The Canadian cow herd has shrunk by one million animals since 2005 and the downward trend isn’t expected to switch directions anytime soon.
Anne Dunford, general manager of Gateway Livestock Marketing, said the herd has fallen from 5.3 million beef cows Jan. 1, 2005, to an expected 4.3 million as of Jan. 1, 2011.
She told Manitoba Ag Days in Brandon Jan. 19 that it will take several years to recover from that kind of drop because fewer cows equals fewer heifers.
“What’s that’s going to do? It’s going to produce less steers and heifers. No question about it,” Dunford said.
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“How do we run packing plants? Steers and heifers. How do we run feedlots? Steers and heifers…. Even if we do start to keep heifers this year, we can’t change this herd until 2013, which really doesn’t change production until 2014.”
Shrinking herds in Canada and the United States are supporting cattle prices.
Dunford said fed steer prices in Western Canada have increased from less than $80 per hundredweight at the beginning of 2010 to more than $100 per cwt. earlier this month.
Those strong prices should continue throughout 2011, she added.
Dunford expects fed steers in Western Canada will sell at $96 per cwt. in the first quarter of 2011, $102 in the second quarter, $91 in the third quarter and $105 in the fourth quarter.
Her predictions were welcome news for producers such as Albert Hamilton, who farms near Glenboro, Man.
Hamilton is about to sell his 850 pound feeder calves and said it’s a much better feeling compared to previous years because he’s selling into a strong market.
“We’re in the driver’s seat for a change.”
He said he feels positive about cattle prices over the next few years.
“The numbers are saying we’ve turned a corner. We’re on our way up.”
Dunford encouraged producers to watch the heifer replacement number in Statistic Canada’s cattle inventory report.
It was down to 624,000 beef heifers July 1, 2010, from 841,000 in 2005.
Dunford said the number could be on the rise, but she remains skeptical that there are enough replacement heifers to rapidly repopulate the country’s cattle herd.
With that in mind, Dunford predicted overall steer and heifer numbers would continue to decline in Canada.
She said fed cattle marketings would likely be down six percent in 2011 and drop another five percent in 2012, when the steer and heifer inventory could hit 3.1 million.
“That means we’re going to have 670,000 fewer steers and heifers (compared to 2005) to put on trucks, to go through auction markets, to move through packing plants…. Everybody is going to feel this,” she said.
“I haven’t even factored in a big heifer retention. What happens if we start to keep heifers back in the herd? There’s even less for feeding, so you could have a more dramatic (decrease).”
Following her presentation, Dunford acknowledged that market speculators, such as hedge funds, helped drive up cattle futures prices in North America last year.
Feeder cattle futures on the Chicago Mercantile Exchange began 2010 below $95 per cwt., but certain contracts topped $130 per cwt last week.
She said speculators could suck the life out of the market if they decided to cash in their profits to buy another Lexus.
However, when that will happen is anybody’s guess.
“They (funds) want to play these markets long while they are still moving up. It’s a positive play for them. But at some point, that’s over. Is it a month? I don’t know? Maybe it’s two years?”
