Consumers were at home with more disposable income and willing to spend it on beef, even with the high retail prices
Beef consumption in Canada rose slightly last year and market analyst Anne Wasko says that’s encouraging as the industry works through strong supply.
Canadians ate about 18 kilograms of beef per capita in 2020, an increase of .3 percent.
Overall, beef demand was 5.5 percent higher than in 2019, she told the recent Saskatchewan Stock Growers Association annual meeting.
Wasko said she wouldn’t have predicted that outcome in March 2020 when the COVID-19 pandemic first hit, but people were at home with more disposable income and willing to spend it on beef, even with high retail prices.
“Pork took it on the chin, down 15 percent,” she said, noting a lot of Canadian pork was exported.
Chicken consumption was down two percent.
“We know retail beef prices were higher at the counter last year,” she said.
“They were actually up six percent in 2020 versus 2019 but that didn’t deter consumers.”
Whether this trend holds true for the rest of the year and into 2022 will depend largely on economic considerations such as inflation and interest rates.
The other positive news from 2020 comes from Canadian export numbers. Although beef exports declined, the value set an all-time record of $3.25 billion. Through the first quarter of 2021, beef exports are up 12 percent in volume and 11 percent in value, she said.
Canadian beef imports last year were up 20 percent. Wasko said many countries saw elevated import levels due to COVID impacts.
But she said imports are returning to more typical levels. Year-to-date imports are down 13 percent and 2020 is likely to stand out as a COVID aberration.
Beef supply is a concern going through the second half of this year and into 2022, Wasko said. Canada has been able to get out from under the COVID backlog quicker and to a more current supply situation, while the U.S. has not.
U.S. weekly fed steer prices have been holding at about US$120 per hundredweight even though wholesale prices are at the second highest level in history. Tighter supplies are likely this fall and higher prices should follow into next year as long as that continues, she added.
Western Canadian fed steer prices have been fairly strong in the low to mid C$160s per cwt. Those too should drop, assuming higher U.S. prices and depending on basis. May saw the strongest basis in history at +18.
“What is happening today in Canada, faster than the U.S., is simply put we’ve been able to get current faster, get through that backlog faster. I do think they’re going to get there. The question is, are we looking at a positive basis level right through the rest of 2021? And are we back to looking at a five-year average or are we looking at a positive basis when we start talking about 2022?”
Feeder cattle prices are seeing a similar relationship, although the highest basis usually occurs in late summer, not spring.
In the calf market, the seasonal tendency is opposite and Wasko expects a decline into October.
High feed costs are a factor in both countries.
American growers planted about 91 million acres of corn this year with an estimated yield of 172 bushels per acre and production of just under 15 billion bu. Ending stocks are tight and prices have moved from $3.50 per bu. a year ago to about $7.
Canadian barley has also moved up from $200 per tonne at Lethbridge to $360.
“For the first time when I run the relationship of Lethbridge versus U.S. corn in Canadian dollars, and accounting for a protein equivalent, we’ve got barley prices back to a feed-cost advantage for the first time since the summer of 2017,” she said.
Both countries are also dealing with smaller beef cow herds. Canada’s herd of 3.5 million head as of Jan. 1 is one of the smallest in more than 30 years and four percent smaller than 2019.
“Even as recent as 2008, when we had five million beef cows, today’s 3.5 million certainly fits in tune with the supply situation,” Wasko said.
In the cow market, slaughter was down 20 percent and exports were up 30 percent. Packers focused on moving the youngest cattle through, she said.
Dry conditions didn’t send as many cows to town as might be expected. Year-to-date marketings are still down by one percent. That movement is something to watch through the rest of this year.
Wasko also said the beef cow cull rate was 10.7 percent last year, which is under the long-term average of 12 percent.
“Anything above 11 percent we talk about liquidation,” she said.
The situation is different in the U.S., where the cow herd is contracting.
“Now in hindsight it’s pretty clear that Jan. 1, 2019 was their peak of this cattle cycle, if you will,” said Wasko. “On the first of January 2021 we saw U.S. beef cow inventory down 100,000 from the previous year and it is now down half a million head from 2019.”
Forecasts for 2022 call for another two percent decline, which would put the U.S. at one million head fewer than the 2019 peak.
U.S. pasture conditions are the worst in 20 years, which is driving producers’ decisions. April data shows beef cow slaughter up 8.4 percent in that month alone.
“We’ll be watching this closely,” said Wasko. “Slaughter at this present time at the present rate is above the level that we would have started off in 2011, and 2011 was one of the largest U.S. beef cow slaughters in the last, certainly, decade at least. We are certainly seeing a sell-off.”
Total numbers of cattle on feed in western Canada were down five percent from a year ago, as of May 1, but three percent above the five-year average. Wasko said it’s important to remember the 2020 number was inflated and even before COVID, the region had the largest number on feed since 2002.
She said the number will drop substantially heading into the second half of 2021.
But she did note that western Canada is feeding more cattle, even with the smaller cow herd, as fewer feeders leave the country and imports arrive. She expects that to continue.
“We’ve already seen just short of 100,000 — 98,000 — head of feeder cattle coming into Canada while our exports for the first part of this year were 35,000,” she observed.
Continued expansion and new builds in the feedlot sector are contributing to those numbers.
Wasko said there have been “significant tonnages” of beef in the system for the last 18 months and production is already up 20 percent year-to-date.
U.S. cattle-on-feed numbers are up five percent at the second largest total ever, Wasko said. She believes that will drop substantially through the second half of the year as the U.S. struggles to get current.
U.S. fed slaughter was down last year and clearing the backlog has taken much longer than anyone thought.
On fed cattle, marketings will be up; by the end of May they were already up 14 percent. And she said packers may look at adding more cows into their slaughter mix.
Canadian carcass weights in 2020 were the second heaviest on record at 917 pounds. They are now 23 lb. less than that but still seven lb. over the five-year average.
Wasko said that is encouraging.
“That tells me that the western Canadian cattle industry is current. I think the U.S. isn’t quite as current as we are, and they really need to get there, to be blunt.”