Cow herd dispersals have been common at auctions across the country in the last five years.
“We have seen over the last five years, a mass exit of cattle producers from the business,” said Jason Danard of the Calgary Stockyards at Strathmore, Alta.
An extended lack of profitability and an aging population of producers are considered key factors in the phenomenon.
Prices recovered in 2011, reaching record levels for all classes. However, instead of sparking herd rebuilding, many producers decided it was an opportunity to retire early.
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“We were seeing calves trade at levels we had never seen before,” Danard said.
Market analysis firm Canfax reports that average prices for 550 pound calves climbed to $154 per hundredweight in 2011 from $121 per cwt. in 2010 and were bid up to $158 per cwt. in the first week of December.
Prices for 850 lb. yearlings were $132 per cwt. in the same week.
The last time they were that high was in 2000, when the loonie was less than 70 cents US and feed and other costs were more favourable.
Canfax also reported bred heifers averaged around a record $1,400 each and bred cows were trading at $1,875 at the end of December.
“I do think, however, over the next five to 10 years that that will be the most profitable sector of the industry,” Danard said.
“I think the cow-calf sector will be where it’s at, but you need somebody who is willing to do the work.”
Canfax statistics show 2011 was the first profitable period for cow-calf producers in the last five years and only the third time in 10 years where the business paid.
Profitability usually entices more people to raise cattle, but the national herd has shown a steady decline since 2005 with the summer inventory at 13.8 million head.
The herd is in the same position it was in 10 years ago, said Andrea Brocklebank of Canfax.
Some heifer retention is apparent, but record high butcher cow prices at $71 per cwt. attracted breeding females to market.
“There are signals of expansion but we are not down to that point where we are going to see massive growth,” she said.
Cow herd populations are smaller throughout the world, said Travis Toews, president of the Canadian Cattlemen’s Association.
“This is a big deal in our industry today,” said Toews. “We are witnessing a major change in beef supplies and fundamentals.”
Expansion isn’t expected, especially in the United States. Strong corn prices in the Midwest encourage people to crop their land rather than grow forage.
As well, a record drought in Texas and Oklahoma has seen a mass cow herd reduction in those states. Females were slaughtered and calves went to feedlots earlier.
In the last year, the Texas cow herd has plunged by about 600,000 head, or 12 percent, according to David Anderson, a livestock economist at Texas A&M University.
The Texas cattle herd is larger than the entire Canadian herd, so a reduction of that historic magnitude has a substantial impact on the North American market, said Brocklebank.
“When you kill your factory, it is fully expected the U.S. cattle herd will continue to reduce,” she said.
It could be at least three to five years before rebuilding starts, she added.
Cattle and beef exports have always supported the Canadian market, but a shift has also occurred there. Canada now exports 44 percent of its entire production as meat or live animals compared to nearly 60 percent before the discovery of BSE disrupted trade in 2003.
Fed cattle exports were up 19 percent in 2010 but crashed 41.5 percent in 2011.
Canada used to ship as many as 800,000 head, but only 363,000 went out this year.
More cattle have been kept at home for processing. Other producers were reluctant to export because of the impacts of country-of-origin labelling in the U.S.
“There has been strong demand domestically for these animals to stay at home, given excess packing capacity,” Brocklebank said.
Cow exports were down 32 percent in 2011 to about 132,000 head.
Feeder calf exports have been down every year since 2009.
“We have moved from shipping over 300,000 head to the fact where we are lowest on record, below 1995 to 87,000 head this year.”
With a smaller herd there has been reduced slaughter. Beef production in 2011 is down 17 percent.
“This was the first year we saw a real decline,” she said.
Canada is the second largest exporter of grain fed beef in the world, but exports declined 19 percent in volume and 10.5 percent in value.
“We have seen some growth with the resumption of market access,” Brocklebank said. “The big factor is, you can’t export what you don’t produce.”
Beef exports are down 19 percent to the U.S. and about 30 percent to Mexico.
“This is partially due to the weak economy and the relative strength of the Canadian dollar that impacted the competitiveness of our product,” she said.
Exports to Hong Kong and Russia have grown, but the volumes are small.
Canada has become the favourite destination for U.S. beef, with imports up 17 percent. Most of the imports were trim that was mixed with domestic product for ground meat.
“We are a relatively attractive market for the U.S., especially to Eastern Canada,” she said.
A U.S. Department of Agriculture report in December said an annual value record was achieved for the first 10 months of 2011.
As of October, U.S. beef exports were worth $4.49 billion.
Mexico is the leading volume destination for U.S. beef at 470 million lb., but Canada is the top value market at $861.9 million.
On the demand side, Canadians are eating less meat.
Canadian beef consumption has been declining since 2003 to a new low of 20 kilograms per person. Total Canadian beef consumption of 944,380 tonnes was the lowest since 1997.
Growth in poultry has leveled off and pork consumption is also falling.
However, consumers are also paying a higher price for beef. North American beef prices were up seven percent, pork improved by 15 percent and poultry increased by three percent.
