Consumers around the world might be suffering sticker shock at the meat counter but so far, they appear to be willing to pay for the taste of beef.
The COVID-19 pandemic shook the entire economy. The beef sector was no exception, but things are starting to stabilize although challenges remain, including high feed grain prices and dry pastures in the western side of the North American plains.
Canadian beef processors so far this year are working at a record level, killing more cattle at higher carcass weights, particularly in Western Canada.
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Beef exports are strong, with good movement to the United States, Japan and Mexico and a big increase to South Korea.
But in Canada and the U.S., cattle producers and feeders are frustrated that they are not benefiting fully from the rise in retail beef prices.
Indeed, the cattle market tracking service Canfax says feedlots in May posted the second largest losses in 31 years, losing as much as $300 a head on cattle placed in the fall and sold in May.
Let’s drill down into the numbers.
Slaughter in Canada to May 21 stood at just under 1.27 million head, up three percent from the same point last year, according to Canfax.
The amount of beef produced, fed and non-fed combined, was just over 1.1 billion pounds, also up three percent.
The increased slaughter is most pronounced in the West where the number of head processed was up four percent and the tonnage of beef produced was up five percent. Plants in the east processed only one percent more cattle and the tonnage of beef produced was down two percent.
Carcass weights in the West are up because dry weather in southern Alberta’s feedlot alley meant cattle were free from spring mud. Also, feedlots tend to try to minimize their negative margins by increasing carcass weight, Canfax said.
The most current beef export numbers from Statistics Canada are available for the January-March quarter.
In that period, 120,289 tonnes of beef were exported, a 10 percent increase over the year before at the same point and a 25.6 percent increase over the average of the first quarter in the previous five years.
Almost 71 percent went to the U.S., or a total of 85,254 tonnes, up 13 percent.
Japan was the second largest importer, taking 13,781 tonnes, also up 13 percent.
Mexico was in third place taking 6,652 tonnes, again up 13 percent.
South Korea was a standout during the period with its imports from Canada soaring 153 percent to 6,160 tonnes.
The country temporarily suspended beef imports from Canada last year due to a BSE infected cow found in February. The case was determined to be isolated and beef trade with South Korea reopened on the last day of 2021.
Because of the huge run up in beef prices, the total value of the exports soared 40 percent to $1.13 billion. We imported $378.2 million worth of beef in the period for a net positive trade balance of $755.8 million.
I should note that China and Hong Kong were not a big presence in the beef trade numbers. Hong Kong imported 983 tonnes in the three months, down 62 percent from last year while China directly imported only 129 tonnes, down 97 percent.
The U.S. is doing a much better job supplying China with beef. This is likely connected with China’s commitment to buy more American agricultural products, part of the truce deal that ended former U.S. President Donald Trump’s tariff war against the Asian powerhouse.
In the first quarter, the U.S. shipped 40,790 tonnes of beef to China, an increase of 62 percent over last year in the same period.
Overall, U.S. beef exports were up six percent by volume in the quarter.
While the trade and slaughter numbers are strong, there are hard feelings within the cattle and beef sector.
Food retailers and packing plant companies are posting strong and even record profits while feedlots are losing money.
In the U.S., President Joe Biden and congressional Democrats have alleged the four companies that dominate beef slaughter profiteered from disruptions related to COVID 19 and supply chain shortages. The companies deny the charges.
But no matter what, it is clear that in the last year or two, retailers and packers took a bigger than normal slice of the beef value pie.
The U.S. Department of Agriculture Economic Research Service tracks the spreads between retail, wholesale and fed cattle prices at www.ers.usda.gov/data-products/meat-price-spreads/.
It shows that on average for the year, in 2021 the fed steer value amounted to 36.8 percent of the final retail price, down from 42.6 percent in 2019 before the pandemic and 44.9 percent in 2017.
In the first quarter of the current year, the share has improved a little to 39.4 percent.
