decrease in processing beef
prices because of the proposed rule, all things equal, is expected to
average about 5 percent, ranging from about \$6.20 per cwt in 2007, to
about \$3.80 per cwt in 2009.

As shown in Table 26, the present value of the welfare changes in 2006
dollars when using a 3 percent discount rate would be \$1.47 billion in
consumer gains, \$770 million in producer losses, for a net benefit of
about \$695 million. Annualized values over the five years, in 2006
dollars when using a 3 percent discount rate, would be consumer gains of
\$320 million, producer losses of \$168 million, and net benefits of
\$152 million.

> Table 26. Cull cattle/processing beef: present and annualized values
> of welfare changes assuming cull cattle imports and processing beef
> imports from Canada would resume at the same time, 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare                                

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  \$1,465,829              -\$770,389               \$695,440

                       7%                  \$1,321,580              -\$692,393               \$629,187

  2001 Dollars         3%                  \$1,274,467              -\$669,797               \$604,670

                       7%                  \$1,149,081              -\$602,002               \$547,078

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  \$320,071                -\$168,218               \$151,853

                       7%                  \$322,321                -\$168,868               \$153,453

  2001 Dollars         3%                  \$278,286                -\$146,253               \$132,033

                       7%                  \$280,250                -\$146,823               \$133,427
  -------------------- ------------------- ------------------------ ------------------------ -------------------

> Note: The present and annualized values are taken from Appendix Table
> 14.

Compared to impacts for the cull cattle/processing beef category when
only cull cattle would enter (Table 7), this scenario would result in
consumer welfare gains larger by 17.9 percent, producer welfare losses
larger by 17.3 percent, and net benefits larger by 18.6 percent.

[Combined Welfare Effects for the Modeled Commodities]{.underline}

Combined effects under this scenario for cull cattle/processing beef,
feeder cattle, fed cattle, and fed beef are shown in Table 27.

> Table 27. Present and annualized values of combined welfare changes
> for the modeled commodities, assuming cull cattle imports and
> processing beef imports from Canada would resume at the same time,
> 2007-2011

  -------------------- ------------------- ------------------------ ------------------------ -------------------
                                                                                             

                                           Changes in Welfare                                

  [Present             [Discount           [Consumer]{.underline}   [Producer]{.underline}   [Net]{.underline}
  Value]{.underline}   Rate]{.underline}                                                     

                                           (Thousand Dollars)                                

  2006 Dollars         3%                  \$669,191                \$2,387                  \$671,578

                       7%                  \$610,108                -\$2,145                 \$607,963

  2001 Dollars         3%                  \$581,395                \$2,519                  \$583,917

                       7%                  \$529,956                -\$1,342                 \$528,614

  [Annualized                                                                                
  Value]{.underline}                                                                         

  2006 Dollars         3%                  \$146,122                \$523                    \$146,643

                       7%                  \$148,808                -\$513                   \$148,294

  2001 Dollars         3%                  \$126,951                \$551                    \$127,501

                       7%                  \$129,252                -\$327                   \$128,923
  -------------------- ------------------- ------------------------ ------------------------ -------------------

> Note: The present and annualized values are taken from Appendix Table
> 15.

Removal of the delay of applicability, thereby allowing importation of
Canadian beef from cattle slaughtered at 30 months or older, is a
decision that will be taken at the discretion of the Secretary of the
U.S. Department of Agriculture.

7\. Initial Regulatory Flexibility Analysis

The Regulatory Flexibility Act requires agencies to evaluate the
potential effects of their proposed and final rules on small businesses,
small organizations and small governmental jurisdictions. Section 603 of
the Act requires agencies to prepare and make available for public
comment an initial regulatory flexibility analysis (IRFA) that describes
expected impacts of a proposed rule on small entities. Section 603(b) of
the Act specifies that an IRFA shall contain:

-   A description of the reasons why action by the agency is being
    considered;

-   A succinct statement of the objectives of, and legal basis for, the
    proposed rule;

-   A description of and, where feasible, an estimate of the number of
    small entities to which the proposed rule will apply;

-   A description of the projected reporting, recordkeeping and other
    compliance requirements of the proposed rule including an estimate
    of the classes of small entities which will be subject to the
    requirement and the type of professional skills necessary for
    preparation of the report or record;

-   An identification, to the extent practicable, of all relevant
    Federal rules which may duplicate, overlap or conflict with the
    proposed rule;

-   A description of any significant alternatives to the proposed rule
    which accomplish the stated objectives of applicable statutes and
    which minimize any significant economic impact of the proposed rule
    on small entities.

[Reasons for the Action]{.underline}

In the BSE minimal-risk regions rule, APHIS amended the CFR regarding
the importation of animals and animal products by establishing a
category of regions that present a minimal risk of introducing BSE into
the United States through live ruminants and ruminant products and
byproducts. The Agency set conditions for the importation of certain
live ruminants and ruminant products and byproducts from such regions,
and named Canada as a BSE minimal-risk region.

APHIS proposes to remove certain restrictions on the importation of
certain bovine commodities from BSE minimal-risk regions. The Agency has
determined that the restrictions are unnecessary for maintaining a
minimal risk of introduction of BSE into the United States from such
regions.

[Objectives and Legal Basis]{.underline}

We are proposing to allow the following commodities to be imported from
Canada under specified conditions (in addition to commodities currently
allowed to be imported from BSE minimal-risk regions):

• Live bovines that were born on or after March 1, 1999;

• Bovine small intestines, minus the distal ileum;

• Bovine casings; and

• Bovine blood and blood products.

The legal basis for the rule can be found at 7 U.S.C. 450, 1622,
7701-7772, 8301-8317; 21 U.S.C. 136 and 136a; 31 U.S.C. 9701; 42 U.S.C.
4331 and 4332; and 7 CFR 2.22, 2.80, 371.4.

[Small Entities that May Be Affected]{.underline}

We have described in this preliminary regulatory impact analysis
expected effects of the proposed rule for certain bovine commodities.
Categories of commodities included in the analysis are feeder cattle,
fed cattle, cull cattle/processing beef, fed beef, breeding cattle,
vealers and slaughter calves, bison, bovine casings and small intestine
products, and bovine blood and blood products. Small entities comprise
the majority of the establishments engaged in the production,
processing, or sale of these commodities, as shown in Table 25. These
small entities number in the hundreds of thousands, with beef and dairy
producers comprising the largest share.

Impacts of the proposed rule for small entities---even entities within
the same industry---may be both positive and negative, because of the
various commodities that may be affected. Overall, both consumers and
producers area expected to benefit from the proposed rule (Table 11). We
summarize here some of the principal expected impacts for the affected
industries. We welcome information that the public may provide that
would allow us to better understand possible effects and their
magnitudes. Prices in the following discussion are in 2006 dollars and
beef prices are expressed in hundredweight (cwt) carcass weight
equivalent, unless indicated otherwise.

*Beef and dairy producers.* Cow-calf beef and dairy producers may be
affected by resumption of breeding cattle imports from Canada under the
proposed rule. As shown in Table 25, the small-entity definition for
beef cattle and dairy producers is annual receipts of not more than
\$750,000. According to the 2002 Census of Agriculture, annual receipts
for beef cattle producers averaged about \$29,200 for those operations
with reported sales, well below the small-entity threshold.[^56] In the
same year, annual receipts for dairy farmers averaged about \$31,000
from the sale of cattle and calves and about \$265,700 from the sale of
milk and other dairy products.[^57] Average receipts for dairy
operations, while much larger than those for cow-calf beef producers,
were still well below the small-entity threshold of \$750,000 per year.

  ----------------------- -------------------------- ------------------------------ ------------------------ ------------------------
  Table 28. Small entity                                                                                     
  representation in                                                                                          
  industries that may be                                                                                     
  affected by the                                                                                            
  proposed rule                                                                                              

  Industry [(NAICS        Small-entity               Total Number of                Number of Small          Percentage of
  code)]{.underline}^1^   [Definition]{.underline}   [Establishments]{.underline}   [Entities]{.underline}   Establishments that are
                                                                                                             Small
                                                                                                             [Entities]{.underline}

  Beef Cattle Ranching    ≤ \$750,000 annual         657,015                        \> 655,757               \> 99.8%
  and Farming (112111)    receipts                                                                           

  Dairy Cattle and Milk   ≤ \$750,000 annual         75,645                         \>72,743                 \>96.2%
  Production (112120)     receipts                                                                           

  All Other Animal        ≤ \$750,000 annual         1,734 ^2^                      Unknown                  Unknown
  Production (112990)     receipts                                                                           

  Cattle Feedlots         ≤ \$2,000,000 annual       88,199                         Unknown                  Unknown
  (112112)                receipts                                                                           

  Animal (except Poultry) ≤ 500 employees            1,728                          1,689                    97.7%
  Slaughtering (311611)                                                                                      

  Meat Processed from     ≤ 500 employees            1,142                          1,073                    94.0%
  Carcasses (311612)                                                                                         

  Meat and Meat Product   ≤ 100 employees            3,004                          \>2,425                  \>80.7%
  Merchant Wholesalers                                                                                       
  (424470)                                                                                                   

  Supermarkets and Other  ≤ \$25,000,000 annual      62,934                         \>38,943                 \>61.9%
  Grocery (except         receipts                                                                           
  Convenience) Stores                                                                                        
  (445110)                                                                                                   

  Meat Markets (445210)   ≤ \$6,500,000 annual       6,467                          \>5,861                  \>90.6%
                          receipts                                                                           

  In-Vitro Diagnostic     ≤ 500 employees            175                            145                      82.9%
  Substance Manufacturing                                                                                    
  (325413)                                                                                                   

  Biological Product      ≤ 500 employees            242                            215                      88.8%
  (except Diagnostic)                                                                                        
  Manufacturing (325414)                                                                                     
  ----------------------- -------------------------- ------------------------------ ------------------------ ------------------------

Sources: U.S. Small Business Administration, Office of Advocacy, based
on data provided by the U.S. Census Bureau, Statistics of U.S.
Businesses; USDA NASS, 2002 Census of Agriculture, Volume 1, Chapter 1,
Tables 16, 17, and 32; USDA NASS "Cattle on Feed," February 24, 2006.

^1^ North American Industry Classification System.
<http://www.sba.gov/size/sizetable2002.html>

^2^ Bison producers with reported sales in 2002.

Notes to Table 28: For Beef Cattle Ranching and Farming, Dairy Cattle
and Milk Production, and Bison Production, number of establishments and
number of small entities only include those establishments that reported
sales in 2002. Numbers of establishments and small entities for dairy
producers are based on dairy product sales. We are unable to approximate
the number of small-entity bison producers. The average number of bison
sold in 2002 by establishments with reported sales was about 33 head.
Clearly, most bison production is by small entities. For Cattle
Feedlots, data are unavailable on the number of establishments with
annual receipts of not more than \$2 million. Over 97 percent of
feedlots (86,000 of 88,199) had capacities of fewer than 1,000 head in
2005, and the majority of these are likely to be small entities. For
Meat and Meat Product Merchant Wholesalers, data are unavailable on the
number of establishments with 100 or fewer employees; of the industry's
3,004 establishments, 2,425 had 20 or fewer employees. For Supermarkets
and Other Grocery Stores, data are unavailable on the number of
establishments with annual receipts of not more than \$25 million; 61.9
percent of establishments had annual receipts of less than \$10 million.
For Meat Markets, data are not available on the number of establishments
with annual receipts of not more than \$6.5 million; 90.6 percent of
establishments had annual receipts of less than \$5 million.

As described in section 4, reestablished breeding cattle imports from
Canada under the proposed rule are expected to be very small in
comparison to the number of replacement breeding heifers supplied on
average by U.S. producers (one-half of one percent). Breeding cattle
imported from Canada would augment the U.S. breeding herd only slightly,
providing buyers with an additional source of breeding stock while
having a very minor effect on prices.

Beef cattle and dairy producers may be affected by the proposed rule in
other ways. We project fewer feeder cattle imported from Canada with the
rule than without the rule, implying less competition for those
producers that sell cattle for feeding. The rule would also permit
cattle to be imported from Canada as stockers for backgrounding on
pasture. The resumption of stocker imports would benefit buyers of these
younger, lighter animals, and result in additional competition for U.S.
sellers of such cattle.

Our analysis indicates that over the period of analysis, 2007-2011, the
annual increase in the price of cattle purchased by feedlots would
average \$3.88 per head, or about 0.6 percent (Appendix Table 6). To
place this average percentage price increase in perspective, we consider
the effect it would have on gross earnings of small-entity beef cow
herds. Based on data from the 2002 Census of Agriculture, the average
value of cattle and calves sold by small-entity beef cow operations was
about \$26,600.[^58] A price increase of 0.6 percent would correspond to
an increase in annual revenue of about \$160, assuming the number of
cattle marketed remained unaffected by the change in price.[^59]

For dairy enterprises that sell cattle for feeding, the rule will have
an even smaller effect because most revenue (over 86 percent in 2002) is
earned from the sale of milk and other dairy products.[^60] The average
per animal value of cattle and calves sold by small-entity diary cow
operations in 2002 was about \$453. A price increase of 0.6 percent
would mean an increase in annual revenue for the average small-entity
dairy operation of about \$133, assuming no change in the number of
cattle sold.[^61] This gain would be less than 0.1 percent increase in
average revenue.[^62]

These examples abstract from the wide range in size of small-entity beef
and dairy cattle herds, but do illustrate the small effect the rule is
expected to have, on average, with respect to the feeder cattle market.
Just as the price increase would result in a small welfare gain for
producers selling feeder cattle, it also would represent a small welfare
loss for small-entity feedlot operators buying feeder cattle.

Small-entity beef cattle and dairy producers would also be affected by
imports of Canadian cull cattle: cows, bulls, and stags for slaughter at
30 months of age and older. Yearly imports of Canadian cull cattle,
2007-2011, are projected to average 545,000 cows and 66,000 bulls and
stags (Appendix Table 3). These import quantities would equal about 10
percent and 12 percent, respectively, of average annual baseline cow and
bull/stag slaughter in the United States projected for the same period
(Appendix Table 2). All things equal, the increased supply of slaughter
cattle would lead to a decline in their price, and consequent welfare
losses for producers marketing cull cattle (and welfare gains for
slaughtering establishments afforded the additional supply). Cull cattle
sales are generally a less critical source of income for beef cattle and
dairy producers than are sales of steers, heifers, and dairy products.

Effects of the proposed rule on imports of Canadian vealers and
slaughter calves are not expected to measurably impact the welfare of
producers that sell them. Over the 5-year period of analysis, an average
of 11,800 fewer Canadian vealers and slaughter calves are projected to
be imported annually under the proposed rule, a number equivalent to
less than 1 percent of historical U.S. vealer and calf slaughter (see
section 4).

*Bison producers.* We do not have information on the number of bison
enterprises that are small entities. We believe that the composition of
the bison industry is very much like that of the beef cattle industry,
with the overwhelming majority of operations small entities. The 2002
Census of Agriculture reported a total of 4,132 bison producers in the
United States, owning 231,950 head of bison. The Census also reported
that 1,734 producers (42 percent) sold 57,210 head of bison (25 percent
of inventory) that year.

