Cattle prices will likely rise if the American border opens to Canadian cattle March 7 as expected, but not entirely because of U.S. demand.
“Just the threat of direct competition can have as much of an impact as the competition itself,” said Canfax economist Anne Dunford.
She told producers attending the Saskatchewan Cattle Feeders Association’s annual meeting in Saskatoon Jan. 31 that they can expect slightly higher prices when the border opens, but U.S. demand for Canadian cattle at first will be tempered by messy paperwork and inspection delays in transporting live animals south.
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“There will be some practical hurdles to overcome.
“It will take a few risk-takers out there in the cattle industry to start that ball rolling and they’ll expect to make some (money) for their efforts, but that too will flatten out as the industry starts to understand how the new rules will work,” she said.
Ben Thorlakson, chair of the Canadian Beef Export Federation, said the processing and marketing sectors that have experienced higher than average profits recently, will likely absorb most the higher prices that will be paid to feeders and cow-calf producers over the short term.
Dunford said the regulatory export bottlenecks will probably keep fed and feeder cattle recently acquired by American investors from moving south too quickly.
Brad Wildeman of Poundmaker Ag Ventures near Lanigan, Sask., agreed.
“The Canadian Prairies is still a very low cost place to feed cattle. To boot, we’ve got large supplies of inexpensive feed this year,” he said.
Wildeman said that would also work to keep feeder cattle in Canada.
It is expected that U.S. inspection and customs processes will be faster and less costly for cattle destined for a terminal slaughter plant than for a feedlot.
Canada’s increase in slaughter capacity over the past 20 months along with a 150,000 tonne drop in beef and veal imports over the same period will further restrict the flow southward.
Despite these factors, Canadian prices are expected to move toward the U.S. futures prices, reducing the basis to as little as -$10 per hundredweight on fed cattle from as much as -$25 and for feeders to -$10 or even less from -$15.
Provided the border opens March 7, Dunford expected 850-pound feeder steers would bring $107.60 per cwt. that month, rising to $111.70 by July, but slipping to $110.80 seasonally by September.
Fed steers would fare a little better with a jump from the current $85-$90 per cwt. to $92-$97 by April, then drop to $85-$90 for June and $82-$88 for August.
“All of this is contingent on so many factors, but the (Canadian) dollar is one the biggest. It has to stay in the (83 cent US range),” said Dunford.
