EDMONTON – A beef market outlook from an analyst with the Canadian Cattlemen’s Association predicts no improvement by year-end for an industry mired in a sinkhole of low prices and shrinking demand.
High carcass weights continue to be a problem, adding more beef to the supply when tonnage is already approaching record levels.
Although analysts had predicted beef tonnage would begin to drop by now, supply for the first six months of this year is already two percent higher. This trend is expected to continue until year end.
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The main culprits are steers entering feedlots at heavier than normal weights and then going to packers at larger sizes than average.
A record was set last year for steer carcass weight at 766 pounds. This year will likely surpass that at 800 lb. average dressed weight. The bottom line is an additional 58.5 million lb. of beef, the equivalent of 85,000 head for the first six months of this year.
Canada hasn’t killed any more cattle but the difference is made up when all classes of cattle, including cows, are heavier. Beef production in 1997 was close to 3.2 billion lb. and analysts expected it to drop by two percent. Instead it rose by two percent.
Producers can’t expect a price rally if weights are not brought down, said Anne Dunford, senior market analyst for Canfax, the marketing analysis and statistical arm of the Canadian Cattlemen’s Association.
“With the carcass weights the way they are, we’re looking at least a two percent increase in beef tonnage for 1998,” she said at the cattlemen’s convention here.
Adding to supply is the high number of heifers going to slaughter rather than being retained as breeding stock. About 57 percent of heifers are being finished compared to five years ago when a third were put on feed and later killed.
Demand also a problem
The problems of an ample beef supply are compounded by flat consumption. Canada’s population is growing, but per capita beef consumption hovers at 49 lb., down from about 80 lb. in the 1970s. Pork and poultry are chief competitors.
The North American pork industry grew by about nine percent, adding more meat to the congested market. Much of this expansion was intended for the Asian market but sales didn’t materialize because of financial problems in the Pacific Rim.
Growth has slowed to three percent from seven percent a year, but together these three classes of meat created 8.5 billion lb. in a slack market.
Other problems plague the industry.
The feedlot sector has lost money for the last seven months of this year. Losses average about $100 per animal and Dunford said it isn’t over.
“It’s stacking up to the losses experienced in the late 1970s,” she said.
Weak economies in Canada and Asia have done damage.
Lower byproduct values can be attributed directly to faltering Asian currency. For example, lower South Korean demand for hides cut $36 a head from the price of cattle.
“That hasn’t come back. That’s the Asian result and that isn’t changing any time soon,” Dunford said.