Projected imports total 4,000 head in 2007, 3,150 head in 2008, and
2,500 head each year thereafter. Each year, 250 head of breeding bison
are projected to be imported. The remainder would be mainly bison for
immediate slaughter (2,500 head in 2007, 2,400 head in 2008, and 2,000
head in each of the following years), with a lesser number of feeders
(1,250 head in 2007, 500 head in 2008, and 250 head in each year
thereafter).

The 2,500 bison projected to be imported for immediate slaughter in 2007
would represent about 7 percent of the U.S. bison slaughter total in
2005. We assume most if not all of these slaughter bison (as well as the
1,250 head projected to be imported in 2007 for feeding) would be
slaughtered at less than 30 months of age, that is, they would be of the
same age as Canadian bison that are currently allowed to be imported.
Thus, the only change in bison imports in 2007 and subsequent years
under the proposed rule would be annual imports of 250 head of breeding
bison. As described in section 4, the imported Canadian breeding bison
would annually represent only about two-tenths of one percent of the
U.S. breeding bison, assuming the composition of the national bison herd
is similar to that of the national cattle herd.

Data on bison prices from the fall 2004 and spring 2005 show that
2-year-old breeding bulls were selling for about \$2,000 each at
auction, and prices for 2-year-old bred heifers averaged about \$1,000
per animal.[^63] Assuming Canadian breeding bison imports to be about 70
percent female and 30 percent male, the total value of annual imports
would be about \$325,000, based on the prices for the 2-year-olds.[^64]

The bison industry is currently strengthening, and the imported Canadian
breeding bison would help meet rising demand for breeding stock.
However, they would constitute a very small addition to the U.S.
breeding herd.

*Feedlot establishments.* We do not know the number of feedlots with
annual receipts of not more than \$2 million, the small-entity
criterion. In 2005, over 97 percent of feedlots had capacities of fewer
than 1,000 animals. Given an average projected price for fed cattle
during the period of analysis of about \$908 per head in 2006 dollars
(Table 3), the average feedlot would need to feed and sell fewer than
2,200 head per year in order to qualify as a small entity. Assuming 2.5
inventory turns per year, only feedlots with capacities of at least 880
animals would be able to feed and sell 2,200 or more cattle per year.
Reasonably, the majority of feedlots are most likely small
establishments with inventory capacities of fewer than 880 animals.

Cattle imports from Canada under the proposed rule may have opposing
effects for feedlot facilities. We project both fewer feeder cattle
imports and fewer fed cattle imports with the rule than without the
rule. All things equal, fewer feeder cattle would mean a smaller supply
and higher purchase prices for feedlot operators; fewer fed cattle would
mean a smaller supply and higher selling prices for these same
operators.

The annual increase in feeder cattle prices, 2007-2011, would average
\$3.88 per head, or about 0.6 percent (Appendix Table 6). For this same
period, the annual increase in fed cattle prices would average \$1.36
per head, or less than 0.2 percent (Appendix Table 7). Thus, the
proposed rule may result in a small net welfare loss for the average
small-entity feedlot operator.[^65]

The effect on the average annual revenue of a small feedlot would also
be minor. Based on sales of 2,000 head over a one-year period (a
throughput quantity at the high end for small-entity feedlots), the cost
of feeder cattle purchased would increase by \$7,760, and the gross
return on fed cattle sold would increase by \$2,720, for a net loss of
\$5,040.[^66] This loss would be less than 0.3 percent of annual
revenue.[^67]

*Slaughtering establishments.* Livestock slaughter is a highly
concentrated industry with a large percentage of the slaughter performed
by a small percentage of establishments. In 2004, less than 7 percent of
cattle slaughtering plants conducted nearly 90 percent of commercial
slaughter.[^68] As indicated in Table 28, most slaughtering
establishments are small entities. The increase in fed cattle prices
just cited, expected to average \$1.36 per head over the five years,
would affect the welfare of slaughtering establishments very marginally.
However, those establishments that specialize in the slaughter of older
cattle would be affected by the resumption of cull cattle imports from
Canada. As noted in the discussion of expected effects for beef cattle
and dairy producers, imports of Canadian cull cattle averaged over the
five years, 2007-2011, are projected to equal about 10 percent and 12
percent, respectively, of average annual baseline cow and bull/stag
slaughter in the United States for the same period. The additional
supply of cull cattle is expected to benefit slaughtering establishments
that primarily slaughter cull cattle and that, prior to May 2003, may
have relied on imports from Canada for at least a part of their supply.
Resumption of cull cattle imports would help address capacity
underutilization that these establishments may have experienced because
of import restrictions. We welcome information that the slaughter
industry and public may provide that would help us to document the
extent to which plants are underutilized and would benefit from the
proposed rule.

Slaughtering establishments are expected to be negligibly affected by
changes in imports of Canadian vealers and slaughter calves due to the
proposed rule. As noted above, over the period of analysis an average of
11,800 fewer Canadian vealers and slaughter calves are projected to be
imported annually under the proposed rule, a number equivalent to less
than one percent of normal U.S. vealer and calf slaughter.

*Meat packing and processing establishments.* Most meat packing and
processing establishments are small. Like livestock slaughter, the meat
packing and processing industry is concentrated, with one-third of
establishments engaged in boxed fed beef production in 2004 accounting
for over 80 percent of total production.[^69] The analysis indicates
that increases in the price of fed beef due to declines in fed beef
imports from Canada would be only \$0.36 per cwt in 2007 and \$0.15 per
cwt in 2008 (Appendix Table 8). In the last three years of the analysis,
the supply of fed beef from Canada is expected to be unaffected by the
proposed rule. Based on projected fed beef prices (\$142 per cwt in 2007
and \$135 per cwt in 2008), the price increases would signify a gain for
the average establishment of less than 0.2 percent of average revenue
for 2007 and 2008 from the sale of fed beef, assuming no change in the
quantity sold. Projected annual decreases in fed cattle imports from
Canada would also result in very small price increases (averaging less
than \$1.40 per head over the 5-year period) that may impact the prices
of carcasses purchased by packing and processing establishments.

Effects of the proposed rule for packers and processors that utilize
processing beef would be larger, due to the resumption of cull cattle
imports from Canada. Annual prices of processing beef are expected to
fall by an average of \$4 per cwt over the period of analysis. The price
declines would benefit establishments that use processing beef to
produce ground beef for the wholesale market. Conversely, establishments
that sell processing beef would be negatively affected by the expected
price declines.

Included within NAICS code 311612 are establishments that make sausage
and similarly encased products. These businesses may be affected by the
proposed rule's effects with respect to bovine casings. We have been
unable to obtain information on the production, consumption, and trade
in bovine casings by the United States. We also do not know the extent
to which the rule would change the domestic supply of bovine casings,
although we anticipate an increased availability due to the rule's
expected effects on slaughter numbers and imports of bovine casings and
bovine small intestines from Canada.

FSIS has amended its rules that prohibit the use of specified risk
materials for human food to permit beef small intestine, excluding the
distal ileum, to be used for human food. [^70] In that amended interim
rule, it is stated that approximately 47 federally-inspected, primarily
large establishments would be affected. FSIS was unable to determine how
many of these establishments are small. The Agency invites public
comment that would allow us to evaluate impacts for small-entity meat
packing and processing establishments generally, and processors and
users of bovine casings in particular.

*Meat importers, exporters, and wholesalers.* Most importers, exporters
and wholesalers of beef are small entities. Effects of the proposed rule
for these businesses would depend on the foreign and domestic markets in
which they trade. Importers of processing beef from other countries
could be faced with reduced sales because of partial displacement by
imports from Canada. Processing beef prices may decline by less than 5
percent per year, on average, over the 5-year period (Appendix Table 5).
The price declines would result in welfare losses for sellers of
processing beef at the wholesale level (Table 7).

As has been described, we expect only very small changes in the domestic
supply of fed beef as a result of the proposed rule. U.S. beef exporters
should be little affected and U.S. access to foreign beef markets is not
expected to be adversely impacted by the rule.

*Grocery stores and meat markets.* Most retail food establishments are
small entities. As buyers at the wholesale level, retailers that market
beef would benefit from the expected decline in the price of processing
beef (which is mixed with fed beef trimmings to produce ground beef).
Effects of the expected price decline on retail stores' revenues would
vary, depending upon the relative importance of ground beef sales as a
source of store receipts. The proposed rule's effect on the price of fed
beef is expected to be negligible.

*Manufacturers of substances that use bovine blood and blood products.*
The majority of businesses that use bovine blood and blood products in
their manufacturing processes are small entities. The primary
commodities affected would be products intended for medical and
scientific use in vaccines and drugs, of which fetal bovine serum (FBS)
is the most important. FBS is used in tissue culture media and to
produce pharmaceuticals and biologics. Under the proposed rule,
commercial imports of FBS of Canadian origin would be allowed to resume.

There is a large and growing demand for FBS. Annual production of FBS in
the United States and Canada combined is about 300,000 liters, while
consumption for the two countries is approximated at 425,000 liters. The
proposed rule may affect the U.S. supply of FBS in two ways: by allowing
its direct importation from Canada, and by reducing restrictions on
bovine imports from Canada and thereby changing the U.S. supply of
pregnant cows presented for slaughter.

As described in section 4, we approximate that the proposed rule may
result in as much as 24,000 liters of Canadian-origin FBS becoming
available for commercial import by the United States. Had this amount
entered the United States in 2005, it would have represented about 13
percent of U.S. imports. Additional U.S. cow slaughter projected under
the proposed rule may result in an increase in annual domestic
production of FBS of between 23,000 and 32,000 liters. These additional
supplies would benefit small-entity establishments that use fetal bovine
serum in their manufacturing processes.

[Reporting, Recordkeeping and Other Compliance Requirements]{.underline}

Currently, bovines imported from Canada are restricted to animals that
are slaughtered at less than 30 months of age. Bovines not imported for
immediate slaughter must be moved from the port of entry to a feedlot in
a sealed means of conveyance and from the feedlot to a recognized
slaughtering establishment again in a sealed means of conveyance. The
animals may not be moved to more than one feedlot. Under the proposed
rule, these movement restrictions would no longer be imposed. Canadian
bovines imported other than for immediate slaughter could be moved any
number of times to any destinations in unsealed means of
conveyance.[^71]

Under the proposed rule, feeder bovines imported from BSE minimal-risk
regions would not need to be accompanied by APHIS Form VS 17-130, which
currently is used to identify the feedlot of destination. (The
individual responsible for the movement of an imported animal and the
individual identification of the animal would still be required
information on the accompanying health certificate.) Also under the
proposed rule, bovines of Canadian origin moved from a U.S. feedlot to a
slaughtering establishment would not need to be accompanied by APHIS
Form VS 1-27.

Removal of these movement and paperwork requirements would benefit
buyers and sellers of Canadian-origin bovines. Many of the beneficiaries
are likely to be small entities, given their predominance among cattle
and dairy operations and feedlot establishments. Affected businesses
would be able to take advantage of a broader range of transactional
opportunities than under current regulations. For example, the sale of a
young steer first for backgrounding, then for confined feeding at one or
more facilities, and finally for slaughter may enable the original and
subsequent owners of the animal to better maximize returns compared to
current marketing possibilities. While we are not able to quantify
impacts of removing current movement restrictions on Canadian cattle
imports, we expect their removal would benefit the cattle industry
across-the-board.

[Duplicating, Overlapping, or Conflicting Federal Rules]{.underline}

APHIS has not identified any duplication, overlap, or conflict of the
proposed rule with other Federal rules.

[Alternatives that would accomplish the Stated Objectives and Minimize
Any Significant Economic Impact on Small Entities]{.underline}

The Agency has found no significant alternatives to the proposed rule
that would continue to protect against the introduction and
dissemination of BSE into the United States while removing unnecessary
prohibitions on the importation of certain commodities from Canada.
Without the proposed rule, restrictions on U.S. importation of certain
Canadian bovine commodities that are without scientific merit would
continue. With the proposed rule, importation of these Canadian
commodities would be allowed to resume under certain conditions and the
risk of introduction of BSE into the United States would remain minimal.

