Record high beef production is expected in the U.S. and demand is holding, but it’s unclear if the growth is slowing
EDMONTON — Global demand for protein remains strong, but a senior analyst for Canfax said it is becoming harder to predict where beef fits in, with so much of the discussion focussing on meat alternatives.
Nevertheless, Canadian beef demand is positive and consumption is up slightly for the second year in a row.
“Canadians are eating a little more beef but retail prices are slower to react,” said Brian Perillat at the Alberta Beef Producers meeting in Edmonton June 11-13.
“Demand is not just consumption but how much people are willing to pay,” he said.
The United States has experienced aggressive expansion since 2014 and consequently more beef is available. Record high beef production is expected and demand is holding.
The big question is whether that growth is slowing.
“Beef cow slaughter is up around 10 or 11 percent but they also had the third largest number of heifer replacements this year. Unless the drought gets more extreme, the U.S. will likely have a large beef herd in 2019,” he said.
The Canadian herd size has remained flat for the last five years. The national herd is around 11.6 million head of cattle.
“I do not see a lot changing going forward,” he said.
Alberta has 1.5 million beef cows and breeding heifer replacements are flat.
“Without heifer retention, we are not going to grow the herd at this rate,” he said.
Canadian weekly slaughter is stable and profitable for packers. Cattle are staying at home rather than being exported for processing in the U.S.
Harmony Beef at Balzac, Alta., is slowly ramping up production and is at about half capacity killing fed cattle and cows.
Feeder exports are 60 percent higher than last year but still considerably lower than past years.
Canada is at a feeding cost disadvantage, but last fall western feedlots imported about 100,000 feeders because of the strong basis.
Markets are remaining supportive. More beef is being sold at higher prices, which is a healthy scenario.
Canadians consume about 54 percent of homegrown beef and the rest is exported, mostly to the U.S. Last year, exports reached a record $2.5 billion.
On the production side, Alberta cattle prices are volatile with fed cattle hovering around $140 per hundredweight. The summer fed cattle market has probably not seen its lows for the season. In the last two years, they bottomed out at the $130s.
If fed cattle prices drop this summer, current feedlot losses of $150-$200 per head could fall to $300 per head later this summer.
“How long those losses last will impact fall calf prices,” he said.
Cow-calf profits have continued but higher costs are expected this year and bids are moderate. Calves weighing around 550 lb. could average around $2 this fall.
Basis has been very positive but has fallen back in recent weeks. Since January Alberta prices have been at a $15 per cwt. premium to the U.S., which prior to 2015 was an unusual event. This adds an extra $200 per head going back to producers.
“If U.S. numbers tighten up a little more, maybe it will become a little more seasonal and we won’t be able to bank on a positive basis,” he said.