WINNIPEG — After lifetimes of working as cow-calf producers, Dave Solverson and Dan Darling are experiencing unfamiliar prosperity.
“The last 18 months have been incredibly beyond our dreams,” said Solverson, who ranches near Camrose, Alta., and is president of the Canadian Cattlemen’s Association.
Vice-president Dan Darling of Castleton, Ont., echoes that optimism.
Both men have been around long enough to witness several cattle cycles but changing global markets and increased demand for beef could alter a 10-year trend of expansion followed by liquidation.
The world is experiencing record low cattle numbers at a time when the world wants more beef, so cattle and beef prices are strong throughout North America.
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“There isn’t the risk of oversupply anytime soon,” said Solverson.
Added Darling: “Cow numbers have dropped and this is what we needed to get producers interested in rebuilding the herd again and to get our young guys interested.”
They agree that this year is reminiscent of 2002,when prices and exports also exceeded expectations.
“It was a year very similar to this in Alberta. It was a dry year and people were doing everything they could to maintain their herd and bought a lot of expensive feed,” Solverson said.
Ontario is also experiencing déjà vu, said Darling, as he recalled the high prices, high optimism and feed quantities of 2002.
However, current prices could settle down somewhat because the U.S. has reported its first herd expansion since 2006. There will be more calves on the ground in 2016 and that could lower prices, said Brian Perillat of Canfax.
U.S. cow slaughter is down and more producers are holding back heifers for breeding. Grass conditions are good and feed is affordable.
“This expansion is for real but you have to keep in mind how bad Texas and Oklahoma were,” said Perillat.
“They lost over a million cows due to drought so there is some talk of whether is this expansion or is this recovery.”
Canadian livestock inventory numbers are expected to be released Aug. 20 but no growth is anticipated.
The signals are there for heifer retention but weather is the wild card.
“With this drought (in the western Prairies), it is really hard to tell where these heifers are. Are they getting bred or are they in the feedlots,” said Perillat.
However, there are no signs of major herd liquidation. People are maintaining their herds and if necessary will ship the heifers first into a strong feeder market.
The Canadian dollar is around US76 cents and two months ago the Alberta cash price was higher than the Nebraska price.
The basis has returned to a more normal range of minus $10, which has increased interest from American buyers. That means many cattle could head south to be fed on corn.
“If they have a feed cost advantage, which they generally do, it is more economical to send the cattle out of the area,” Perillat said.
Even with trade disputes including country-of-origin labelling, there is still enough interest in Canadian cattle to fill U.S. feedlots because they do not have enough calves of their own.
“If the Canadian packers want to keep cattle here, they have got to pay the dollars. It is a challenge for the packers.”
Perillat always advises caution but admitted the cattle outlook is good and cow-calf producers are reaping the rewards.
“How can you turn down $3.50 (per lb.) on a 500 lb. steer? You can’t really go wrong with that. If you miss out on 20 cents, so be it.”
Meanwhile, beef prices continue to rise and people are still buying.
“We have always seen beef as the luxury good and the other part of this is we didn’t think we would see beef prices go up so fast,” he said.
Traditionally beef was twice the price of pork but now it is triple the price and it continues to sell.
“Global demand is a big part of that. Wealth is the number one driver of beef demand,” said Perillat.