+-----+---------------------------+------+------+------+------+------+
| Ap  |                           |      |      |      |      |      |
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| and |                           |      |      |      |      |      |
| pri |                           |      |      |      |      |      |
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| in  |                           |      |      |      |      |      |
| 2   |                           |      |      |      |      |      |
| 006 |                           |      |      |      |      |      |
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| d   |                           |      |      |      |      |      |
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| der |                           |      |      |      |      |      |
| c   |                           |      |      |      |      |      |
| att |                           |      |      |      |      |      |
| le, |                           |      |      |      |      |      |
| fed |                           |      |      |      |      |      |
| c   |                           |      |      |      |      |      |
| att |                           |      |      |      |      |      |
| le, |                           |      |      |      |      |      |
| p   |                           |      |      |      |      |      |
| roc |                           |      |      |      |      |      |
| ess |                           |      |      |      |      |      |
| ing |                           |      |      |      |      |      |
| be  |                           |      |      |      |      |      |
| ef, |                           |      |      |      |      |      |
| and |                           |      |      |      |      |      |
| fed |                           |      |      |      |      |      |
| be  |                           |      |      |      |      |      |
| ef, |                           |      |      |      |      |      |
| 200 |                           |      |      |      |      |      |
| 7-2 |                           |      |      |      |      |      |
| 011 |                           |      |      |      |      |      |
+-----+---------------------------+------+------+------+------+------+
|     |                           |      |      |      |      |      |
+-----+---------------------------+------+------+------+------+------+
|     |                           | [2   | [2   | [2   | [2   | [2   |
|     |                           | 007] | 008] | 009] | 010] | 011] |
|     |                           | {.un | {.un | {.un | {.un | {.un |
|     |                           | derl | derl | derl | derl | derl |
|     |                           | ine} | ine} | ine} | ine} | ine} |
+-----+---------------------------+------+------+------+------+------+
| N   |                           |      |      |      |      |      |
| omi |                           |      |      |      |      |      |
| nal |                           |      |      |      |      |      |
| pri |                           |      |      |      |      |      |
| ces |                           |      |      |      |      |      |
+-----+---------------------------+------+------+------+------+------+
|     | Feeder cattle (\$ per     | 751  | 721  | 700  | 711  | 718  |
|     | head)                     |      |      |      |      |      |
+-----+---------------------------+------+------+------+------+------+
|     | Fed cattle (\$ per head)  | 968  | 955  | 966  | 988  | 1    |
|     |                           |      |      |      |      | ,004 |
+-----+---------------------------+------+------+------+------+------+
|     | Processing beef (\$ per   | 101  | 99   | 98   | 101  | 103  |
|     | cwt)                      |      |      |      |      |      |
+-----+---------------------------+------+------+------+------+------+
|     | Fed beef (\$ per cwt)     | 145  | 142  | 141  | 146  | 149  |
+-----+---------------------------+------+------+------+------+------+
| 2   |                           |      |      |      |      |      |
| 006 |                           |      |      |      |      |      |
| pri |                           |      |      |      |      |      |
| ces |                           |      |      |      |      |      |
+-----+---------------------------+------+------+------+------+------+
|     | Feeder cattle (\$ per     | 733  | 687  | 652  | 646  | 634  |
|     | head)                     |      |      |      |      |      |
+-----+---------------------------+------+------+------+------+------+
|     | Fed cattle (\$ per head)  | 945  | 910  | 899  | 898  | 887  |
+-----+---------------------------+------+------+------+------+------+
|     | Processing beef (\$ per   | 99   | 94   | 91   | 92   | 91   |
|     | cwt)                      |      |      |      |      |      |
+-----+---------------------------+------+------+------+------+------+
|     | Fed beef (\$ per cwt)     | 142  | 135  | 131  | 133  | 132  |
+-----+---------------------------+------+------+------+------+------+
| 2   |                           |      |      |      |      |      |
| 001 |                           |      |      |      |      |      |
| pri |                           |      |      |      |      |      |
| ces |                           |      |      |      |      |      |
+-----+---------------------------+------+------+------+------+------+
|     | Feeder cattle (\$ per     | 643  | 600  | 567  | 560  | 548  |
|     | head)                     |      |      |      |      |      |
+-----+---------------------------+------+------+------+------+------+
|     | Fed cattle (\$ per head)  | 828  | 795  | 783  | 779  | 766  |
+-----+---------------------------+------+------+------+------+------+
|     | Processing beef (\$ per   | 86   | 82   | 79   | 80   | 79   |
|     | cwt)                      |      |      |      |      |      |
+-----+---------------------------+------+------+------+------+------+
|     | Fed beef (\$ per cwt)     | 124  | 118  | 114  | 115  | 114  |
+-----+---------------------------+------+------+------+------+------+
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| and |                           |      |      |      |      |      |
| Tr  |                           |      |      |      |      |      |
| ade |                           |      |      |      |      |      |
| Eco |                           |      |      |      |      |      |
| nom |                           |      |      |      |      |      |
| ics |                           |      |      |      |      |      |
| Div |                           |      |      |      |      |      |
| isi |                           |      |      |      |      |      |
| on, |                           |      |      |      |      |      |
| Ani |                           |      |      |      |      |      |
| mal |                           |      |      |      |      |      |
| Pro |                           |      |      |      |      |      |
| duc |                           |      |      |      |      |      |
| ts, |                           |      |      |      |      |      |
| G   |                           |      |      |      |      |      |
| rai |                           |      |      |      |      |      |
| ns, |                           |      |      |      |      |      |
| and |                           |      |      |      |      |      |
| Oil |                           |      |      |      |      |      |
| Se  |                           |      |      |      |      |      |
| eds |                           |      |      |      |      |      |
| B   |                           |      |      |      |      |      |
| ran |                           |      |      |      |      |      |
| ch, |                           |      |      |      |      |      |
| ba  |                           |      |      |      |      |      |
| sed |                           |      |      |      |      |      |
| on  |                           |      |      |      |      |      |
| ERS |                           |      |      |      |      |      |
| L   |                           |      |      |      |      |      |
| ive |                           |      |      |      |      |      |
| sto |                           |      |      |      |      |      |
| ck, |                           |      |      |      |      |      |
| Dai |                           |      |      |      |      |      |
| ry, |                           |      |      |      |      |      |
| and |                           |      |      |      |      |      |
| P   |                           |      |      |      |      |      |
| oul |                           |      |      |      |      |      |
| try |                           |      |      |      |      |      |
| Ou  |                           |      |      |      |      |      |
| tlo |                           |      |      |      |      |      |
| ok/ |                           |      |      |      |      |      |
| Agr |                           |      |      |      |      |      |
| icu |                           |      |      |      |      |      |
| ltu |                           |      |      |      |      |      |
| ral |                           |      |      |      |      |      |
| Mar |                           |      |      |      |      |      |
| ket |                           |      |      |      |      |      |
| ing |                           |      |      |      |      |      |
| S   |                           |      |      |      |      |      |
| erv |                           |      |      |      |      |      |
| ice |                           |      |      |      |      |      |
| da  |                           |      |      |      |      |      |
| ta. |                           |      |      |      |      |      |
| CPI |                           |      |      |      |      |      |
| ra  |                           |      |      |      |      |      |
| tes |                           |      |      |      |      |      |
| ta  |                           |      |      |      |      |      |
| ken |                           |      |      |      |      |      |
| f   |                           |      |      |      |      |      |
| rom |                           |      |      |      |      |      |
| <   |                           |      |      |      |      |      |
| htt |                           |      |      |      |      |      |
| p:/ |                           |      |      |      |      |      |
| /ww |                           |      |      |      |      |      |
| w.e |                           |      |      |      |      |      |
| rs. |                           |      |      |      |      |      |
| usd |                           |      |      |      |      |      |
| a.g |                           |      |      |      |      |      |
| ov/ |                           |      |      |      |      |      |
| dat |                           |      |      |      |      |      |
| a/m |                           |      |      |      |      |      |
| acr |                           |      |      |      |      |      |
| oec |                           |      |      |      |      |      |
| ono |                           |      |      |      |      |      |
| mic |                           |      |      |      |      |      |
| s/> |                           |      |      |      |      |      |
|     |                           |      |      |      |      |      |
| No  |                           |      |      |      |      |      |
| te: |                           |      |      |      |      |      |
| N   |                           |      |      |      |      |      |
| omi |                           |      |      |      |      |      |
| nal |                           |      |      |      |      |      |
| pri |                           |      |      |      |      |      |
| ces |                           |      |      |      |      |      |
| are |                           |      |      |      |      |      |
| de  |                           |      |      |      |      |      |
| fla |                           |      |      |      |      |      |
| ted |                           |      |      |      |      |      |
| to  |                           |      |      |      |      |      |
| 2   |                           |      |      |      |      |      |
| 006 |                           |      |      |      |      |      |
| and |                           |      |      |      |      |      |
| 2   |                           |      |      |      |      |      |
| 001 |                           |      |      |      |      |      |
| pri |                           |      |      |      |      |      |
| ces |                           |      |      |      |      |      |
| us  |                           |      |      |      |      |      |
| ing |                           |      |      |      |      |      |
| ann |                           |      |      |      |      |      |
| ual |                           |      |      |      |      |      |
| Co  |                           |      |      |      |      |      |
| nsu |                           |      |      |      |      |      |
| mer |                           |      |      |      |      |      |
| Pr  |                           |      |      |      |      |      |
| ice |                           |      |      |      |      |      |
| In  |                           |      |      |      |      |      |
| dex |                           |      |      |      |      |      |
| hi  |                           |      |      |      |      |      |
| sto |                           |      |      |      |      |      |
| ric |                           |      |      |      |      |      |
| and |                           |      |      |      |      |      |
| pro |                           |      |      |      |      |      |
| jec |                           |      |      |      |      |      |
| ted |                           |      |      |      |      |      |
| ra  |                           |      |      |      |      |      |
| tes |                           |      |      |      |      |      |
| for |                           |      |      |      |      |      |
| the |                           |      |      |      |      |      |
| ye  |                           |      |      |      |      |      |
| ars |                           |      |      |      |      |      |
| 2   |                           |      |      |      |      |      |
| 002 |                           |      |      |      |      |      |
| -20 |                           |      |      |      |      |      |
| 11, |                           |      |      |      |      |      |
| as  |                           |      |      |      |      |      |
| fo  |                           |      |      |      |      |      |
| llo |                           |      |      |      |      |      |
| ws: |                           |      |      |      |      |      |
| 1.5 |                           |      |      |      |      |      |
| 9%, |                           |      |      |      |      |      |
| 2.3 |                           |      |      |      |      |      |
| 2%, |                           |      |      |      |      |      |
| 2.6 |                           |      |      |      |      |      |
| 1%, |                           |      |      |      |      |      |
| 3.0 |                           |      |      |      |      |      |
| 2%, |                           |      |      |      |      |      |
| 2.5 |                           |      |      |      |      |      |
| 0%, |                           |      |      |      |      |      |
| 2.4 |                           |      |      |      |      |      |
| 0%, |                           |      |      |      |      |      |
| 2.3 |                           |      |      |      |      |      |
| 0%, |                           |      |      |      |      |      |
| 2.2 |                           |      |      |      |      |      |
| 0%, |                           |      |      |      |      |      |
| 2.2 |                           |      |      |      |      |      |
| 4%, |                           |      |      |      |      |      |
| and |                           |      |      |      |      |      |
| 2.5 |                           |      |      |      |      |      |
| 0%. |                           |      |      |      |      |      |
| B   |                           |      |      |      |      |      |
| eef |                           |      |      |      |      |      |
| pri |                           |      |      |      |      |      |
| ces |                           |      |      |      |      |      |
| are |                           |      |      |      |      |      |
| per |                           |      |      |      |      |      |
| cwt |                           |      |      |      |      |      |
| (hu |                           |      |      |      |      |      |
| ndr |                           |      |      |      |      |      |
| edw |                           |      |      |      |      |      |
| eig |                           |      |      |      |      |      |
| ht, |                           |      |      |      |      |      |
| or  |                           |      |      |      |      |      |
| 100 |                           |      |      |      |      |      |
| p   |                           |      |      |      |      |      |
| oun |                           |      |      |      |      |      |
| ds) |                           |      |      |      |      |      |
| c   |                           |      |      |      |      |      |
| arc |                           |      |      |      |      |      |
| ass |                           |      |      |      |      |      |
| wei |                           |      |      |      |      |      |
| ght |                           |      |      |      |      |      |
| eq  |                           |      |      |      |      |      |
| uiv |                           |      |      |      |      |      |
| ale |                           |      |      |      |      |      |
| nt. |                           |      |      |      |      |      |
+-----+---------------------------+------+------+------+------+------+

+----------------------------+-------+-------+-------+-------+-------+
| Appendix Table 2. Beef     |       |       |       |       |       |
| cow, dairy cow, and bull   |       |       |       |       |       |
| and stag slaughter         |       |       |       |       |       |
| quantities and carcass     |       |       |       |       |       |
| weights per animal used to |       |       |       |       |       |
| project U.S. processing    |       |       |       |       |       |
| beef production, 2007-2011 |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+
|                            |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+
|                            | [20   | [20   | [20   | [20   | [20   |
|                            | 07]{. | 08]{. | 09]{. | 10]{. | 11]{. |
|                            | under | under | under | under | under |
|                            | line} | line} | line} | line} | line} |
+----------------------------+-------+-------+-------+-------+-------+
|                            |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+
| Beef cow slaughter (1,000  | 2,377 | 2,660 | 2,957 | 3,205 | 3,236 |
| head)                      |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+
| Dairy cow slaughter (1,000 | 2,561 | 2,553 | 2,539 | 2,523 | 2,508 |
| head)                      |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+
| Beef and dairy cow         | 4,938 | 5,213 | 5,496 | 5,728 | 5,744 |
| slaughter                  |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+
| Carcass weight per cow     | 576   | 579   | 583   | 586   | 590   |
| (pounds)                   |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+
| Sub-total, U.S. production | 2,84  | 3,01  | 3,20  | 3,35  | 3,38  |
| from cow                   | 4,288 | 8,327 | 4,168 | 6,608 | 8,960 |
|                            |       |       |       |       |       |
| slaughter (1,000 pounds    |       |       |       |       |       |
| carcass                    |       |       |       |       |       |
|                            |       |       |       |       |       |
| weight equivalent)         |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+
| Bull and stag slaughter    | 529   | 550   | 583   | 599   | 610   |
| (1,000 head)               |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+
| Carcass weight per bull or | 888   | 893   | 899   | 904   | 909   |
| stag (pounds)              |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+
| Sub-total, U.S. production | 46    | 49    | 52    | 54    | 55    |
| from bull                  | 9,752 | 1,150 | 4,117 | 1,496 | 4,490 |
|                            |       |       |       |       |       |
| and stag slaughter (1,000  |       |       |       |       |       |
| pounds                     |       |       |       |       |       |
|                            |       |       |       |       |       |
| carcass weight equivalent) |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+
| Total U.S. processing beef | 3,31  | 3,50  | 3,72  | 3,89  | 3,94  |
| production (1,000 pounds   | 4,040 | 9,477 | 8,285 | 8,104 | 3,450 |
| carcass weight equivalent) |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+
| Source: Expert opinion,    |       |       |       |       |       |
| USDA Economic Research     |       |       |       |       |       |
| Service, Market and Trade  |       |       |       |       |       |
| Economics Division, Animal |       |       |       |       |       |
| Products, Grains, and Oil  |       |       |       |       |       |
| Seeds Branch. Based on     |       |       |       |       |       |
| "USDA Agricultural         |       |       |       |       |       |
| Baseline Projections to    |       |       |       |       |       |
| 2015," United States       |       |       |       |       |       |
| Department of Agriculture, |       |       |       |       |       |
| Interagency Agricultural   |       |       |       |       |       |
| Projections Committee,     |       |       |       |       |       |
| Baseline Report            |       |       |       |       |       |
| OCE-2006-1, February 2006. |       |       |       |       |       |
| <http://www.usda.gov/oce/  |       |       |       |       |       |
| commodity/ag_baseline.htm> |       |       |       |       |       |
+----------------------------+-------+-------+-------+-------+-------+

