OKOTOKS, Alta. – When Alberta rancher Wendy Adams sells a cull cow for 35 cents a pound, somebody is making a profit and she knows it is not her.
In pre-BSE days she could sell a good D1,2 cow for at least 55 cents a pound. But as long as there is a surplus of beef from cows older than 30 months, prices are likely to stay low.
Packers appear to be earning more value from these cows, with no added returns to the producers, Adams said at an Alberta Beef Producers zone meeting in Okotoks.
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“I think the packer is being a very good businessman.”
The Beef Information Centre is compiling comparative information about the shift in non-fed and fed kill levels and the shift in prices for different classes of cows. It plans to release the data early next year.
“The problem we’ve got is getting good data from the packers,” said BIC chief executive officer Glenn Brand.
Cam Ostercamp, who heads the Beef Initiative Group, said producers are carrying the burden of losses on cow prices.
“The producer is carrying the brunt of this. The packer has lifted considerable amount of profit out of our pockets,” he said. “I appreciate all the efforts that have gone into BIC, but I also can see clearly that the strides you have made are not benefiting the primary producer.”
He was referring to the centre’s commercial beef program to move more meat through fast food outlets, restaurants and specialty items such as Maple Leaf’s ready to heat pot roast.
While Brand agreed not every one has shared the pain equally, he said the problem would be worse if new markets had not been found.
“There wouldn’t be as big of a market for those animals as there is,” he said.
“It is not the size of the market we ideally want … but because we have been able to quadruple the amount of product for over 30 months, we believe it has helped support prices.”
Canada produces 903,000 to one million tonnes of beef a year from all classes of cattle. Nearly half is exported as boneless beef from cattle younger than 30 months.
The country produced 125,224 tonnes of commercial beef in 2002 and 163,778 tonnes in 2005. BIC expects an increased cow kill and better use of commercial beef will increase production to 196,386 tonnes this year. That is the equivalent of 820,000 cows at an 8.2 percent cull rate.
However, that is only part of the story, said consultant Charlie Gracey, who compiled a study with Canfax on the age distribution of cows.
“You’ll hear the industry bragging about the fact that we are killing more cows than we ever did before. That is a true statement, but we are exporting zero,” he said.
Canada used to export 42 percent of its cows and more than 70 percent of its bulls to the United States because there were not enough facilities to handle older, larger animals. These animals and their beef are now banned from most export markets so the meat must find a domestic buyer.
“Because we have more than our market can absorb, the price is low,” Gracey said.
Besides more beef, there is the problem of an aging cow herd.
“In 2003-04, our culling rate went down to six percent, which is impossibly low,” Gracey said in an interview from his Ontario home.
“You can do that for a little while, but if you do it for too long, the herd gets too old.”
The problem of surplus beef and too many old cows will continue until other countries relent and allow imports of mature animals and beef.
“This problem is only to get worse until somebody does something about the unjustified fact that over 30 month old animals can’t be exported,” he said. “There is no justice in that. There is no science in that at all.”
Imports of beef are down because domestic cows are so cheap, he added. On the other hand, prices for beef from young animals remain high because they are set against the American price.
Large processors sell to large retailers for the same price regardless of location.
“The next sale that I make as a Cargill either goes to Safeway or to the States and I am not giving Safeway any breaks. Why should I?” said Gracey.
A major study commissioned by ABP and the Western Stock Growers Association on the cull cow situation confirmed severe losses.
Plan 2000 Management Consultants Ltd. and Informa Economics estimate that producer losses on D1,2 cows from June 2003 to December 2005 were $470 to $547 per head. Losses on D3 cows were $390 to $474 per head. Losses in Eastern Canada were higher.
Several federal and provincial support programs provided $43 per marketed cow, which reduced the loss from $489 to $390 per head.
The study said cull cows account for about 14 percent of a beef farm’s revenue but during this period fell to about seven percent of revenue. This contributed to increased debt or declines in equity.
In addition, those electing to hold cows for another breeding season experienced losses in lower calving rates, reduced weaning weights and higher feed costs when managing older animals.
There are also new costs in processing. Packing plants must remove all specified risk materials, which costs $25 to $50 per head.
New rules about removal of these materials from the feed chain and from fertilizer could add as much as $5 per head. If the U.S. does not take similar action, it leaves Canadian packers at a disadvantage to the Americans but could also result in more cows exported to U.S. slaughter plants when the border reopens.
The study recommended revising the cow grading system to improve the value assessed on cow carcasses.
The Canadian Beef Grading Agency has been approached to work on revisions.
