COCHRANE, Alta. – Seasonal records and all time high prices should be enough to encourage North American cattle producers to expand, but it’s not happening.
Western Canada appears to be turning the corner faster by keeping more heifers at home, but the eastern herd is shrinking, even though market signals are favourable, says Brian Perillat, a senior market analyst with Canfax.
Replacement heifer retention increased by 8.2 percent in the West but fell 2.4 percent in the East.
“It is still a low number of retention and it is not enough to offset our culling of our cows,” Perillat told an Alberta Beef Producers zone meeting Oct. 25 in Cochrane.
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He expects the 2012 calf crop to be smaller than this year.
Cow prices are approaching record levels at $80.50 per hundredweight. They have averaged $71.27 during the year compared to $69.29 in 2001, the last period of comparable profitability.
Finished cattle were worth $121 per cwt. in 2001 but this year have stayed around $115 per cwt., although a seasonal record of $120 was briefly reached earlier this year.
As well, fat prices in the United States achieved record levels, reaching $125 per cwt. in August.
Currency issues
However, Perillat said market volatility is the name of the game. Prices change daily and marketing decisions are hard to make.
Calf prices change by three cents per pound for every one cent change in the loonie.
There is money to be made in the beef business, but the U.S. cattle inventory remains in a downward trajectory of one percent per year.
Cow slaughter is up four percent because of drought in Oklahoma and Texas, and the most recent U.S. cattle-on-feed report saw placements up over the five year average for this time of year. Heifer replacement remains below average as well.
The situation will increase beef supplies in the first quarter of 2012, but that is pulling lighter cattle forward and fewer are being born to replace them next year. The beef sup-p ly will continue to fall even as exports remain strong.
A weaker dollar helped the United States become a net exporter of beef rather than a net importer in the first half of the year.
The Canadian beef supply is expected to be down 18 percent. The country is expected to accept more U.S. beef, mostly in the East.
Canada is also stepping up its exports, with the U.S. remaining the main market. However, more beef is also going to Japan, Hong Kong and Russia.
“We are still making progress in export markets,” Perillat said. “Even though our beef supply is lower, we are actually exporting more to the non-NAFTA (North American Free Trade Agreement) countries.”