<table>
<colgroup>
<col style="width: 3%" />
<col style="width: 2%" />
<col style="width: 25%" />
<col style="width: 3%" />
<col style="width: 3%" />
<col style="width: 11%" />
<col style="width: 0%" />
<col style="width: 12%" />
<col style="width: 0%" />
<col style="width: 12%" />
<col style="width: 12%" />
<col style="width: 12%" />
</colgroup>
<tbody>
<tr class="odd">
<td colspan="12">Appendix Table 3. Bovine imports from Canada projected
with and without the proposed rule, 2007-2011, in thousand head</td>
</tr>
<tr class="even">
<td colspan="5"></td>
<td colspan="2"><u>2007</u></td>
<td><u>2008</u></td>
<td colspan="2"><u>2009</u></td>
<td><u>2010</u></td>
<td><u>2011</u></td>
</tr>
<tr class="odd">
<td colspan="12"><u>With the Rule</u></td>
</tr>
<tr class="even">
<td></td>
<td colspan="11">Breeding Cattle</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="3">Dairy Cows and Heifers</td>
<td colspan="2">50</td>
<td>46</td>
<td colspan="2">44</td>
<td>47</td>
<td>47</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="3">Beef Cows and Heifers</td>
<td colspan="2">5</td>
<td>5</td>
<td colspan="2">4</td>
<td>5</td>
<td>5</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td>Bulls</td>
<td></td>
<td></td>
<td colspan="2">3</td>
<td>3</td>
<td colspan="2">3</td>
<td>3</td>
<td>3</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td>Subtotal</td>
<td></td>
<td></td>
<td colspan="2">58</td>
<td>53</td>
<td colspan="2">51</td>
<td>54</td>
<td>54</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="11">Slaughter Cattle</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="2">Steers and Heifers</td>
<td></td>
<td colspan="2">728</td>
<td>673</td>
<td colspan="2">644</td>
<td>685</td>
<td>688</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td>Cows</td>
<td></td>
<td></td>
<td colspan="2">670</td>
<td>586</td>
<td colspan="2">481</td>
<td>495</td>
<td>494</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="2">Bulls and Stags</td>
<td></td>
<td colspan="2">81</td>
<td>71</td>
<td colspan="2">59</td>
<td>59</td>
<td>60</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="3">Vealers and Light Calves</td>
<td colspan="2">51</td>
<td>47</td>
<td colspan="2">45</td>
<td>48</td>
<td>49</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td>Subtotal</td>
<td></td>
<td></td>
<td colspan="2">1,530</td>
<td>1,377</td>
<td colspan="2">1,229</td>
<td>1,287</td>
<td>1,291</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="3">Stockers and Feeders</td>
<td></td>
<td colspan="2">189</td>
<td>175</td>
<td colspan="2">167</td>
<td>178</td>
<td>179</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="2">Total Cattle</td>
<td></td>
<td></td>
<td colspan="2">1,777</td>
<td>1,605</td>
<td colspan="2">1,447</td>
<td>1,519</td>
<td>1,524</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="11">Bison</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td>Breeding</td>
<td></td>
<td></td>
<td colspan="2">0.25</td>
<td>0.25</td>
<td colspan="2">0.25</td>
<td>0.25</td>
<td>0.25</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="2">For Slaughter</td>
<td></td>
<td colspan="2">2.50</td>
<td>2.40</td>
<td colspan="2">2.00</td>
<td>2.00</td>
<td>2.00</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="2">For Feeding</td>
<td></td>
<td colspan="2">1.25</td>
<td>0.50</td>
<td colspan="2">0.25</td>
<td>0.25</td>
<td>0.25</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Total Bison</td>
<td></td>
<td></td>
<td colspan="2">4.00</td>
<td>3.15</td>
<td colspan="2">2.50</td>
<td>2.50</td>
<td>2.50</td>
</tr>
<tr class="odd">
<td colspan="12"></td>
</tr>
<tr class="even">
<td colspan="12"><u>Without the Rule</u></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="11">Slaughter Cattle</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="2">Steers and heifers</td>
<td></td>
<td colspan="2">742</td>
<td>731</td>
<td colspan="2">729</td>
<td>755</td>
<td>756</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="3">Vealers and Light Calves</td>
<td colspan="2">55</td>
<td>58</td>
<td colspan="2">61</td>
<td>63</td>
<td>63</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td>Subtotal</td>
<td></td>
<td></td>
<td colspan="2">797</td>
<td>789</td>
<td colspan="2">790</td>
<td>818</td>
<td>819</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Feeders</td>
<td></td>
<td></td>
<td colspan="2">302</td>
<td>371</td>
<td colspan="2">425</td>
<td>440</td>
<td>441</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Total Cattle</td>
<td></td>
<td></td>
<td colspan="2">1,099</td>
<td>1,160</td>
<td colspan="2">1,215</td>
<td>1,258</td>
<td>1,260</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="11">Bison</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="2">For Slaughter</td>
<td></td>
<td colspan="2">2.50</td>
<td>2.40</td>
<td colspan="2">2.00</td>
<td>2.00</td>
<td>2.00</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="2">For Feeding</td>
<td></td>
<td colspan="2">1.25</td>
<td>0.50</td>
<td colspan="2">0.25</td>
<td>0.25</td>
<td>0.25</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Total Bison</td>
<td></td>
<td></td>
<td colspan="2">3.75</td>
<td>2.90</td>
<td colspan="2">2.25</td>
<td>2.25</td>
<td>2.25</td>
</tr>
<tr class="odd">
<td colspan="3">(continued)</td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td colspan="12">Appendix Table 3. continued</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td><u>2007</u></td>
<td colspan="3"><u>2008</u></td>
<td><u>2009</u></td>
<td><u>2010</u></td>
<td><u>2011</u></td>
</tr>
<tr class="even">
<td colspan="12"><u>Change in Imports with the Rule</u></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="11">Breeding Cattle</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="3">Dairy Cows and Heifers</td>
<td colspan="2">50</td>
<td>46</td>
<td colspan="2">44</td>
<td>47</td>
<td>47</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="3">Beef Cows and Heifers</td>
<td colspan="2">5</td>
<td>5</td>
<td colspan="2">4</td>
<td>5</td>
<td>5</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td>Bulls</td>
<td></td>
<td></td>
<td colspan="2">3</td>
<td>3</td>
<td colspan="2">3</td>
<td>3</td>
<td>3</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td>Subtotal</td>
<td></td>
<td></td>
<td colspan="2">58</td>
<td>53</td>
<td colspan="2">51</td>
<td>54</td>
<td>54</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td></td>
<td colspan="11">Slaughter Cattle</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="2">Steers and Heifers</td>
<td></td>
<td colspan="2">-14</td>
<td>-58</td>
<td colspan="2">-85</td>
<td>-70</td>
<td>-68</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td>Cows</td>
<td></td>
<td></td>
<td colspan="2">670</td>
<td>586</td>
<td colspan="2">481</td>
<td>495</td>
<td>494</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="2">Bulls and Stags</td>
<td></td>
<td colspan="2">81</td>
<td>71</td>
<td colspan="2">59</td>
<td>59</td>
<td>60</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="3">Vealers and Light Calves</td>
<td colspan="2">-4</td>
<td>-11</td>
<td colspan="2">-15</td>
<td>-15</td>
<td>-14</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td>Subtotal</td>
<td></td>
<td></td>
<td colspan="2">733</td>
<td>588</td>
<td colspan="2">440</td>
<td>469</td>
<td>472</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="3">Stockers and Feeders</td>
<td></td>
<td colspan="2">-113</td>
<td>-196</td>
<td colspan="2">-258</td>
<td>-262</td>
<td>-262</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="2">Total Cattle</td>
<td></td>
<td></td>
<td colspan="2">678</td>
<td>445</td>
<td colspan="2">233</td>
<td>261</td>
<td>264</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="even">
<td></td>
<td colspan="11">Bison</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td>Breeding</td>
<td></td>
<td></td>
<td colspan="2">0.25</td>
<td>0.25</td>
<td colspan="2">0.25</td>
<td>0.25</td>
<td>0.25</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td colspan="2">For Slaughter</td>
<td></td>
<td colspan="2">0</td>
<td>0</td>
<td colspan="2">0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="odd">
<td></td>
<td></td>
<td colspan="2">For Feeding</td>
<td></td>
<td colspan="2">0</td>
<td>0</td>
<td colspan="2">0</td>
<td>0</td>
<td>0</td>
</tr>
<tr class="even">
<td></td>
<td></td>
<td></td>
<td></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td colspan="2"></td>
<td></td>
<td></td>
</tr>
<tr class="odd">
<td> </td>
<td colspan="4">Total Bison </td>
<td colspan="2">0.25</td>
<td>0.25</td>
<td colspan="2">0.25</td>
<td>0.25</td>
<td>0.25</td>
</tr>
<tr class="even">
<td colspan="12"><p>Source: Expert opinion, USDA Economic Research
Service, Market and Trade Economics Division, Animal Products, Grains,
and Oil Seeds Branch. Based on “USDA Agricultural Baseline Projections
to 2015,” United States Department of Agriculture, Interagency
Agricultural Projections Committee, Baseline Report OCE-2006-1, February
2006. <a
href="http://www.usda.gov/oce/commodity/ag_baseline.htm">http://www.usda.gov/oce/commodity/ag_baseline.htm</a></p>
<p>Note: Categories may not sum due to rounding.</p></td>
</tr>
</tbody>
</table>

+---+------------------+----------+--------+--------+--------+--------+
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+---+------------------+----------+--------+--------+--------+--------+
|   |                  | [2       | [2008] | [2009] | [2010] | [2011] |
|   |                  | 007]{.un | {.unde | {.unde | {.unde | {.unde |
|   |                  | derline} | rline} | rline} | rline} | rline} |
+---+------------------+----------+--------+--------+--------+--------+
| [ |                  |          |        |        |        |        |
| W |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| R |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
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| ] |                  |          |        |        |        |        |
| { |                  |          |        |        |        |        |
| . |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| } |                  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
|   | Processing Beef  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
| F |                  | 0        | 0      | 0      | 0      | 0      |
| r |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| C |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
| F |                  | 3,055    | 3,008  | 2,924  | 2,800  | 2,725  |
| r |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| O |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| C |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
|   | Fed Beef from    | 371      | 390    | 420    | 419    | 419    |
|   | Canada           |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
| [ |                  |          |        |        |        |        |
| W |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
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| u |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| ] |                  |          |        |        |        |        |
| { |                  |          |        |        |        |        |
| . |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| } |                  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
|   | Processing Beef  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
| F |                  | 0        | 0      | 0      | 0      | 0      |
| r |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| C |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
| F |                  | 3,225    | 3,157  | 3,052  | 2,906  | 2,831  |
| r |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| O |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| C |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
|   | Fed Beef from    | 446      | 425    | 420    | 419    | 419    |
|   | Canada           |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
| [ |                  |          |        |        |        |        |
| C |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| g |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| I |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| p |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
| w |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| R |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| ] |                  |          |        |        |        |        |
| { |                  |          |        |        |        |        |
| . |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| } |                  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
|   | Processing Beef  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
| F |                  | 0        | 0      | 0      | 0      | 0      |
| r |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| C |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
| F |                  | -170     | -149   | -128   | -106   | -106   |
| r |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| O |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| C |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
|   | Fed Beef from    | -75      | -35    | 0      | 0      | 0      |
|   | Canada           |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+
| S |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
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| n |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
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| i |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| S |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
| B |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
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| n |                  |          |        |        |        |        |
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| h |                  |          |        |        |        |        |
| . |                  |          |        |        |        |        |
|   |                  |          |        |        |        |        |
| N |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| c |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| p |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| c |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| g |                  |          |        |        |        |        |
| b |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| f |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| p |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
| f |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| c |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
| w |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| h |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| p |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| p |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| w |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| b |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
| p |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| c |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| b |                  |          |        |        |        |        |
| y |                  |          |        |        |        |        |
| p |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| c |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| g |                  |          |        |        |        |        |
| b |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| f |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| v |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| f |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| c |                  |          |        |        |        |        |
| u |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| c |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| l |                  |          |        |        |        |        |
| e |                  |          |        |        |        |        |
| i |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| p |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| t |                  |          |        |        |        |        |
| s |                  |          |        |        |        |        |
| f |                  |          |        |        |        |        |
| r |                  |          |        |        |        |        |
| o |                  |          |        |        |        |        |
| m |                  |          |        |        |        |        |
| C |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| n |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| d |                  |          |        |        |        |        |
| a |                  |          |        |        |        |        |
| . |                  |          |        |        |        |        |
+---+------------------+----------+--------+--------+--------+--------+

  ------------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------- ---------------------
  Appendix Table 5.                                                                                                                                                                                           
  Cull                                                                                                                                                                                                        
  cattle/processing                                                                                                                                                                                           
  beef: welfare and                                                                                                                                                                                           
  price changes with                                                                                                                                                                                          
  the proposed rule,                                                                                                                                                                                          
  assuming projected                                                                                                                                                                                          
  displacement of                                                                                                                                                                                             
  processing beef                                                                                                                                                                                             
  imports from other                                                                                                                                                                                          
  countries by                                                                                                                                                                                                
  imports from                                                                                                                                                                                                
  Canada, 2007-2011                                                                                                                                                                                           

                                                        [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}   5-Year                                       Annual-ized
                                                                                                                                                                 [Total]{.underline}                          [Value]{.underline}

                                                        Thousand Dollars                                                                                                                                      

  Undiscounted                                                                                                                                                                                                
  Welfare Changes                                                                                                                                                                                             

                      2006                                                                                                                                                                                    
                      Dollars                                                                                                                                                                                 

                                          Consumer      348,984              286,091              217,965              249,382              247,643              1,350,064                                    
                                          Surplus                                                                                                                                                             

                                          Producer      -171,079             -146,391             -117,260             -139,396             -140,614             -714,740                                     
                                          Surplus                                                                                                                                                             

                                          Net           177,904              139,700              100,705              109,985              107,029              635,324                                      

                                                                                                                                                                                                              

  Discounted Welfare                                                                                                                                                                                          
  Changes (3%)                                                                                                                                                                                                

                                2006                                                                                                                                                                          
                                Dollars                                                                                                                                                                       

                                          Consumer      338,819              269,668              199,469              221,572              213,619              1,243,147                                    271,447
                                          Surplus                                                                                                                                                             

                                          Producer      -166,097             -137,987             -107,310             -123,852             -121,295             -656,540                                     -143,358
                                          Surplus                                                                                                                                                             

                                          Net           172,723              131,681              92,159               97,720               92,324               586,607                                      128,089

                                2001                                                                                                                                                                          
                                Dollars                                                                                                                                                                       

                                          Consumer      294,328              235,242              173,165              192,672              185,449              1,080,856                                    236,010
                                          Surplus                                                                                                                                                             

                                          Producer      -144,286             -120,372             -93,159              -107,697             -105,300             -570,814                                     -124,640
                                          Surplus                                                                                                                                                             

                                          Net           150,042              114,870              80,007               84,974               80,150               510,043                                      111,370

                                                                                                                                                                                                              

  Discounted Welfare                                                                                                                                                                                          
  Changes (7%)                                                                                                                                                                                                

                                2006                                                                                                                                                                          
                                Dollars                                                                                                                                                                       

                                          Consumer      326,153              249,883              177,924              190,252              176,566              1,120,778                                    273,347
                                          Surplus                                                                                                                                                             

                                          Producer      -159,887             -127,863             -95,719              -106,345             -100,256             -590,070                                     -143,912
                                          Surplus                                                                                                                                                             

                                          Net           166,266              122,019              82,205               83,907               76,310               530,708                                      129,435

                                2001                                                                                                                                                                          
                                Dollars                                                                                                                                                                       

                                          Consumer      283,325              217,983              154,462              165,437              153,282              974,488                                      237,669
                                          Surplus                                                                                                                                                             

                                          Producer      -138,892             -111,540             -83,097              -92,474              -87,035              -513,038                                     -125,125
                                          Surplus                                                                                                                                                             

                                          Net           144,433              106,443              71,365               72,963               66,247               461,450                                      112,544

                                                                                                                                                                                                              

                                                                                                                                                                                       [5-Year                
                                                                                                                                                                                       Average]{.underline}   

                                                                                                                                                                                                              

  Price Changes in                                      -\$5.00              -\$4.00              -\$3.00              -\$4.00              -\$4.00                                    -\$4.00                
  2006 Dollars                                                                                                                                                                                                
  (dollars per cwt)                                                                                                                                                                                           

  Percentage Price                                      -5.33%               -4.52%               -3.51%               -3.95%               -3.99%                                     -4.26%                  
  Changes                                                                                                                                                                                                     

  Note: Welfare and                                                                                                                                                                                           
  price changes are                                                                                                                                                                                           
  computed using the                                                                                                                                                                                          
  BAS model, as                                                                                                                                                                                               
  described in                                                                                                                                                                                                
  section 2.                                                                                                                                                                                                  
  Consumers are U.S.                                                                                                                                                                                          
  buyers of                                                                                                                                                                                                   
  processing beef at                                                                                                                                                                                          
  the wholesale                                                                                                                                                                                               
  level. Producers                                                                                                                                                                                            
  are sellers of                                                                                                                                                                                              
  U.S.-produced                                                                                                                                                                                               
  processing beef at                                                                                                                                                                                          
  the wholesale                                                                                                                                                                                               
  level. Prices are                                                                                                                                                                                           
  in carcass weight                                                                                                                                                                                           
  equivalent. Welfare                                                                                                                                                                                         
  changes may not sum                                                                                                                                                                                         
  due to rounding.                                                                                                                                                                                            
  ------------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------- ---------------------

