LONDON, Ont. — Solid demand for beef is holding up prices.
“We continue probably to be in fairly impressive markets and we continue to look at the big supplies coming down the pipeline … with very solid demand for domestic consumers and internationally,” Brian Perillat, senior market analyst at Canfax, said during the Canadian Beef Industry Conference held in London Aug. 12-16.
Longer-term trend prices are historically very strong, but seasonally markets can bounce.
Feeder calf prices are strong but the fed cattle market struggled this summer and lower prices for that category are anticipated.
“Seasonally in Canada we do tend to see a little more weakness as we go into August and September,” he said.
On the feedlot side there has been a string of losses in Ontario and Alberta.
“Feedlots right now in basically all regions are a little into the red ink,” he said.
The West is dry so more calves could move to market earlier this year and pressure prices.
Cow-calf producers are profitable but the dollars are shrinking compared to the extremely profitable years of 2014-15.
The United States has been through a large and rapid expansion, whereas Canada remains stable with about 3.8 million cows, the same size as it was in the early 1990s.
“We have lost a million and a half cows in just over 10 years,” he said.
“We don’t see any expansion coming in the next year. A big part of it is the feed circumstance and the market side,” he said.
Heifers are not being retained at a rate to prompt growth and cow slaughter continues to be strong.
“In general, the Alberta cow market has one of the strongest cow markets in North America,” he said.
Alberta-fed steers are also at a premium to Nebraska.
“For almost two years the Alberta fed cattle market has been the strongest fat market in North America,” he said.
Live cattle from all classes are staying in Canada for finishing and processing rather than being exported.
Canada should produce about three billion pounds this year. Carcass weights are on an upward trend by adding about 30 lb. per head per year, but some moderation has been noted this year.
The shrinking cow herd affected the processing sector, which needs cattle to stay in Canada. In the last year or so, about 65,000 head a week are killed in Canada so the packers are working flat out.
“Those utilization rates are a good sign in terms of the health of the sector,” he said.
Canadian retail beef demand is solid and supports cattle prices. Consumption has dropped a bit but the amount people were willing to pay was strong.
Demand has also been strong in the U.S. where the industry is in its fifth year of expansion, said Kevin Good of Cattlefax.
The national herd is at 31.7 million beef cows.
He anticipates this year could see a slowdown but calf prices are strong so people have an incentive to continue growing.
“More heifers are going on feed but not at the point where they are liquidating. This combination would suggest we are still expanding this year,” he said.
However, very dry conditions in the beef-producing states bear watching. The corn crop is expected to be adequate but forage could start to run out in the very dry regions of Kansas, Oklahoma and Texas.
With more cows producing heavier weight calves, beef production is reaching record levels.
However, in the last 20 years the U.S. has lost many major beef plants because of lack of cattle and profitability.
With ample supplies of cattle in a limited number of plants, Good predicts more profitability in the packing segment.
While beef production is soaring, pork and chicken is also increasing.
“We are doing a great job but our competition is doing a good job as well,” Good said.
He also warns about inflation as energy, land, feed and interest rates increase.
“If we do have inflation in the grains market, to some degree that hits our competition, pork and poultry, harder than us because their input costs on the grain side make up a higher percentage of input costs,” he said.
As well, the global beef herd is growing in countries like Brazil, China and Argentina .
Global beef production is up 2.4 percent this year compared to stagnant growth between 2007-15.
“As we go into that global market, recognize that we do have more competition around the globe from a tonnage standpoint,” he said.
However, as the world population grows, there should be a place for that extra beef.
“There are more mouths to feed each and every year,” he said.