Canada’s cow herd will continue to shrink in the short term as producers cope with market volatility, says the Canadian Cattlemen’s Association research manager.
Andrea Brocklebank, who is also interim manager of Canfax, told the association’s semi-annual meeting in Regina last week that she expects a reduction of two to three percent this year, compared to six percent last year.
She said the biggest unknown is what happens this fall, given drought and probable feed shortages in Alberta.
“If they don’t have feed despite even a want or desire to keep their animals, we’re going to see larger numbers of cows come into the market than would otherwise be expected,” she told reporters.
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“If this is the case, inventory reductions might be more dramatic, but overall through Canada we’ve got some other areas where we’re likely starting to see things turn around.”
Producers have been bombarded with one problem after another since BSE was found in Canada in 2003. In the past year, the volatile Canadian dollar, escalating feed costs, higher oil prices and ongoing market access issues have all affected the industry.
Brocklebank said more recent problems include H1N1 and slumping beef demand.
Recession-weary consumers are eating fewer restaurant meals, which affects middle meat values and overall returns. When consumers are choosing beef to cook at home, they are tending toward lower priced cuts.
The H1N1 virus, although not directly linked to pork, has limited exports and resulted in a large supply of cheaper pork on the market. Brocklebank said that has dragged down the entire meat sector and caused consumers to shy away from more expensive beef and poultry.
Tighter supply should force prices up, she added, but demand must also pick up before cut-out amounts improve and packers begin to pay more for fed cattle.
Every $1 increase in cut-out value equates to a 67 cent increase in fed cattle prices, she said. Ribs and loins are typically worth about 50 percent of carcass value, and they are trading below historical volumes and at lower prices. Trim is worth about 12 percent, and demand is relatively strong.
Byproducts have taken a huge hit and tallow demand for the oil industry is weak, as is hide demand from the auto industry.
“Overall, on the demand side, the global economy has had a dramatic impact on us and our overall returns,” Brocklebank said. “While we have started to see that reduction in size that should support prices, we’re not seeing that right now in the near term.”
Lower inventories are also affecting exports. Exports of fed cattle are projected to be down 23 percent while feeder cattle exports are down 48 percent.
Brocklebank said inventory won’t increase until 2012 or 2013.
