The current condition for Canadian beef is profitability, while the 2018 forecast is steady with a chance of volatility.
Canfax research manager Brenna Grant said “2017 was a year of surprising strength that wasn’t anticipated to be there.”
Large supplies of beef, pork and poultry in Canada and the United States were expected to pressure prices down, but that did not happen, she said at Alberta Beef Producers’ annual meeting held in Calgary Dec. 4-6.
Feedlots and packers are turning profits that are passed back to cow-calf producers. The situation was especially obvious in Alberta with a strong basis and good demand.
“Alberta out-performed some of the other markets, whether you compare it to Ontario or the U.S.,” she said.
Alberta fed cattle have a $5 premium over Ontario, partly because of the poor performance of the eastern fed market.
The strong prices and good demand kept a larger percentage than normal of cattle at home for slaughter than exported.
Programs in which retailers and food service are looking for AAA or 100 percent Canadian beef have been influential.
“When you think about the impact of any of these fast food or hamburger chains that are going to 100 percent Canadian, it means in order to supply that contract the packers have to have Canadian cows,” she said in an interview.
Producers have not changed their marketing plans and cull rates remain around 11 percent, but the value is staying at home.
Fewer feeder and slaughter cattle are being exported to the U.S. Since 2014, feeder exports to the U.S. have been declining because of competitive bidding from Canadian feedlots and packers. There have also been a small number of U.S. feeders entering Canada, but no import figures are available.
“Even though you have not increased the herd, we are increasing production with feeders,” she said.
The U.S. herd continues to grow at around three percent a year, and by next fall another 1.2 million calves are expected to appear on the market.
The Americans are looking at record beef production in 2018, so they need to increase their per capita meat consumption or find alternative markets.
“They have got some wiggle room where if they had to they could push it onto the domestic market, but what they are really depending on is exports,” she said.
“They really need to be exporting this product to get the prices or they will be challenging their domestic consumer with a lot of protein. That will be really critical for cattle prices moving forward.”
The hog sector is also expanding with new processing plants opening in the United States.
U.S. beef packers are working at 103 percent capacity, which means working six days a week and double shifting. Labour supplies are tight, and companies do not feel confident about opening new plants. Capacity could expand to 106 percent as more cattle come online.
Being at over-capacity has diminished interest in importing Canadian cattle to fill the slots, Grant said.
Canadian packing plants are working at around 82 percent of capacity in 2017 and have room for more cattle.
Canada’s protein production is up 2.3 percent at 11.8 billion pounds, tying a record set in 2008.
Annual production growth for beef was 1.6 percent, while pork was at two percent and poultry at 2.2 percent.
On the beef side, the additional meat production has been exported. Canada has found strong international demand.
Beef exports in 2017 are projected at 384,000 tonnes, a seven percent growth in volume, while value is up eight percent at $2.4 billion.
Canada’s non-U.S. exports are increasing. This year about 60,000 tonnes went to non-U.S. markets, which is the highest volume since 2010.
Exports to Japan are growing year by year, but they are interested in very specific cuts. China has agreed to allow fresh chilled beef into the country through a pilot project so more opportunities are expected there.
Exports to other parts of Asia are growing slowly but surely. These markets tend to take products with less value in Canada. There is limited volume, and more countries bidding on the same products drive up prices.
Overall, the U.S., Mexico, Japan, Taiwan and Southeast Asia are the key destinations. Canada also has a free trade agreement with Europe to accept up to 50,000 tonnes tariff free, but there are specific production requirements for the cattle, which take time to implement.
Cargill at High River, Alta., and JBS at Brooks, Alta., are working to get approved to export to Europe, and Harmony Beef at Balzac, Alta., may be involved later.