Rick Wright sees good times ahead for Canada’s cattle industry once the United States reopens its border to imports of live animals younger than 30 months.
But while the market manager for Heartland Livestock Services in Brandon said it’s no secret that there’s pent-up demand in the U.S. for Canadian feeder and finished cattle, and that demand should make for strong prices once the U.S. border opens, he warned against blind optimism.
“The thinking is right to a certain extent, but they (U.S. buyers) don’t need them as badly as we think they do,” Wright said during the Manitoba Livestock Expo in Brandon last week.
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U.S. feedlots are not starved for cattle, he added, and Mexican cattle are helping stock feedlots in the southern part of the country. That could temper prices once Canadian cattle start moving south again.
Price is what makes U.S. buyers keen to see a resumption in imports of Canadian cattle, which are attractive largely because of the value of Canadian currency.
Rising prices on retail beef can prompt consumers to shift to other sources of animal protein such as pork and poultry, which U.S. beef packers and processors want to avoid. Sliding beef demand would make it harder for those plants to continue operating at full capacity, which is where they are most efficient and profitable.
As long as the loonie’s value does not rise too much, U.S. demand for Canadian cattle should be strong until at least 2006, Wright said.
However, if the Canadian dollar continues rising, as it has for much of this year, American buyers may be less inclined to look north for cattle.
“One of the biggest enemies we have in the business right now is the value of the dollar,” he said.
“As long as the dollar doesn’t start running away on us, we should be in a fairly good position.”
Wright said there’s evidence that herds on both sides of the border will get smaller over the next three years, which would reinforce strong prices.
That trend has already been seen in the U.S. for several years, but is being partly offset by faster weight gain.
“Supply and demand should make for good stable to strong prices,” Wright said.
Heifers at auction
In Canada, cull cow prices are de-pressed because of the bovine spongi-form encephalopathy crisis. To generate cash flow, producers are sending more heifers to market than they normally would, while holding back more cull cows.
Among those heifers are animals that before the BSE crisis would have been kept on the farm as replacement animals. Their slaughter is one of the reasons the Canadian herd is expected to shrink.
Wright anticipated the U.S. border will reopen to imports of Canadian cattle younger than 30 months by March 1, although he knows there could be hitches to getting the necessary regulations in place.
He thinks finished cattle will be allowed across the border before feeder cattle, since the finished animals will go straight to slaughter in sealed trailers to fixed destinations.
Like most people, he predicted it will be at least a couple of years and probably longer before cull cattle from Canada start moving south again.
But on the positive side, he noted that cattle producers typically cull only about 10 percent of their herd a year. Their main income still comes from the sale of steers and heifers and prices for those animals have been higher this fall than many people expected.