  -------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------------------- ---------------------
  Appendix Table                                                                                                                                                                   
  6. Feeder                                                                                                                                                                        
  cattle:                                                                                                                                                                          
  welfare and                                                                                                                                                                      
  price changes                                                                                                                                                                    
  with the                                                                                                                                                                         
  proposed rule,                                                                                                                                                                   
  2007-2011                                                                                                                                                                        

                                                   [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}   5-Year                 Annual-ized
                                                                                                                                                            [Total]{.underline}    [Value]{.underline}

                                                   Thousand Dollars                                                                                                                

  Undiscounted                                                                                                                                                                     
  Welfare                                                                                                                                                                          
  Changes                                                                                                                                                                          

                 2006                                                                                                                                                              
                 Dollars                                                                                                                                                           

                                     Consumer      -65,578              -106,550             -133,102             -133,945             -131,504             -570,678               
                                     Surplus                                                                                                                                       

                                     Producer      62,647               101,788              126,991              127,710              125,239              544,375                
                                     Surplus                                                                                                                                       

                                     Net           -2,930               -4,762               -6,111               -6,235               -6,265               -26,303                

                                                                                                                                                                                   

  Discounted                                                                                                                                                                       
  Welfare                                                                                                                                                                          
  Changes (3%)                                                                                                                                                                     

                           2006                                                                                                                                                    
                           Dollars                                                                                                                                                 

                                     Consumer      -63,667              -100,433             -121,807             -119,008             -113,436             -518,352               \--113,184
                                     Surplus                                                                                                                                       

                                     Producer      60,823               95,945               116,215              113,469              108,032              494,483                107,973
                                     Surplus                                                                                                                                       

                                     Net           -2,845               -4,489               -5,593               -5,540               -5,404               -23,870                -5,212

                           2001                                                                                                                                                    
                           Dollars                                                                                                                                                 

                                     Consumer      -55,850              -87,715              -105,928             -103,165             -98,049              -450,706               -98,414
                                     Surplus                                                                                                                                       

                                     Producer      53,355               83,795               101,064              98,363               93,378               429,954                93,883
                                     Surplus                                                                                                                                       

                                     Net           -2,496               -3,920               -4,864               -4,802               -4,671               -20,752                -4,531

                                                                                                                                                                                   

  Discounted                                                                                                                                                                       
  Welfare                                                                                                                                                                          
  Changes (7%)                                                                                                                                                                     

                           2006                                                                                                                                                    
                           Dollars                                                                                                                                                 

                                     Consumer      -61,287              -93,065              -108,651             -102,186             -93,760              -458,949               -111,933
                                     Surplus                                                                                                                                       

                                     Producer      58,549               88,905               103,662              97,429               89,294               437,840                106,785
                                     Surplus                                                                                                                                       

                                     Net           -2,739               -4,159               -4,989               -4,756               -4,467               -21,109                -5,148

                           2001                                                                                                                                                    
                           Dollars                                                                                                                                                 

                                     Consumer      -55,850              -87,715              -105,928             -103,165             -98,049              -450,706               -97,349
                                     Surplus                                                                                                                                       

                                     Producer      53,355               83,795               101,064              98,363               93,378               429,954                92,873
                                     Surplus                                                                                                                                       

                                     Net           -2,496               -3,920               -4,864               -4,802               -4,671               -20,752                -4,477

                                                                                                                                                                                   

                                                                                                                                                            [5-Year                
                                                                                                                                                            Average]{.underline}   

                                                                                                                                                                                   

  Price Changes                                    \$2.22               \$3.58               \$4.55               \$4.58               \$4.46               \$3.88                 
  in 2006                                                                                                                                                                          
  Dollars                                                                                                                                                                          
  (dollars per                                                                                                                                                                     
  head)                                                                                                                                                                            

  Percentage                                       0.30%                0.52%                0.70%                0.71%                0.70%                0.59%                   
  Price Changes                                                                                                                                                                    

  Note: Welfare                                                                                                                                                                    
  and price                                                                                                                                                                        
  changes are                                                                                                                                                                      
  computed using                                                                                                                                                                   
  the BAS model,                                                                                                                                                                   
  as described                                                                                                                                                                     
  in section 2.                                                                                                                                                                    
  Consumers are                                                                                                                                                                    
  buyers of                                                                                                                                                                        
  cattle for                                                                                                                                                                       
  feedlot                                                                                                                                                                          
  feeding in the                                                                                                                                                                   
  United States.                                                                                                                                                                   
  Producers are                                                                                                                                                                    
  sellers of                                                                                                                                                                       
  U.S.-raised                                                                                                                                                                      
  cattle for                                                                                                                                                                       
  U.S. feedlot                                                                                                                                                                     
  feeding.                                                                                                                                                                         
  Welfare                                                                                                                                                                          
  changes may                                                                                                                                                                      
  not sum due to                                                                                                                                                                   
  rounding.                                                                                                                                                                        
  -------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------------------- ---------------------

  -------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------------------- ---------------------
  Appendix Table                                                                                                                                                                   
  7. Fed cattle:                                                                                                                                                                   
  welfare and                                                                                                                                                                      
  price changes                                                                                                                                                                    
  with the                                                                                                                                                                         
  proposed rule,                                                                                                                                                                   
  2007-2011                                                                                                                                                                        

                                                   [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}   5-Year                 Annual-ized
                                                                                                                                                            [Total]{.underline}    [Value]{.underline}

                                                   Thousand Dollars                                                                                                                

  Undiscounted                                                                                                                                                                     
  Welfare                                                                                                                                                                          
  Changes                                                                                                                                                                          

                 2006                                                                                                                                                              
                 Dollars                                                                                                                                                           

                                     Consumer      -9,702               -38,673              -55,961              -46,061              -44,198              -194,596               
                                     Surplus                                                                                                                                       

                                     Producer      9,446                37,714               54,633               44,911               43,093               189,796                
                                     Surplus                                                                                                                                       

                                     Net           -256                 -960                 -1,328               -1,150               -1,106               -4,800                 

                                                                                                                                                                                   

  Discounted                                                                                                                                                                       
  Welfare                                                                                                                                                                          
  Changes (3%)                                                                                                                                                                     

                           2006                                                                                                                                                    
                           Dollars                                                                                                                                                 

                                     Consumer      -9,419               -36,453              -51,212              -40,925              -38,126              -176,136               -38,460
                                     Surplus                                                                                                                                       

                                     Producer      9,171                35,549               49,997               39,903               37,172               171,791                37,512
                                     Surplus                                                                                                                                       

                                     Net           -249                 -905                 -1,216               -1,022               -954                 -4,345                 -948

                           2001                                                                                                                                                    
                           Dollars                                                                                                                                                 

                                     Consumer      -8,253               -31,847              -44,604              -35,502              -32,925              -153,131               -33,437
                                     Surplus                                                                                                                                       

                                     Producer      8,035                31,056               43,545               34,615               32,101               149,353                32,612
                                     Surplus                                                                                                                                       

                                     Net           -218                 -790                 -1,059               -886                 -824                 -3,777                 -825

                                                                                                                                                                                   

  Discounted                                                                                                                                                                       
  Welfare                                                                                                                                                                          
  Changes (7%)                                                                                                                                                                     

                           2006                                                                                                                                                    
                           Dollars                                                                                                                                                 

                                     Consumer      -9,067               -33,779              -45,681              -35,140              -31,513              -155,180               -37,839
                                     Surplus                                                                                                                                       

                                     Producer      8,828                32,941               44,597               34,263               30,724               151,352                36,923
                                     Surplus                                                                                                                                       

                                     Net           -239                 -838                 -1,084               -877                 -789                 -3,828                 -917

                           2001                                                                                                                                                    
                           Dollars                                                                                                                                                 

                                     Consumer      -7,944               -29,510              -39,787              -30,483              -27,214              -134,939               -32,910
                                     Surplus                                                                                                                                       

                                     Producer      7,735                28,778               38,842               29,722               26,533               131,610                32,099
                                     Surplus                                                                                                                                       

                                     Net           -210                 -732                 -944                 -761                 -681                 -3,328                 -812

                                                                                                                                                                                   

                                                                                                                                                            [5-Year                
                                                                                                                                                            Average]{.underline}   

                                                                                                                                                                                   

  Price Changes                                    \$0.35               \$1.37               \$1.94               \$1.60               \$1.53               \$1.36                 
  in 2006                                                                                                                                                                          
  Dollars                                                                                                                                                                          
  (dollars per                                                                                                                                                                     
  head)                                                                                                                                                                            

  Percentage                                       0.04%                0.15%                0.22%                0.18%                0.17%                0.15%                   
  Price Changes                                                                                                                                                                    

  Note: Welfare                                                                                                                                                                    
  and price                                                                                                                                                                        
  changes are                                                                                                                                                                      
  computed using                                                                                                                                                                   
  the BAS model,                                                                                                                                                                   
  as described                                                                                                                                                                     
  in section 2.                                                                                                                                                                    
  Consumers are                                                                                                                                                                    
  buyers of fed                                                                                                                                                                    
  cattle for                                                                                                                                                                       
  slaughter in                                                                                                                                                                     
  the United                                                                                                                                                                       
  States.                                                                                                                                                                          
  Producers are                                                                                                                                                                    
  sellers of                                                                                                                                                                       
  U.S.-sourced                                                                                                                                                                     
  fed cattle for                                                                                                                                                                   
  slaughter in                                                                                                                                                                     
  the United                                                                                                                                                                       
  States.                                                                                                                                                                          
  Welfare                                                                                                                                                                          
  changes may                                                                                                                                                                      
  not sum due to                                                                                                                                                                   
  rounding.                                                                                                                                                                        
  -------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------------------- ---------------------

  --------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------------------- ---------------------
  Appendix Table                                                                                                                                                                    
  8. Fed beef:                                                                                                                                                                      
  welfare and                                                                                                                                                                       
  price changes                                                                                                                                                                     
  with the                                                                                                                                                                          
  proposed rule,                                                                                                                                                                    
  2007-2011                                                                                                                                                                         

                                                    [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}   5-Year                 Annual-ized
                                                                                                                                                             [Total]{.underline}    [Value]{.underline}

                                                    Thousand Dollars                                                                                                                

  Undiscounted                                                                                                                                                                      
  Welfare Changes                                                                                                                                                                   

                  2006                                                                                                                                                              
                  Dollars                                                                                                                                                           

                                      Consumer      -74,823              -33,181              0                    0                    0                    -108,003               
                                      Surplus                                                                                                                                       

                                      Producer      73,378               32,557               0                    0                    0                    105,934                
                                      Surplus                                                                                                                                       

                                      Net           -1,445               -624                 0                    0                    0                    -2,069                 

                                                                                                                                                                                    

  Discounted                                                                                                                                                                        
  Welfare Changes                                                                                                                                                                   
  (3%)                                                                                                                                                                              

                            2006                                                                                                                                                    
                            Dollars                                                                                                                                                 

                                      Consumer      -72,643              -31,276              0                    0                    0                    -103,919               -22,691
                                      Surplus                                                                                                                                       

                                      Producer      71,240               30,688               0                    0                    0                    101,928                22,257
                                      Surplus                                                                                                                                       

                                      Net           -1,403               -588                 0                    0                    0                    -1,991                 -435

                            2001                                                                                                                                                    
                            Dollars                                                                                                                                                 

                                      Consumer      -63,435              -27,338              0                    0                    0                    -90,773                -19,820
                                      Surplus                                                                                                                                       

                                      Producer      62,210               26,824               0                    0                    0                    89,033                 19,441
                                      Surplus                                                                                                                                       

                                      Net           -1,225               -514                 0                    0                    0                    -1,739                 -380

                                                                                                                                                                                    

  Discounted                                                                                                                                                                        
  Welfare Changes                                                                                                                                                                   
  (7%)                                                                                                                                                                              

                            2006                                                                                                                                                    
                            Dollars                                                                                                                                                 

                                      Consumer      -69,928              -28,981              0                    0                    0                    -98,909                -24,123
                                      Surplus                                                                                                                                       

                                      Producer      68,577               28,436               0                    0                    0                    97,014                 23,661
                                      Surplus                                                                                                                                       

                                      Net           -1,350               -545                 0                    0                    0                    -1,895                 -462

                            2001                                                                                                                                                    
                            Dollars                                                                                                                                                 

                                      Consumer      -61,064              -25,332              0                    0                    0                    -86,396                -21,071
                                      Surplus                                                                                                                                       

                                      Producer      59,884               24,856               0                    0                    0                    84,740                 20,667
                                      Surplus                                                                                                                                       

                                      Net           -1,179               -476                 0                    0                    0                    -1,656                 -404

                                                                                                                                                                                    

                                                                                                                                                             [5-Year                
                                                                                                                                                             Average]{.underline}   

                                                                                                                                                                                    

  Price Changes                                     \$0.36               \$0.15               \$0.00               \$0.00               \$0.00               \$0.10                 
  in 2006 Dollars                                                                                                                                                                   
  (dollars per                                                                                                                                                                      
  cwt)                                                                                                                                                                              

  Percentage                                        0.25%                0.11%                0.00%                0.00%                0.00%                0.07%                   
  Price Changes                                                                                                                                                                     

  Note: Welfare                                                                                                                                                                     
  and price                                                                                                                                                                         
  changes are                                                                                                                                                                       
  computed using                                                                                                                                                                    
  the BAS model,                                                                                                                                                                    
  as described in                                                                                                                                                                   
  section 2.                                                                                                                                                                        
  Consumers are                                                                                                                                                                     
  U.S. buyers of                                                                                                                                                                    
  fed beef at the                                                                                                                                                                   
  wholesale                                                                                                                                                                         
  level.                                                                                                                                                                            
  Producers are                                                                                                                                                                     
  sellers of                                                                                                                                                                        
  U.S.-produced                                                                                                                                                                     
  fed beef at the                                                                                                                                                                   
  wholesale                                                                                                                                                                         
  level. Prices                                                                                                                                                                     
  are in carcass                                                                                                                                                                    
  weight                                                                                                                                                                            
  equivalent.                                                                                                                                                                       
  Welfare changes                                                                                                                                                                   
  may not sum due                                                                                                                                                                   
  to rounding.                                                                                                                                                                      
  --------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------------------- ---------------------

  ------------------- ------------ -------------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------- ---------------------
  Appendix Table 9.                                                                                                                                                                                                   
  Cull                                                                                                                                                                                                                
  cattle/processing                                                                                                                                                                                                   
  beef: welfare and                                                                                                                                                                                                   
  price changes with                                                                                                                                                                                                  
  the proposed rule,                                                                                                                                                                                                  
  assuming projected                                                                                                                                                                                                  
  displacement of                                                                                                                                                                                                     
  processing beef                                                                                                                                                                                                     
  imports from other                                                                                                                                                                                                  
  countries by cull                                                                                                                                                                                                   
  cattle imported                                                                                                                                                                                                     
  from Canada and a                                                                                                                                                                                                   
  price elasticity of                                                                                                                                                                                                 
  demand of -0.6, in                                                                                                                                                                                                  
  2006 dollars,                                                                                                                                                                                                       
  2007-2011                                                                                                                                                                                                           

