Canadian cattle heading south not good for packers, barley growers

Dry cows sold for as much as $100 per hundredweight in central Alberta Feb. 13.

However, even with these record prices, the Canadian beef industry is on an uphill drive in low gear.

Drought, BSE and a revised country-of-origin labelling law in the United States have battered the Canadian industry since 2002.

The legislation, which came into effect in November, has created uncertainty with its strict segregation requirements between foreign and domestic livestock in the U.S.

Anne Wasko, a market analyst, said this has prompted Canadian prices to sink far below U.S. bids.

“Typically our market trades around $10 below, but now we are starting to talk for the first part of 2014 as much as $20 a hundred(weight),” she told the Western Barley Growers Association’s annual meeting Feb. 13.

Some of that discount is masked by record prices. The Canfax report for the week of Feb. 10 said the western Canadian feeder index established a new high Feb. 7 at $191.04 per cwt., while butcher bulls traded at their highest levels since August, when they averaged $90 per cwt.

Large numbers of feeder cattle from Western Canada are moving south, even with the added costs of COOL.

A shortage of cattle on both sides of the border means bids are fierce. As a result, nearly 100,000 feeders left Canada between November and January. That should concern barley growers.

A steer consumes about a tonne of barley to achieve market weight, which means barley requirements drop by 300,000 tonnes if 300,000 head are exported.

“The concern over increased feeder cattle exports is that they are not going to stay in the Canadian feedlot, they are not going to be here for a Canadian packing plant and we are already looking at shrinking supplies,” Wasko said.

Feed grain prices between Lethbridge barley and Omaha corn also affect competitiveness.

There have been times when Lethbridge barley was higher than corn, which meant the cost of gain was cheaper in Nebraska. However, Alberta has the feeding advantage when this reverses, with corn more than $6 per bushel.

Wasko said the spread between corn and barley is tight again, and the advantage is back in Nebraska.

Canada should be looking at expansion because of lower feed grain prices, good moisture and improved profits, but Wasko estimated the herd will be down another one percent when Statistics Canada releases inventory numbers March 1.

The cow herd has shrunk by 25 percent since 2005.

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