PONOKA, Alta. – Canada’s BSE experience and subsequent market disarray has been unprecedented, says Kevin Grier, a livestock market analyst with the George Morris Centre in Guelph, Ont.
“No one faced a situation where 69 percent of their industry was exported and they couldn’t do it anymore,” Grier told a producer meeting in Ponoka.
Before the announcement on May 20 that a case of bovine spongiform encephalopathy had been found in Alberta, Canada slaughtered about 56,000 cattle a week. Total packer weekly capacity is 74,000 with 80 percent controlled by four companies: Better Beef in Ontario; Cargill Foods and Lakeside Packers in Alberta and XL Foods in Calgary and Moose Jaw.
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When international trade halted, a backlog of market-ready fed steers and heifers, cull cows and bulls crowded the system.
“The industry needs 55,000 per week, but 85,000 (head) were available,” Grier said.
Trade in beef from young animals to the United States resumed Sept. 10 but a backlog persists.
The situation could have been worse if not for increasing beef consumption in Canada. Grier estimated per capita consumption is 52 pounds this year compared to 48 lb. in previous years.
Yet frustration is obvious as Canadians watch the American market achieving unprecedented heights.
American processors are short of cattle because the U.S. cow herd and calf crop have dropped to their lowest levels since 1975. Short supplies have kept marketings current so no heavy weights are going to market, adding extra beef to the pile.
Before May 20, Americans bought the equivalent of 20,000 slaughter cattle and beef a week from Canada, about six percent of their requirements.
“The fact that our cattle were not down there helped, but it doesn’t tell the whole story,” Grier said.
The U.S. Department of Agriculture reported cattle prices have increased 34 percent since July, and this month Nebraska Choice steers went from $90 US to $116 per hundredweight compared to a year ago when the price was $64 per cwt.
Prices are up because consumer demand for beef has increased nearly 10 percent since 1998, after declining for 20 years. Several years of liquidation in the North American herd also reduced the supply of market-ready cattle because fewer calves are being born.
These factors make market projections difficult.
Canadian prices are governed by the American market, exchange rate and local supply and demand. However, backlogged supplies and lower feedlot placements are disrupting normal market patterns.
“Price discovery is whatever it takes to get the cattle,” Grier said.
Canadian fed cattle prices should improve toward the end of the year. Grier suspected there could be a shortage of slaughter-ready cattle because of lower placements in the summer and fall.
Feeder prices are based on the fed price, grain prices and supply of cattle. Feeder supply is higher than normal because of a lack of exports, but Grier anticipated continued price improvement.
“I can’t explain why they were as high as they were this fall,” Grier said.
“They were out of line with what we would normally have expected.”
The cow kill is a continuing problem because there are too many culls available relative to processor capacity.
