When Iowa feedlot owner Richard Hartman was offered 92 cents a pound for his finished cattle, he could not believe his good fortune.
“I took the money and ran,” he said.
Profitability has been elusive these last few years. Last year he finished Holstein steers and lost money. This year he cannot find enough good calves to fill his 1,000 head feedlot. Feeder weight steers and heifers have become so pricey he has difficulty competing against the larger finishing lots.
American beef producers have been riding high for the last 10 months with soaring prices and high demand for beef in stores and restaurants.
Read Also
VIDEO: British company Antler Bio brings epigenetics to dairy farms
British company Antler Bio is bringing epigenetics to dairy farms using blood tests help tie how management is meeting the genetic potential of the animals.
“This is one of the most profitable time periods for cattle feeders in history. It’s a little unfortunate it came at the expense of Canadian producers,” said market analyst Dave Webber. He is with the market analysis firm Cattlefax, based in Colorado.
There is sympathy for Canadian producers who have lost markets due to the discovery of one cow stricken with bovine spongiform encephalopathy.
While some northern tier state producers believe the ban on Canadian imports is responsible for their new prosperity, Webber said that is only partly true.
Industry watchers knew a year ago there would be fewer calves available due to heavy liquidation in the past few years. The short supply is going to continue.
“As we go into our expansion phase in the next couple of years, that is going to intensify. We’re going to have to pull heifers out of the beef supply chain and make mama cows out of them. That will tighten feeder cattle supplies,” he said.
Cattle are moving to market on time with no heavyweight carcasses and no big supply of cattle waiting to be killed. The supply of calves has been smaller but having no Canadian cattle in the U.S. market helped.
“After May 20 we had to make up for our lack of supply domestically and we just went through our supply way too quickly,” he said.
Mexican feeders are displacing Canadian imports.
Imports reached record levels in 2000 when 1.2 million Mexican cattle entered the U.S. Webber expects at least one million to arrive this year.
“It could be the second largest import of Mexican feeder cattle and calves since 1996,” he said.
Concerns remain over country-of-origin labelling because many of the Mexican cattle won’t be ready for market until after Sept. 30, 2004, when labelling becomes mandatory.
Ironically, the U.S. cow market remains under 50 cents a lb.
The annual American beef cull is usually around 10-11 percent of the herd and dairy culls are much higher at 30-33 percent.
This year saw more dairy cattle marketed because of poor milk prices. They do not yield as much meat and generally receive lower prices.
While the cull is higher, American dairy producers are in a bind because they traditionally imported at least 60,000 Canadian dairy heifers each year.
Meanwhile uncertainty within the Canadian cattle industry has not taken the steam out of fall feeder prices in Canada.
Auction prices are as strong as they were last fall. About 90 percent of the sales are for yearlings with growing demand for feeder calves.
Yearlings are going between $115-$120 Cdn per cwt. with interest coming from packers and some American buyers gambling the borders will reopen sooner rather than later.
There was strong packer and feedlot interest in yearling steers with prices up to $115 on Sept. 19.
Webber also noted there was more interest in buying yearlings that have just come off grass, compared to those already on a feeding program.
“Plants are buying a lot of the heavier steers,” said Jason Danard of the Calgary Stockyards, which runs the weekly internet sale. About 6,000 calves and yearlings out of the four western provinces sold for healthy prices. In two days last week, live and electronic sales saw 10,000 head sold through the stockyards.
The 500 pound calves were $115-$130.
“It’s higher than we had last year,” Danard said.
The market at Strathmore, Alta., was standing room only as curious producers crowded in to monitor markets on Sept. 18.
While prices have been strong so far this fall, no one is willing to believe these will hold throughout the feeder run. There are no inklings on when the border could open to live cattle.
“We’re still in a jam. The general public has stopped talking,” he said.
The industry’s other problems include the culls and heavyweight cattle, said Canfax market analyst Ann Dunford. Carcasses are increasing in size because producers held them back, adding more tonnage to the beef surplus, she said.
Cows continue to move slowly through the marketplace. There is a surplus of about 300,000 head.
“The industry is looking at ways to take these animals. They also add to the beef surplus,” she said.
Last year’s drought forced the liquidation of about 900,000 cows for a higher than normal cull rate. This year 450,000 head have been removed.
