The malaise hurting the beef industry has struck hardest at the feedlot sector, which has lost money for 13 consecutive months.
Now, as the fall calf run is starting, industry analysts predict the worst should be over as beef inventory shrinks in the liquidation phase of the cycle.
Heavyweight cattle, lots of beef in the marketplace and a big spread between grades continue to plague the industry on the slaughter side.
“Losses have not been the $10 and $20 stuff. It’s been three digits,” said Canfax senior analyst Anne Dunford.
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Heavyweight cattle tend to peak in September so it’s hoped the bottleneck will start to clear in the last quarter of this year.
Comparatively, eastern Canadian feeders haven’t suffered the losses of those in the West, said Kevin Grier, editor of the Canadian Cattle Buyer.
Grier said eastern lots didn’t pay as much for their calves as their western counterparts who were bidding competitively to fill expanded pen space.
However, carcass weights are even higher in Ontario than the West where the average has edged up past 800 pounds as feeders hold back cattle.
When cattle are losing money and feed grain is cheap, feedlots hold them back and put more weight on them. This year, cattle entered feedlots larger, gained more than average and left the lot at higher than normal finished weights.
“Cheap feed and the idea that things get better next week are driving up the weight,” Grier said.
Longer than expected
What surprises him is the length of this slump. Four months ago he predicted the situation would have corrected itself. Now he forecasts the end is still out of sight until front end supplies are chewed through.
“We are getting through all these cattle. We’re just getting through them far slower than we should have.”
He expects Alberta prices to improve later in the fall by about $4 per cwt.
“The whole caveat has to be that we market our way out of this,” said Grier.
Edmonton analyst Herb Locke says one of the problems facing the industry is that it did not create more demand for beef during the down phase of the cycle.
“One of the biggest problems in the beef industry is that in the down side of the cattle cycle when you have a lot of meat, you’re supposed to commit yourself to rebuilding demand,” said Locke.
“The cattle industry knows it’s going to have too much meat every 10 years. They have known this for 40 years.”
Also there is a wide spread between the grades and packers profits have been looking good since June.
“The Choice-select spread at $10 per cwt. is a huge spread. It shouldn’t exist in summertime. It shouldn’t happen until the non-fed grass beef comes to market. The market is trying to tell you ‘We don’t want them,’ ” said Locke.
Not geared to demand
He says the problem isn’t too much beef, but the wrong kind of product offered to consumers.
And chicken continues to peck away at the market as people buy more chicken breasts, wings, fingers and chicken sandwiches at fast food restaurants.
Poultry quotas have increased and producers are selling more chicken at a higher price while pork and beef can’t seem to get a break, said Grier.
“It’s quite a trauma for pork and beef producers to look over and see chicken not only increasing their prices at the wholesale, but selling more.”
He tracks Ontario fresh pork and beef prices and has found pork is featured frequently to help move ample supplies yet chicken has been featured less and has had no problem selling.
“They haven’t been featuring it, but they are still getting decent sales and margins on it,” said Grier.
In the third quarter of the year over the summer, beef and pork were featured items 35 percent of the time. Earlier in the year beef was featured 40 percent of the time compared to pork’s share at 25 percent.
