CALGARY – Usually business owners are pleased when production levels are high, but cattle producers are nervous when they see a large increase in beef supplies.
Lots of beef often indicates low prices.
“Someday we too will get excited when we see an increase in production,” said Cattlefax’s analyst Randy Blach. Cattlefax is a member-owned market analysis and information service based in the U.S.
The North American meat industry is a $100-billion-a-year business. But in the last 20 years beef has lost 12 percent of its share of the meat pie.
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“If we hadn’t lost it we’d have to have 17 million more cows and not change anything,” he said at the recent Western Stock Growers Association convention.
With some creative thinking, cattle producers can survive the regular beef cycles of high and low production. For instance, retaining ownership of animals until slaughter is one way to increase profits. Blach advises this as a protective measure against this year’s low prices. Fewer than one in 10 American cow/calf producers retain ownership of their calves.
Also, some people have started weaning earlier in the fall to get their calves to slaughter before the big rush. They find cows are in better shape going into winter because they don’t have a calf on them and they rebreed easier in the spring.
Blach projects about 26 million head will be on feed in the U.S., which translates into a 2.5 billion pound increase in beef supplies. That means every one of 250 million Americans must eat an extra 10 pounds of beef a year to get rid of it. At the same time poultry and pork supplies increase steadily.
“We can’t export our way out of the situation we’re in today,” he said.
With record high beef production and the largest cow herd in North America since the mid-’70s, downsizing of the cattle inventory is inevitable, he said.
The American cattle inventory will peak at about 105-106 million head next month.
“The Canadian cycle is probably one year behind.”
If about 15 percent of the cow herd is slaughtered each year, the national herd maintains the status quo. But 13 percent was killed this year so analysts conclude some expansion continues.
More heifers are being sold as feeders than two years ago when large numbers were retained as breeding stock.
“We have totally stopped expanding on the heifer side,” said Blach.
Feeder calves will sell below fat cattle this year. In the past there has been a wide price spread but Blach expects that gap will close this year.
Seasonal high prices generally occur in March, but Blach said prices won’t likely be much higher than they are now. He warned those who operate in tight margins, such as cattle feeders, to be prepared. He predicts 1997 will be the low for feeder cattle.