                                                                [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}   5-Year                                       Annual-ized
                                                                                                                                                                         [Total]{.underline}                          [Value]{.underline}

                                                                Thousand Dollars                                                                                                                                      

                                   Undiscounted                                                                                                                                                                       
                                   Welfare                                                                                                                                                                            
                                   Changes                                                                                                                                                                            

                                                  Consumer      281,552              231,624              177,180              203,607              202,519              1,096,483                                    
                                                  Surplus                                                                                                                                                             

                                                  Producer      -138,337             -118,735             -95,443              -113,967             -115,147             -581,628                                     
                                                  Surplus                                                                                                                                                             

                                                  Net           143,216              112,889              81,738               89,641               87,372               514,855                                      

                                   Discounted                                                                                                                                                                         
                                   Welfare                                                                                                                                                                            
                                   Changes (3%)                                                                                                                                                                       

                                                  Consumer      273,352              218,328              162,145              180,902              174,694              1,009,422                                    220,412
                                                  Surplus                                                                                                                                                             

                                                  Producer      -134,308             -111,919             -87,344              -101,258             -99,327              -534,155                                     -116,635
                                                  Surplus                                                                                                                                                             

                                                  Net           139,044              106,409              74,802               79,645               75,368               475,267                                      103,777

                      Discounted                                                                                                                                                                                      
                      Welfare                                                                                                                                                                                         
                      Changes (7%)                                                                                                                                                                                    

                                                  Consumer      263,133              202,310              144,632              155,331              144,393              909,799                                      221,892
                                                  Surplus                                                                                                                                                             

                                                  Producer      -129,287             -103,708             -77,910              -86,945              -82,098              -479,947                                     -117,054
                                                  Surplus                                                                                                                                                             

                                                  Net           133,846              98,602               66,722               68,387               62,295               429,852                                      104,837

                                                                                                                                                                                                                      

                                                                                                                                                                                               [5-Year                
                                                                                                                                                                                               Average]{.underline}   

                                                                                                                                                                                                                      

  Price Changes                                                 -\$4.00              -\$3.00              -\$3.00              -\$3.00              -\$3.00                                    \$4.80                 
  (dollars per cwt)                                                                                                                                                                                                   

  Percentage Price                                              -4.29%               -3.66%               -2.85%               -3.22%               -3.25%                                     -5.32%                  
  Changes                                                                                                                                                                                                             

  Note: Welfare and                                                                                                                                                                                                   
  price changes are                                                                                                                                                                                                   
  computed using the                                                                                                                                                                                                  
  BAS model, as                                                                                                                                                                                                       
  described in                                                                                                                                                                                                        
  section 2.                                                                                                                                                                                                          
  Consumers are U.S.                                                                                                                                                                                                  
  buyers of                                                                                                                                                                                                           
  processing beef at                                                                                                                                                                                                  
  the wholesale                                                                                                                                                                                                       
  level. Producers                                                                                                                                                                                                    
  are sellers of                                                                                                                                                                                                      
  U.S.-produced                                                                                                                                                                                                       
  processing beef at                                                                                                                                                                                                  
  the wholesale                                                                                                                                                                                                       
  level. Prices are                                                                                                                                                                                                   
  in carcass weight                                                                                                                                                                                                   
  equivalent. Welfare                                                                                                                                                                                                 
  changes may not sum                                                                                                                                                                                                 
  due to rounding.                                                                                                                                                                                                    
  ------------------- ------------ -------------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------- ---------------------

  ------------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------
  Appendix Table 10.                                                                                                                                                                   
  Combined (cull                                                                                                                                                                       
  cattle/processing                                                                                                                                                                    
  beef, feeder                                                                                                                                                                         
  cattle, fed cattle,                                                                                                                                                                  
  and fed beef)                                                                                                                                                                        
  welfare changes                                                                                                                                                                      
  with the proposed                                                                                                                                                                    
  rule, 2007-2011                                                                                                                                                                      

                                                        [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}   5-Year                Annual-ized
                                                                                                                                                                 [Total]{.underline}   [Value]{.underline}

                                                        Thousand Dollars                                                                                                               

  Undiscounted                                                                                                                                                                         
  Welfare Changes                                                                                                                                                                      

                      2006                                                                                                                                                             
                      Dollars                                                                                                                                                          

                                          Consumer      198,881              107,687              28,902               69,376               71,941               476,787               
                                          Surplus                                                                                                                                      

                                          Producer      -25,608              25,668               64,364               33,225               27,718               125,365               
                                          Surplus                                                                                                                                      

                                          Net           173,273              133,354              93,266               102,600              99,658               602,152               

                                                                                                                                                                                       

  Discounted Welfare                                                                                                                                                                   
  Changes (3%)                                                                                                                                                                         

                                2006                                                                                                                                                   
                                Dollars                                                                                                                                                

                                          Consumer      193,090              101,506              26,450               61,639               62,057               444,740               97,112
                                          Surplus                                                                                                                                      

                                          Producer      -24,863              24,195               58,902               29,520               23,909               111,662               24,384
                                          Surplus                                                                                                                                      

                                          Net           168,226              125,699              85,350               91,158               85,966               556,401               121,494

                                2001                                                                                                                                                   
                                Dollars                                                                                                                                                

                                          Consumer      166,790              88,342               22,633               54,005               54,475               386,246               84,339
                                          Surplus                                                                                                                                      

                                          Producer      -20,686              21,303               51,450               25,281               20,179               97,526                21,296
                                          Surplus                                                                                                                                      

                                          Net           146,103              109,646              74,084               79,286               74,655               483,775               105,634

                                                                                                                                                                                       

  Discounted Welfare                                                                                                                                                                   
  Changes (7%)                                                                                                                                                                         

                                2006                                                                                                                                                   
                                Dollars                                                                                                                                                

                                          Consumer      185,871              94,058               23,592               52,926               51,293               407,740               99,452
                                          Surplus                                                                                                                                      

                                          Producer      -23,933              22,419               52,540               25,347               19,762               96,136                23,457
                                          Surplus                                                                                                                                      

                                          Net           161,938              116,477              76,132               78,274               71,054               503,876               122,908

                                2001                                                                                                                                                   
                                Dollars                                                                                                                                                

                                          Consumer      158,467              75,426               8,747                31,789               28,019               302,447               86,339
                                          Surplus                                                                                                                                      

                                          Producer      -17,918              25,889               56,809               35,611               32,876               133,266               20,514
                                          Surplus                                                                                                                                      

                                          Net           140,548              101,315              65,557               67,400               60,895               435,714               106,851

  Note: Welfare                                                                                                                                                                        
  changes are                                                                                                                                                                          
  computed using the                                                                                                                                                                   
  BAS model, as                                                                                                                                                                        
  described in                                                                                                                                                                         
  section 2. They are                                                                                                                                                                  
  the sum of the                                                                                                                                                                       
  partial equilibrium                                                                                                                                                                  
  changes shown in                                                                                                                                                                     
  Appendix Tables 6,                                                                                                                                                                   
  7, 8, and 10.                                                                                                                                                                        
  Definitions of                                                                                                                                                                       
  consumer and                                                                                                                                                                         
  producer are given                                                                                                                                                                   
  in the notes to                                                                                                                                                                      
  these appendix                                                                                                                                                                       
  tables.                                                                                                                                                                              
  ------------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------

  ------------------- ------------ -------------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------- ---------------------
  Appendix Table 11.                                                                                                                                                                                                  
  Cull                                                                                                                                                                                                                
  cattle/processing                                                                                                                                                                                                   
  beef: welfare and                                                                                                                                                                                                   
  price changes with                                                                                                                                                                                                  
  the proposed rule,                                                                                                                                                                                                  
  assuming no                                                                                                                                                                                                         
  displacement of                                                                                                                                                                                                     
  processing beef                                                                                                                                                                                                     
  imports from other                                                                                                                                                                                                  
  countries by                                                                                                                                                                                                        
  imports from                                                                                                                                                                                                        
  Canada, in 2006                                                                                                                                                                                                     
  dollars, 2007-2011                                                                                                                                                                                                  

                                                                [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}   5-Year                                       Annual-ized
                                                                                                                                                                         [Total]{.underline}                          [Value]{.underline}

                                                                Thousand Dollars                                                                                                                                      

                                   Undiscounted                                                                                                                                                                       
                                   Welfare                                                                                                                                                                            
                                   Changes                                                                                                                                                                            

                                                  Consumer      558,439              456,303              355,601              362,185              358,265              2,090,793                                    
                                                  Surplus                                                                                                                                                             

                                                  Producer      -268,384             -229,626             -188,697             -200,219             -201,194             -1,088,120                                   
                                                  Surplus                                                                                                                                                             

                                                  Net           290,055              226,677              166,903              166,966              157,071              1,007,672                                    

                                   Discounted                                                                                                                                                                         
                                   Welfare                                                                                                                                                                            
                                   Changes (3%)                                                                                                                                                                       

                                                  Consumer      542,174              430,110              325,425              321,797              309,043              1,928,548                                    421,107
                                                  Surplus                                                                                                                                                             

                                                  Producer      -260,567             -216,445             -172,685             -177,892             -173,552             -1,001,140                                   -218,603
                                                  Surplus                                                                                                                                                             

                                                  Net           281,607              213,665              152,740              143,905              135,491              927,408                                      202,504

                      Discounted                                                                                                                                                                                      
                      Welfare                                                                                                                                                                                         
                      Changes (7%)                                                                                                                                                                                    

                                                  Consumer      521,906              398,553              290,276              276,310              255,438              1,742,482                                    424,975
                                                  Surplus                                                                                                                                                             

                                                  Producer      -250,826             -200,564             -154,033             -152,746             -143,448             -901,619                                     -219,896
                                                  Surplus                                                                                                                                                             

                                                  Net           271,080              197,988              136,243              123,563              111,990              840,864                                      205,079

                                                                                                                                                                                                                      

                                                                                                                                                                                               [5-Year                
                                                                                                                                                                                               Average]{.underline}   

                                                                                                                                                                                                                      

  Price Changes                                                 -\$8.00              -\$7.00              -\$5.00              -\$5.00              -\$5.00                                    -\$6.00                
  (dollars per cwt)                                                                                                                                                                                                   

  Percentage Price                                              -8.48%               -7.18%               -5.70%               -5.72%               -5.75%                                     -6.57%                  
  Changes                                                                                                                                                                                                             

  Note: Welfare and                                                                                                                                                                                                   
  price changes are                                                                                                                                                                                                   
  computed using the                                                                                                                                                                                                  
  BAS model, as                                                                                                                                                                                                       
  described in                                                                                                                                                                                                        
  section 2.                                                                                                                                                                                                          
  Consumers are U.S.                                                                                                                                                                                                  
  buyers of                                                                                                                                                                                                           
  processing beef at                                                                                                                                                                                                  
  the wholesale                                                                                                                                                                                                       
  level. Producers                                                                                                                                                                                                    
  are sellers of                                                                                                                                                                                                      
  U.S.-produced                                                                                                                                                                                                       
  processing beef at                                                                                                                                                                                                  
  the wholesale                                                                                                                                                                                                       
  level. Prices are                                                                                                                                                                                                   
  in carcass weight                                                                                                                                                                                                   
  equivalent. Welfare                                                                                                                                                                                                 
  changes may not sum                                                                                                                                                                                                 
  due to rounding.                                                                                                                                                                                                    
  ------------------- ------------ -------------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------- ---------------------

  ------------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------- ---------------------
  Appendix Table 12.                                                                                                                                                                                          
  Alternative of no                                                                                                                                                                                           
  restriction by date                                                                                                                                                                                         
  of birth on live                                                                                                                                                                                            
  bovine imports:                                                                                                                                                                                             
  cull                                                                                                                                                                                                        
  cattle/processing                                                                                                                                                                                           
  beef welfare and                                                                                                                                                                                            
  price changes,                                                                                                                                                                                              
  assuming projected                                                                                                                                                                                          
  displacement of                                                                                                                                                                                             
  processing beef                                                                                                                                                                                             
  imports from other                                                                                                                                                                                          
  countries by                                                                                                                                                                                                
  imports from                                                                                                                                                                                                
  Canada, 2007-2011                                                                                                                                                                                           

                                                        [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}   5-Year                                       Annual-ized
                                                                                                                                                                 [Total]{.underline}                          [Value]{.underline}

                                                        Thousand Dollars                                                                                                                                      

  Undiscounted                                                                                                                                                                                                
  Welfare Changes                                                                                                                                                                                             

                      2006                                                                                                                                                                                    
                      Dollars                                                                                                                                                                                 

                                          Consumer      437,381              358,986              217,965              249,382              247,643              1,511,356                                    
                                          Surplus                                                                                                                                                             

                                          Producer      -212,624             -182,382             -117,260             -139,396             -140,614             -792,276                                     
                                          Surplus                                                                                                                                                             

                                          Net           224,757              176,604              100,705              109,985              107,029              719,080                                      

                                                                                                                                                                                                              

  Discounted Welfare                                                                                                                                                                                          
  Changes (3%)                                                                                                                                                                                                

                                2006                                                                                                                                                                          
                                Dollars                                                                                                                                                                       

                                          Consumer      424,642              338,379              199,469              221,572              213,619              1,397,680                                    305,190
                                          Surplus                                                                                                                                                             

                                          Producer      -206,431             -171,912             -107,310             -123,852             -121,295             -730,800                                     -159,573
                                          Surplus                                                                                                                                                             

                                          Net           218,210              166,466              92,159               97,720               92,324               666,880                                      145,617

                                2001                                                                                                                                                                          
                                Dollars                                                                                                                                                                       

                                          Consumer      368,881              295,181              173,165              192,672              185,449              1,215,348                                    265,377
                                          Surplus                                                                                                                                                             

                                          Producer      -179,324             -149,966             -93,159              -107,697             -105,300             -635,446                                     -138,752
                                          Surplus                                                                                                                                                             

                                          Net           189,556              145,215              80,007               84,974               80,150               579,902                                      126,624

                                                                                                                                                                                                              

  Discounted Welfare                                                                                                                                                                                          
  Changes (7%)                                                                                                                                                                                                

                                2006                                                                                                                                                                          
                                Dollars                                                                                                                                                                       

                                          Consumer      408,767              313,552              177,924              190,252              176,566              1,267,061                                    309,025
                                          Surplus                                                                                                                                                             

                                          Producer      -198,714             -159,299             -95,719              -106,345             -100,256             -660,333                                     -161,049
                                          Surplus                                                                                                                                                             

                                          Net           210,053              154,253              82,205               83,907               76,310               606,728                                      147,976

                                2001                                                                                                                                                                          
                                Dollars                                                                                                                                                                       

                                          Consumer      355,091              273,524              154,462              165,437              153,282              1,101,796                                    268,718
                                          Surplus                                                                                                                                                             

                                          Producer      -172,620             -138,963             -83,097              -92,474              -87,035              -574,189                                     -140,039
                                          Surplus                                                                                                                                                             

                                          Net           182,470              134,561              71,365               72,963               66,247               527,606                                      128,678

                                                                                                                                                                                                              

