Slaughter levels have been above year-ago levels for the past two months, with daily kills now close to pre-COVID levels
The backlog of slaughter ready cattle is slowly working its way through the system, according to market data.
Canfax senior analyst Brian Perillat told participants of the recent Canadian Beef Industry Conference that slaughter levels have been above year-ago levels for the past two months, with daily kills now close to pre-COVID levels.
“We have been able to work through the backlog somewhat, but it’s a slow process,” he said. “It’s going to take a little bit more time to work through these numbers.”
An estimated 130,000 head of cattle were backlogged this spring when Alberta’s two main processing plants, Cargill in High River and JBS in Brooks, experienced slowdowns due to worker illness with the virus.
Cargill closed completely for two weeks during the height of the COVID-19 outbreak among workers in its plant and JBS experienced slowdowns when many workers there became ill or did not report for work due to concerns about infection. A third federally inspected plant, Harmony Beef in Balzac, Alta., also experienced worker illness and temporarily reduced slaughter capacity.
Perillat said 2020 began with high hopes for beef processing and export, given that 2019 had the largest slaughter numbers of the past decade and Western Canada had grown its feed and slaughter capacity over the years.
That is in part why 2020 began with nine percent more cattle on feed in the West.
“We had a lot more cattle on feed and bigger numbers to work through, through the year, barring even any issues,” said Perillat.
The pandemic changed it all.
Slaughter numbers are down seven percent, year to date. Plants are concentrating on fed cattle, with fewer cows in the mix. Good grazing conditions have allowed producers to keep cows on pasture longer, easing the pressure on plants. More cows were also shipped to Eastern Canada and the United States during the slowdown, he said.
As well, many cattle are being fed for longer periods, raising a caution that those calves will be coming to market soon and potentially causing further backup and price pressure. However, Perillat said most cattle are being marketed “in a fairly timely manner” and although 100,000 head in backlog is a big number “we’re going to manage through it.”
Processing plant closures and pace reduction in the U.S. due to COVID caused similar problems there, said Brett Stuart, president of Global AgriTrends, during the same CIBC presentation.
Ordinarily processing 550 million pounds of beef per week, U.S. plants slowed to 350 million this spring.
The backlog of animals there was 1.5 million head and as of July 1, there were 956,000 cattle that had been on feed for 150 days or more, Stuart said.
“That’s a lot of overheavy cattle and that takes a long time to burn through. Those are cattle on maintenance rations, losing money. How long can you hold them? How long can you kick this can down the road?”
Placements fell at the same time. Stuart said estimates indicate 300,000 head more than one year ago were outside feedlots.
Plants will give priority to long-fed cattle so “we’re trying to create a hole in the future that those overweight cattle are going to fall into.”
It will be difficult to calculate the right timing for that, he noted, so market volatility is the inevitable result.
“Cattle slaughter is going to remain high. These backlogs can be carried for a long time. The packer is very good at holding those backlogs up once he gets them. It’s really hard to get current again. And so it’s just going to take time. That’s going to weigh on us through 2021.”