RED DEER – A major structural shift is happening for beef operations in Canada and the United States.
The downsizing and consolidating occurring in both countries is a response to higher costs and slim profits, said a trio of market analysts at the Alberta Beef Industry Council convention in Red Deer last month. Herd sizes are down by one percent, according to recent statistics.
In Canada, it is estimated the national cattle herd is less than 14 million with female animals especially being removed, said Anne Dunford of Gateway Livestock in Taber, Alta.
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Bean prices have been slumping and the outlook is for more of the same.
Canada’s cow numbers peaked in 2005 and grew substantially compared to the U.S. herd because closed borders due to BSE stopped the normal culling process.
“As we get into 2008, we are going to see more cows processed in this country,” Dunford said.
An estimated 850,000 cows will be slaughtered this year, the highest level since the drought year of 2002.
“It will go a long way to getting our cow numbers back to pre-BSE levels,” she said.
Dunford predicts the cow herd could decline by as much as four percent next year, leaving the country with its smallest numbers since 1990.
Since borders started opening, more young cattle left the country for slaughter and feeding in the U.S. Last year 839,000 fat cattle, of which about 40 percent were heifers, went stateside. More than 500,000 feeders headed to the U.S. and three-quarters of them came from Saskatchewan and Manitoba. Most were destined for Nebraska, Colorado, Iowa and Washington.
That left cattle-on-feed numbers down sharply by up to 13 percent in Alberta and Saskatchewan. Less than 900,000 head were placed in the first part of this year.
While the U.S. is absorbing plenty of Canadian cattle, its numbers are also down and no growth is expected in the American cow herd, said Duane Lenz of Cattlefax in Colorado.
Many leaving the industry had small herds and worked off the farm. They could not afford to hold on during this period of high costs and low returns.
There is no relief in sight as corn prices continue upward. Lenz suggested it could exceed $5 a bushel later this year depending on the corn harvest and demand for grain for ethanol.
Private analyst Charles McVean of Tennessee agreed the ongoing liquidation is significant, although it is harder to monitor U.S. statistics because of year round calving and herds spread around the country. He agrees downsizing is ongoing since 2006 for a number of reasons.
“The data challenges whether the liquidation cycle ever came to an end,” he said.
The decisions are fueled by severe drought in the southern states. In the last year there was an acute shortage of hay.
U.S. ethanol policy is also pushing up the price of grain. This demand for grain is pushing cows off the land for more urban development and crop production.
“As we speak, some of the finest pasture land in the United States is being plowed up to shift to row crop or corn production,” he said.
At the same time, young people are leaving for jobs in other sectors.
As the number of beef operations decreases, more cattle are controlled by fewer people in the U.S. Among the feedyards with more than 16,000 head capacity, about 80 percent are controlled by about 250 operations. They are concentrated in the central U.S.
Lenz and Dunford agreed this is a tough period for livestock producers but they said ranchers should look at opportunities existing offshore if market access is gained. Improving standards of living in developing countries increases the demand for higher value products like beef.