                                                                                                                                                                                       [5-Year                
                                                                                                                                                                                       Average]{.underline}   

                                                                                                                                                                                                              

  Price Changes in                                      -\$7.00              -\$5.00              -\$4.00              -\$4.00              -\$4.00                                    -\$4.80                
  2006 Dollars                                                                                                                                                                                                
  (dollars per cwt)                                                                                                                                                                                           

  Percentage Price                                      -6.83%               -5.80%               -4.63%               -4.66%               -4.69%                                     -5.32%                  
  Changes                                                                                                                                                                                                     

  Note: Welfare and                                                                                                                                                                                           
  price changes are                                                                                                                                                                                           
  computed using the                                                                                                                                                                                          
  BAS model, as                                                                                                                                                                                               
  described in                                                                                                                                                                                                
  section 2.                                                                                                                                                                                                  
  Consumers are U.S.                                                                                                                                                                                          
  buyers of                                                                                                                                                                                                   
  processing beef at                                                                                                                                                                                          
  the wholesale                                                                                                                                                                                               
  level. Producers                                                                                                                                                                                            
  are sellers of                                                                                                                                                                                              
  U.S.-produced                                                                                                                                                                                               
  processing beef at                                                                                                                                                                                          
  the wholesale                                                                                                                                                                                               
  level. Prices are                                                                                                                                                                                           
  in carcass weight                                                                                                                                                                                           
  equivalent. Welfare                                                                                                                                                                                         
  changes may not sum                                                                                                                                                                                         
  due to rounding.                                                                                                                                                                                            
  ------------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------- ---------------------

  ------------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------
  Appendix Table 13.                                                                                                                                                                   
  Alternative of no                                                                                                                                                                    
  restriction by date                                                                                                                                                                  
  of birth on live                                                                                                                                                                     
  bovine imports:                                                                                                                                                                      
  combined (cull                                                                                                                                                                       
  cattle/processing                                                                                                                                                                    
  beef, feeder                                                                                                                                                                         
  cattle, fed cattle,                                                                                                                                                                  
  and fed beef)                                                                                                                                                                        
  welfare changes,                                                                                                                                                                     
  2007-2011                                                                                                                                                                            

                                                        [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}   5-Year                Annual-ized
                                                                                                                                                                 [Total]{.underline}   [Value]{.underline}

                                                        Thousand Dollars                                                                                                               

  Undiscounted                                                                                                                                                                         
  Welfare Changes                                                                                                                                                                      

                      2006                                                                                                                                                             
                      Dollars                                                                                                                                                          

                                          Consumer      287,507              180,936              29,349               69,835               72,403               640,029               
                                          Surplus                                                                                                                                      

                                          Producer      -66,610              -9,428               65,545               34,436               28,930               52,872                
                                          Surplus                                                                                                                                      

                                          Net           220,897              171,507              94,894               104,270              101,332              692,900               

                                                                                                                                                                                       

  Discounted Welfare                                                                                                                                                                   
  Changes (3%)                                                                                                                                                                         

                                2006                                                                                                                                                   
                                Dollars                                                                                                                                                

                                          Consumer      279,134              170,551              26,859               62,046               62,455               601,042               131,241
                                          Surplus                                                                                                                                      

                                          Producer      -64,670              -8,886               59,983               30,596               24,955               41,976                9,168
                                          Surplus                                                                                                                                      

                                          Net           214,462              161,662              86,841               92,642               87,410               643,018               140,407

                                2001                                                                                                                                                   
                                Dollars                                                                                                                                                

                                          Consumer      241,537              148,573              22,989               54,358               54,819               522,276               114,042
                                          Surplus                                                                                                                                      

                                          Producer      -55,262              -7,555               52,390               26,214               21,083               36,870                8,052
                                          Surplus                                                                                                                                      

                                          Net           186,274              141,019              75,380               80,572               75,903               559,149               122,092

                                                                                                                                                                                       

  Discounted Welfare                                                                                                                                                                   
  Changes (7%)                                                                                                                                                                         

                                2006                                                                                                                                                   
                                Dollars                                                                                                                                                

                                          Consumer      268,698              158,037              23,957               53,276               51,622               555,589               135,512
                                          Surplus                                                                                                                                      

                                          Producer      -62,253              -8,235               53,505               26,271               20,626               29,915                7,306
                                          Surplus                                                                                                                                      

                                          Net           206,446              149,802              77,462               79,547               72,248               585,504               142,817

                                2001                                                                                                                                                   
                                Dollars                                                                                                                                                

                                          Consumer      232,508              137,673              20,506               46,675               45,310               482,671               117,720
                                          Surplus                                                                                                                                      

                                          Producer      -53,196              -7,000               46,732               22,508               17,426               26,471                6,457
                                          Surplus                                                                                                                                      

                                          Net           179,311              130,674              67,239               69,183               62,737               509,142               124,174

  Note: Welfare                                                                                                                                                                        
  changes are                                                                                                                                                                          
  computed using the                                                                                                                                                                   
  BAS model, as                                                                                                                                                                        
  described in                                                                                                                                                                         
  section 2. They are                                                                                                                                                                  
  the sum of the                                                                                                                                                                       
  partial equilibrium                                                                                                                                                                  
  changes shown in                                                                                                                                                                     
  Appendix Tables 6,                                                                                                                                                                   
  7, 8, and 10.                                                                                                                                                                        
  Definitions of                                                                                                                                                                       
  consumer and                                                                                                                                                                         
  producer are given                                                                                                                                                                   
  in the notes to                                                                                                                                                                      
  these appendix                                                                                                                                                                       
  tables.                                                                                                                                                                              
  ------------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------

  ------------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------- ---------------------
  Appendix Table 14.                                                                                                                                                                                          
  Cull                                                                                                                                                                                                        
  cattle/processing                                                                                                                                                                                           
  beef: welfare and                                                                                                                                                                                           
  price changes,                                                                                                                                                                                              
  assuming cull                                                                                                                                                                                               
  cattle imports and                                                                                                                                                                                          
  processing beef                                                                                                                                                                                             
  imports from Canada                                                                                                                                                                                         
  would resume at the                                                                                                                                                                                         
  same time,                                                                                                                                                                                                  
  2007-2011                                                                                                                                                                                                   

                                                        [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}   5-Year                                       Annual-ized
                                                                                                                                                                 [Total]{.underline}                          [Value]{.underline}

                                                        Thousand Dollars                                                                                                                                      

  Undiscounted                                                                                                                                                                                                
  Welfare Changes                                                                                                                                                                                             

                      2006                                                                                                                                                                                    
                      Dollars                                                                                                                                                                                 

                                          Consumer      411,551              337,311              257,629              293,984              291,383              1,591,857                                    
                                          Surplus                                                                                                                                                             

                                          Producer      -200,558             -171,735             -138,050             -163,609             -164,729             -838,680                                     
                                          Surplus                                                                                                                                                             

                                          Net           210,993              165,576              119,578              130,375              126,654              753,177                                      

                                                                                                                                                                                                              

  Discounted Welfare                                                                                                                                                                                          
  Changes (3%)                                                                                                                                                                                                

                                2006                                                                                                                                                                          
                                Dollars                                                                                                                                                                       

                                          Consumer      399,564              317,948              235,767              261,201              251,349              1,465,829                                    320,071
                                          Surplus                                                                                                                                                             

                                          Producer      -194,716             -161,876             -126,336             -145,364             -142,097             -770,389                                     -168,218
                                          Surplus                                                                                                                                                             

                                          Net           204,848              156,072              109,431              115,837              109,253              695,440                                      151,853

                                2001                                                                                                                                                                          
                                Dollars                                                                                                                                                                       

                                          Consumer      347,096              277,359              204,677              227,131              218,204              1,274,467                                    278,286
                                          Surplus                                                                                                                                                             

                                          Producer      -169,147             -141,211             -109,676             -126,404             -123,359             -669,797                                     -146,253
                                          Surplus                                                                                                                                                             

                                          Net           177,949              136,148              95,001               100,728              94,846               604,670                                      132,033

                                                                                                                                                                                                              

  Discounted Welfare                                                                                                                                                                                          
  Changes (7%)                                                                                                                                                                                                

                                2006                                                                                                                                                                          
                                Dollars                                                                                                                                                                       

                                          Consumer      384,627              294,621              210,302              224,279              207,752              1,321,580                                    322,321
                                          Surplus                                                                                                                                                             

                                          Producer      -187,437             -150,000             -112,690             -124,816             -117,449             -692,393                                     -168,868
                                          Surplus                                                                                                                                                             

                                          Net           197,190              144,621              97,611               99,463               90,303               629,187                                      153,453

                                2001                                                                                                                                                                          
                                Dollars                                                                                                                                                                       

                                          Consumer      334,120              257,009              182,570              195,025              180,356              1,149,081                                    280,250
                                          Surplus                                                                                                                                                             

                                          Producer      -162,824             -130,851             -97,830              -108,536             -101,962             -602,002                                     -146,823
                                          Surplus                                                                                                                                                             

                                          Net           171,296              126,159              84,740               86,489               78,394               547,078                                      133,427

                                                                                                                                                                                                              

                                                                                                                                                                                       [5-Year                
                                                                                                                                                                                       Average]{.underline}   

                                                                                                                                                                                                              

  Price Changes in                                      -\$6.22              -\$5.01              -\$3.77              -\$4.28              -\$4.26                                    -\$4.71                
  2006 Dollars                                                                                                                                                                                                
  (dollars per cwt)                                                                                                                                                                                           

  Percentage Price                                      -6.28%               -5.33%               -4.14%               -4.65%               -4.68%                                     -5.02%                  
  Changes                                                                                                                                                                                                     

  Note: Welfare and                                                                                                                                                                                           
  price changes are                                                                                                                                                                                           
  computed using the                                                                                                                                                                                          
  BAS model, as                                                                                                                                                                                               
  described in                                                                                                                                                                                                
  section 2.                                                                                                                                                                                                  
  Consumers are U.S.                                                                                                                                                                                          
  buyers of                                                                                                                                                                                                   
  processing beef at                                                                                                                                                                                          
  the wholesale                                                                                                                                                                                               
  level. Producers                                                                                                                                                                                            
  are sellers of                                                                                                                                                                                              
  U.S.-produced                                                                                                                                                                                               
  processing beef at                                                                                                                                                                                          
  the wholesale                                                                                                                                                                                               
  level. Prices are                                                                                                                                                                                           
  in carcass weight                                                                                                                                                                                           
  equivalent. Welfare                                                                                                                                                                                         
  changes may not sum                                                                                                                                                                                         
  due to rounding.                                                                                                                                                                                            
  ------------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------- ---------------------

  ------------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------
  Appendix Table 15.                                                                                                                                                                   
  Combined (feeder                                                                                                                                                                     
  cattle, fed cattle,                                                                                                                                                                  
  cull                                                                                                                                                                                 
  cattle/processing                                                                                                                                                                    
  beef, and fed beef)                                                                                                                                                                  
  welfare changes,                                                                                                                                                                     
  assuming cull                                                                                                                                                                        
  cattle imports and                                                                                                                                                                   
  processing beef                                                                                                                                                                      
  imports from Canada                                                                                                                                                                  
  would resume at the                                                                                                                                                                  
  same time,                                                                                                                                                                           
  2007-2011                                                                                                                                                                            

                                                        [2007]{.underline}   [2008]{.underline}   [2009]{.underline}   [2010]{.underline}   [2011]{.underline}   5-Year                Annual-ized
                                                                                                                                                                 [Total]{.underline}   [Value]{.underline}

                                                        Thousand Dollars                                                                                                               

  Undiscounted                                                                                                                                                                         
  Welfare Changes                                                                                                                                                                      

                      2006                                                                                                                                                             
                      Dollars                                                                                                                                                          

                                          Consumer      261,677              159,261              69,013               114,437              116,143              720,530               
                                          Surplus                                                                                                                                      

                                          Producer      -54,544              1,219                44,755               10,223               4,815                6,468                 
                                          Surplus                                                                                                                                      

                                          Net           207,133              160,479              113,767              124,660              120,957              726,997               

                                                                                                                                                                                       

  Discounted Welfare                                                                                                                                                                   
  Changes (3%)                                                                                                                                                                         

                                2006                                                                                                                                                   
                                Dollars                                                                                                                                                

                                          Consumer      254,056              150,120              63,157               101,675              100,185              669,191               146,122
                                          Surplus                                                                                                                                      

                                          Producer      -52,955              1,150                40,957               9,084                4,153                2,387                 523
                                          Surplus                                                                                                                                      

                                          Net           201,100              151,268              104,113              110,759              104,339              671,578               146,643

                                2001                                                                                                                                                   
                                Dollars                                                                                                                                                

                                          Consumer      219,752              130,751              54,501               88,817               87,574               581,395               126,951
                                          Surplus                                                                                                                                      

                                          Producer      -45,085              1,200                35,873               7,507                3,024                2,519                 551
                                          Surplus                                                                                                                                      

                                          Net           174,667              131,952              90,374               96,326               90,599               583,917               127,501

                                                                                                                                                                                       

  Discounted Welfare                                                                                                                                                                   
  Changes (7%)                                                                                                                                                                         

                                2006                                                                                                                                                   
                                Dollars                                                                                                                                                

                                          Consumer      244,558              139,106              56,335               87,303               82,808               610,108               148,808
                                          Surplus                                                                                                                                      

                                          Producer      -50,976              1,064                36,534               7,800                3,433                -2,145                -513
                                          Surplus                                                                                                                                      

                                          Net           193,583              140,170              92,868               95,103               86,241               607,963               148,294

                                2001                                                                                                                                                   
                                Dollars                                                                                                                                                

                                          Consumer      211,537              121,158              48,614               76,263               72,384               529,956               129,252
                                          Surplus                                                                                                                                      

                                          Producer      -43,400              1,112                31,999               6,446                2,499                -1,342                -327
                                          Surplus                                                                                                                                      

                                          Net           168,137              122,272              80,614               82,709               74,884               528,614               128,923

  Note: Welfare                                                                                                                                                                        
  changes are                                                                                                                                                                          
  computed using the                                                                                                                                                                   
  BAS model, as                                                                                                                                                                        
  described in                                                                                                                                                                         
  section 2. They are                                                                                                                                                                  
  the sum of the                                                                                                                                                                       
  partial equilibrium                                                                                                                                                                  
  changes shown in                                                                                                                                                                     
  Appendix Tables 6,                                                                                                                                                                   
  7, 8, and 10.                                                                                                                                                                        
  Definitions of                                                                                                                                                                       
  consumer and                                                                                                                                                                         
  producer are given                                                                                                                                                                   
  in the notes to                                                                                                                                                                      
  these appendix                                                                                                                                                                       
  tables.                                                                                                                                                                              
  ------------------- --------- --------- ------------- -------------------- -------------------- -------------------- -------------------- -------------------- --------------------- ---------------------

[^1]: Three examples of studies based on this type of model are:
    Paarlberg, P.L. "Agricultural Export Subsidies and Intermediate
    Goods Trade," *American Journal of Agricultural Economics*. 77,
    1(1995): 119 - 128. Paarlberg, P.L., J.G. Lee, and A.H. Seitzinger.
    "Potential Revenue Impact of an Outbreak of Foot-and-Mouth Disease
    in the United States," *Journal of the American Veterinary Medical
    Association*. 220, 7(April 1, 2002): 988 - 992. Sanyal, K.K. and
    R.W. Jones. "The Theory of Trade in Middle Products," *American
    Economic Review*. 72(1982): 16 - 31.

