Strong beef demand continues to keep industry healthy

RED DEER — The story of Canada’s shrinking cow herd is getting repetitious yet the industry continues to do reasonably well thanks to good demand for beef.

“Consumers still spend a lot of money on beef. It is their number one protein expenditure,” said Brian Perillat of Canfax.

Consumption has grown for the last three years and Canada is exporting beef more at a higher value, he told about 650 people attending the Alberta Beef Industry conference held in Red Deer from March 12-14.

The United States has experienced four years of rapid expansion and is anticipating record beef production of 27.7 billion pounds, a 2.7 percent increase for this year.

“Canada has the smallest cowherd since 1991,” he said.

More cows are going to slaughter and heifers are not being retained.

Dry weather and land-use competition between grain and forage land have discouraged growth. Producers are not keeping replacement heifers to build their herds.

“We should be keeping 700,000 to 800,000 heifers if we were truly in expansion,” he said.

Feedlots are full but owners have lost money for the last few months. They are not draining equity but this spring has been disappointing. It comes down to basis levels shifting from a positive position to negative numbers.

Traditionally, the U.S. market is at a premium but last year Alberta moved to positive basis levels. That ended in February with the lowest levels for the month since 2014.

“We went from extremely strong basis levels to very negative basis levels. These are $20 swings going from a plus $5 to a minus $15. That is $300 per head or $250 per head,” he said.

Feed is also more expensive this year.

Cattle move to where feed is available, so more are going south. However, feeder exports are still historically low at about 194,000 head last year. In 2018, about 180,000 head of dairy calves were imported. A few years ago, 400,000 Canadian feeders went stateside.

Slaughter usage is dependent on keeping cattle in Canada. Packing plants are running flat out killing about 69,000 head a week, including Saturday shifts.

“We have seen really good utilization at the packing sector and feedlots are full,” he said.

The cow-calf sector is profitable but profits are shrinking and there is more volatility.

“Everybody is going to have their own numbers. There is huge variation between operations.”

Calf price projections on a 550 lb. steer could be around $2 per lb. this coming year.

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