The Canadian cattle industry is in that sweetest of spots — all sectors are making money.
How long that will last is tricky to predict, market analyst Anne Wasko told those at a Nov. 15 Cow-Calfenomics session organized by Alberta Agriculture. The fall calf run was better than expected, feeders are doing well after a disastrous 2016 and packers are making good margins, she said. Beef demand has been steady.
“The market has gotten much more extreme in when and how it’s trading,” she said, noting that swings of $600 per head in profits or losses in the feeder market are no longer unusual.
Profits at the feedlot earlier this year led to quicker turnover, so average carcass weights in 2017 are lower than 2016. Carcass weights tend to rise in the latter part of the year, but the average weight for the year to date is still about 30 pounds lighter than last year.
Wasko said the average slaughter weight in the U.S. is about 10 lb. lower than last year after steady increases since 2011. That 10 lb. per animal equates to a 28 percent reduction in tonnage, equivalent to removing about 400,000 head from the system.
“This (carcass weight factor) is huge, and it will be a factor to watch as we go into (2018),” said Wasko.
She anticipates Canadian slaughter will be up by about six percent this year because more cattle are being kept in Canada for processing. This year could see the largest Canadian slaughter numbers since 2010.
Wasko said there’s been much talk about expansion in the U.S. cow herd, but she thinks restocking is a more accurate way to look at it. Widespread drought in the U.S. caused a rapid selloff, but cow numbers are expected to be up by about three million animals by year end.
That increase is the equivalent of Canada’s entire domestic cow herd.
The U.S. has killed 1.2 million more young cattle than it did last year, said Wasko. Beef production there is up by four percent, but slaughter is up by almost six percent, a reflection of those lower carcass weights.
“2018 is going to be the largest beef production for the Americans ever. Ever,” she said.
The Canadian herd is not expanding, added Wasko. It has hovered around 3.8 million head for the past seven years and is seven percent smaller than before BSE caused market havoc in 2003. The number of heifer placements in feedlots indicates that no expansion is underway.
She said heifer and steer placements in Alberta and Saskatchewan feedlots are up by 16 percent year to date, a reflection of more being fed at home rather than being shipped to the U.S.
On the demand side, moves by major retailers toward higher quality cuts boosted wholesale levels, and at retail, there’s more attention on buying local. That essentially means buying Canadian beef, Wasko said.
“At the retail level here in Canada, we’ve certainly seen the buy-in to Canadian. There’s a beef story going on but also a local story going on.”
Retail prices have been about three percent lower this year than last but are still good relative to pre-2014 levels.
Canadian beef exports, year to date, are up eight percent, said Wasko, which is the best year since 2010. There was growth in all key markets, although the U.S. remains the biggest buyer.
As for imports, Australia and New Zealand shipped less beef into Canada this year as they retain heifers for breeding rather than shipping to slaughter. They are working to expand their herds after a drought-induced sell-off.
The U.S. is also seeing good exports, expected to be up by 12 percent this year over last, he said.
A massive corn crop and good moisture conditions across much of the U.S. will keep feed prices low and boost American beef production, along with pork and chicken.