[^2]: "Bovine Spongiform Encephalophy; Minimal-Risk Regions and
    Importation of Commodities;" Final Rule. *Federal Register*, Vol.
    70, No. 2; January 4, 2005, 460-553.
    <http://www.access.gpo.gov/su_docs/fedreg/a050104c.html>

[^3]: Canada had been added to the list of countries where BSE exists in
    May 2003. "Change of Disease Status of Canada Because of BSE;"
    Interim Rule. *Federal Register*, Vol. 68, No.103; May 29, 2003,
    31939-31940).

    <http://www.access.gpo.gov/su_docs/fedreg/a030529c.html>

[^4]: APHIS, Veterinary Services. "Assessment of Bovine Spongiform
    Encephalopathy (BSE) risks associated with the importation of
    certain commodities from BSE minimal risk regions (Canada)," October
    27, 2006.

[^5]: <http://www.whitehouse.gov/omb/inforeg/eo12866.pdf>

[^6]: <http://www.sba.gov/advo/laws/regflex.html>

[^7]: Source: Department of Commerce, U.S. Census Bureau, Foreign Trade
    Statistics. <http://www.fas.usda.gov/ustrade/>

[^8]: Processing beef should not be confused with processed beef, that
    is, cooked, canned, or preserved meat. By this terminology, some
    processing beef is used for processed products.

[^9]: This approximation is based on the carcass weight equivalent
    conversion rates for 2007 used in this analysis: cows, 576 pounds
    per animal; bulls and stags, 888 pounds per animal. We recognize
    that these rates may overestimate the carcass weight equivalent of
    the cull cattle from this time period due to the long-term trend
    toward heavier weights.

[^10]: Canadian cattle inventory statistics in this and the following
    paragraph are from
    <http://www.statcan.ca/english/freepub/23-012-XIE/23-012-XIE2005002.pdf>

[^11]: <http://usda.mannlib.cornell.edu/reports/nassr/livestock/pct-bb/>

[^12]: USDA Agricultural Marketing Service, Market News. Prices in U.S.
    dollars. For the price of Canadian slaughter cows:
    <http://www.ams.usda.gov/mnreports/WA_LS718.txt>.

[^13]: The BAS model is being peer reviewed as an Influential Scientific
    Information document, as called for by OMB's Peer Review Bulletin
    (*Federal Register*, January 14, 2005, 2664-2677), and in accordance
    with USDA's Peer Review Implementation Guidelines of June 2005,
    <http://www.ocio.usda.gov/qi_guide/doc/FINAL_Peer_Review_Guidelines.doc>.

[^14]: <http://www.aphis.usda.gov/peer_review/content/printable_version/bas_model_econOnly_apr20.pdf>.

[^15]: <http://www.whitehouse.gov/omb/circulars/a004/a-4.html>

[^16]: We note that the price elasticity of supply used for cull
    cattle/processing beef is the same as that for fed beef (0.84), and
    is more elastic than the supply elasticities for fed cattle (0.62)
    and feeder cattle (0.40). Assuming a more inelastic supply also
    would result in larger welfare and price effects for the cull
    cattle/processing beef category.

[^17]: Three examples of studies based on this type of model are:
    Paarlberg, P.L. "Agricultural Export Subsidies and Intermediate
    Goods Trade," *American Journal of Agricultural Economics*. 77,
    1(1995): 119 - 128. Paarlberg, P.L., J.G. Lee, and A.H. Seitzinger.
    "Potential Revenue Impact of an Outbreak of Foot-and-Mouth Disease
    in the United States," *Journal of the American Veterinary Medical
    Association*. 220, 7(April 1, 2002): 988 - 992. Sanyal, K.K. and
    R.W. Jones. "The Theory of Trade in Middle Products," *American
    Economic Review*. 72(1982): 16 - 31.

[^18]: Al Mussell, Graeme Hedley, Don Ault, and David Bullock, "Role and
    Impact of Renewed Canada -- US Trade in Dairy Heifers and Dairy
    Breeding Stock," George Morris Centre, Informa Economics, February
    2006. <http://www.informaecon.com/>

[^19]: USDA Agricultural Marketing Service, United States Standards for
    Vealers and Slaughter Calves,
    <http://www.ams.usda.gov/lsg/stand/standards/sl-v&c.pdf>.
    Information on vealers and slaughter calves in this paragraph is
    taken from this source.

[^20]: ERS Red Meat Yearbook,
    <http://www.ers.usda.gov/data/sdp/view.asp?f=livestock/94006/>

[^21]: Much of the information presented on the bison industry is taken
    from the Web-site of the National Bison Association,
    http://www.bisoncentral.com/

[^22]: <http://www.agr.gc.ca/redmeat/documents/factsheet05.pdf>

[^23]: James G. Robb, Livestock Marketing Information Center, personal
    communication.

[^24]: January 1, 2006, cattle inventory: out of a total of 97,101,500
    head, there were 42,311,400 cows and heifers that calved, 10,182,500
    replacement heifers, and 2,262,800 bulls 500 pounds and over
    (<http://www.nass.usda.gov:8080/QuickStats/PullData_US>). The
    combined breeding cattle stock totaled 54,756,700 head, or 56.4
    percent of the national herd. Annual imports of 250 head of breeding
    bison / (232,000 \[2002 U.S. bison inventory\] x 0.564) = 0.2
    percent of the approximated U.S. breeding bison population.

[^25]: Variety meats, a catch-all term, refers primarily to the organs,
    feet, and tails of slaughtered livestock. The proposed rule would
    result in an increase in the U.S. supply of bovine byproducts in
    general, due to reestablished imports of Canadian cull cattle
    exceeding projected declines in imports of Canadian feeder and fed
    cattle. We include in this discussion the expected increase in the
    U.S. supply of small intestine-derived casings and variety meats so
    as to complete our consideration of sources of impact for this
    commodity category.

[^26]: 9CFR 96.1. <http://www.gpoaccess.gov/cfr/index.html>

[^27]: International Natural Sausage Casing Association,
    http://www.insca.org/

[^28]: 9 CFR 310.22(a) and 9 CFR 310.22(b).
    <http://www.gpoaccess.gov/cfr/index.html>

[^29]: "Prohibited cattle materials; use" *Federal Register*, Vol. 69,
    No. 134; July 14, 2004, 42255-42274.
    <http://www.access.gpo.gov/su_docs/fedreg/a040714c.html>

[^30]: Meat and poultry inspection: "Specified risk materials use for
    human food, prohibition; and non-ambulatory disabled cattle,"
    disposition requirements, 53043-53050; Food and cosmetics: "Cattle
    materials," prohibited use, 53063--53069; *Federal Register*, Vol.
    70, No. 172; September 7, 2005.
    <http://www.access.gpo.gov/su_docs/fedreg/a050907c.html>

[^31]: "Preliminary Analysis of Interim Final Rules and an Interpretive
    Rule to Prevent the BSE Agent from Entering the U.S. Food Supply,"
    <http://www.fsis.usda.gov/Frame/FrameRedirect.asp?main=http://www.fsis.usda.gov/OPPDE/rdad/FRPubs/Docs_03-025IF.htm>.
    The PRIA examined expected economic effects of the interim rule's
    requirement that the entire small intestine be removed and disposed
    of as inedible.

[^32]: The computations used to arrive at this approximated quantity
    included an average weight of the small intestine including the
    distal ileum (11 pounds for a 1,250-pound bovine) multiplied by the
    number of slaughtered cattle from which the small intestine would be
    taken for human food (14,535,000 head). This number of cattle was
    based on an FSIS 2002 survey and slaughterhouse site visits.

[^33]: James Wilkus, FSIS, personal communication.

[^34]: Ibid.

[^35]: USDA ERS, Red Meat Yearbook,
    <http://www.ers.usda.gov/data/sdp/view.asp?f=livestock/94006/>

[^36]: "Bovine Spongiform Encephalophy; Minimal-Risk Regions and
    Importation of Commodities;" Final Rule. *Federal Register*, Vol.
    70, No. 2; January 4, 2005, 460-553.
    <http://www.access.gpo.gov/su_docs/fedreg/a050104c.html>

[^37]: Other conditions are that meat, meat byproducts, and meat food
    products must be derived from bovines that have been subject to a
    ruminant feed ban and for which an air-injected stunning process was
    not used at slaughter.

[^38]: 9 CFR 96.1(b). The one exception is sheep casings from BSE
    minimal-risk regions, if the sheep are less than 12 months of age at
    slaughter and had been subject to a ruminant feed ban. Part 94.18(a)
    lists regions where BSE exists; regions that, because of import
    requirements less restrictive than those that would be acceptable
    for import into the United States and/or because of inadequate
    surveillance, present an undue risk of introducing BSE into the
    United States; and BSE minimal-risk regions.
    <http://www.gpoaccess.gov/cfr/index.html>

[^39]: Bovine casings produced from the small intestine minus the distal
    ileum (as well as other types of bovine casings) would be allowed to
    be imported from certified establishments in Canada listed by FSIS
    in 9 CFR 327.2(b) as eligible to export meat products to the United
    States. <http://www.gpoaccess.gov/cfr/index.html>

[^40]: Venita Powell, U.S. Department of Commerce, personal
    communication.

[^41]: Farshid, M., R.E. Taffs, D. Scott, D.M. Asher, and K. Brorson.
    (2005). "The clearance of viruses and transmissible spongiform
    encephalopathy agents from biologicals." *Current Opinion in
    Biotechnology*. 16: 561-567.
    <http://www.current-opinion.com/jbio/about.htm?jcode=jbio>

[^42]: Fetal bovine serum is also called fetal calf serum.

[^43]: Biotrade, Inc. "Fetal Bovine Serum: Proposal to allow importation
    from South America," Proposal submitted to USDA/APHIS, 2005.

[^44]: Foreign Agricultural Service, USDA. <http://www.fas.usda.gov/>
    National Agricultural Statistics Service, USDA.
    <http://www.nass.usda.gov/>

[^45]: 300,000 liters of FBS from 6.3 million slaughtered cows yields
    0.048 liters of FBS per cow slaughtered. 500,000 cows slaughtered in
    Canada \* 0.048 liters per cow = 24,000 liters.

[^46]: 24,000 liters / 180,000 liters of U.S. imports of FBS = 13
    percent.

[^47]: 481,000 cows slaughtered \* 0.048 liters per cow = 23,088 liters;
    670,000 cows slaughtered \* 0.048 liters per cow = 32,160 liters.

[^48]: Biotrade, Inc. "Fetal Bovine Serum: Proposal to allow importation
    from South America," Proposal submitted to USDA/APHIS, 2005.

[^49]: We assume the quantities of bison that would be imported under
    the proposed rule and under this alternative would be much the same.

[^50]: APHIS, Veterinary Services. "Assessment of Bovine Spongiform
    Encephalopathy (BSE) risks associated with the importation of
    certain commodities from BSE minimal risk regions (Canada)," October
    27, 2006.

[^51]: <http://www.oie.int/eng/normes/Mcode/en_chapitre_2.3.13.htm>

[^52]: The ban provided exceptions for milk, blood, gelatin, and protein
    derived solely from porcine or equine sources.

[^53]: "Bovine Spongiform Encephalophy; Minimal-Risk Regions and
    Importation of Commodities;" Final Rule. *Federal Register*, Vol.
    70, No. 2; January 4, 2005, 460-553.
    <http://www.access.gpo.gov/su_docs/fedreg/a050104c.html>

[^54]: "Bovine Spongiform encephalopathy; minimal-risk regions and
    commodities importation;" Partial delay of applicability. *Federal
    Register*, Vol. 70, No. 47; March 11, 2005, 12112-12113.
    <http://www.access.gpo.gov/su_docs/fedreg/a050311c.html>

[^55]: <http://www.ca9.uscourts.gov/ca9/newopinions.nsf/3A12983071711CF4882570490055E969/$file/0535264.pdf?openelement>

[^56]: USDA, NASS. 2002 Census of Agriculture, Volume 1, Chapter 1,
    Table 16. <http://www.nass.usda.gov/Census_of_Agriculture/index.asp>

[^57]: USDA, NASS. 2002 Census of Agriculture, Volume 1, Chapter 1,
    Table 17. <http://www.nass.usda.gov/Census_of_Agriculture/index.asp>

[^58]: USDA, NASS. 2002 Census of Agriculture, Volume 1, Chapter 1,
    Table 16. The \$ 26,000 average is for operations with fewer than
    1,000 head.
    <http://www.nass.usda.gov/Census_of_Agriculture/index.asp>

[^59]: (\$26,600) (0.006) = \$160.

[^60]: USDA, NASS, 2002 Census of Agriculture, Volume 1, Chapter 1,
    Table 17. For small-entity producers, revenue from cattle and calf
    sales totaled \$1.7 billion and revenue from dairy product sales
    totaled \$11.2 billion.
    <http://www.nass.usda.gov/Census_of_Agriculture/index.asp>

[^61]: In 2002, the average revenue from cattle sales for small-entity
    dairy operations was \$22,197 (\$453 per head multiplied by 49
    head). (\$22,197)(0.006) = \$133.

[^62]: \$133 divided by \$175,912 (average income for small dairy farms
    from combined diary product and cattle sales) equals 0.08 percent.

[^63]: <http://www.bisoncentral.com/doc_lib/2005WebSaleResults.pdf>

[^64]: Gender percentages approximated by USDA ERS. (175 females)
    (\$1,000 per female) + (75 males) (\$2,000 per male) = \$325,000.

[^65]: The reader is reminded that these price changes are computed
    using separate partial equilibrium analyses that do not take into
    account supply and demand interactions between the feeder cattle and
    fed cattle markets.

[^66]: (\$3.88 per head)(2,000 head) = \$7,760. (\$1.36 per head)(2,000
    head) = \$2,720. \$7,760 - \$2,720 = \$5,040.

[^67]: Average price of fed cattle (\$908 per head) multiplied by 2,000
    animals equals \$1,816,000. \$2,900 divided by \$1,816,000 equals
    0.28 percent.

[^68]: <http://www.gipsa.usda.gov/GIPSA/webapp?area=newsroom&subject=landing&topic=pub-stat>
    Based on data for federally inspected slaughter plants. Forty-seven
    out of 689 reporting plants accounted for 89.8 percent of total
    commercial slaughter.

[^69]: *Ibid.* Twenty-one out of 64 reporting plants accounted for 82.2
    percent of total boxed fed beef production.

[^70]: Meat and poultry inspection: "Specified risk materials use for
    human food, prohibition; and non-ambulatory disabled cattle,"
    disposition requirements; *Federal Register*, Vol. 70, No. 172;
    September 7, 2005, 53043-53050.
    <http://www.access.gpo.gov/su_docs/fedreg/a050907c.html>

[^71]: Canadian bovines imported for immediate slaughter would still be
    required to be moved directly to slaughter in a sealed means of
    conveyance because they are not subject to the tuberculosis and
    brucellosis testing requirements applied to Canadian bovines that
    are imported other than for immediate slaughter.