Expensive feed and dry pastures concern cattle sector

Cattle producers and feeders are hoping 2021 will be a more prosperous year but rising feed costs and moisture deficits are creating challenges.

The year that just ended saw COVID-19 disrupt the beef industry. The supply chain had to pivot quickly as dining out options were restricted causing people to eat more beef at home.

COVID-19 flashed through meat-packing plants in Canada and the United States causing shut downs that backed up the cattle supply line but created shortages and higher beef prices at the retail meat counter.

Slaughter weights rose.

At the end of the year, total Canadian slaughter was down three percent at 3.06 million head, according to figures from Canfax.

The main decline was in non-fed cattle with cows down 20 percent at 407,524 head and bulls down 14 percent at 13,709.

Fed steer slaughter was up two percent at 1.746 million and heifers were down three percent at 889,953 head.

Heavier carcass weights offset the drop in slaughter numbers, resulting in fed beef production edging up one percent to 2.35 billion pounds.

At the end of November, steer carcasses rose to average 950 lb., 23 lb. heavier than the same point the year before.

By Jan. 2 the weight was down to 929 lb. but that was still 24 lb. heavier than the year before.

The mild fall and early winter helped fed cattle to gain weight quickly.

Overall for 2020, Alberta fed steers averaged $140 per hundredweight, the lowest since 2013, according to Canfax data.

Alberta 550 lb. steer calves averaged $220 per cwt., slightly better than 2019.

Optimism for 2021 is based on signs that the cattle slaughter backlog has mostly been worked through and there should be fewer calves born because the breeding herds in Canada and the United States will be a little smaller.

The Statistics Canada July 1, 2020, livestock report showed the number of beef cows at 3.667 million, down 1.4 percent from the same point the year before and down 3.2 percent from 2016.

The number of heifers headed to the breeding herd stood at 630,800, down 0.76 percent from the year before and down 6.5 percent from 2016.

In the U.S. on July 1, 2020, the population of beef cows was 32.1 million head, down one percent from the year before. The total number of beef cows and heifers that had calved was 41.4 million, 0.5 percent lower.

Hopefully COVID will be brought under control by late summer and calf supply will tighten, ultimately leading to fewer cattle on feed.

It will be a slow grind higher, but the second half of the year should see cattle price improvement.

The U.S. Department of Agriculture forecasts fed live steer prices will improve to average US$113 per cwt. in the first and second quarters, to $115 in the third quarter and $120 in the fourth quarter, up from an average of $108 in the fourth quarter in the year just ended.

Prices might rise, but that does not guarantee improved profitability.

Costs are also rising with feed grain prices soaring because of tightening supplies, weather problems in South America and strong world demand, especially from China. Argentina’s corn export pause and Russia’s wheat export tax also support grain prices.

Canfax said in its Jan. 8 report that feed barley prices in southern Alberta for January to March delivery were around $279-$285 per tonne. That is up from $265-$280 at the start of December. In January 2020 barley prices were $228-$235.

Another concern is the amount of dry pastureland across the Canadian Prairies at freeze up, and the light snowpack in many areas.

Dry soil concerns spread south through the Dakotas, Nebraska and northern Kansas. Also large parts of the U.S. mountain states and southwest are in severe to extreme drought.

An important part of beef and cattle pricing every year is the pace of exports.

In 2020, pork benefited by soaring exports to China from Canada and the United States, smashing previous records for total exports of the meat.

American beef exports look to be slightly higher than 2019, with improved sales to China a significant driver.

The value of Canadian beef exports looks like it will be close to the pace set in 2019 even as the volume falls a little behind.

Data is available to the end of November and it shows the value of beef and veal exports sales totalling $2.98 billion, up 0.2 percent over the same point last year.

But exports by weight totalled 333.57 million kilograms, down 4.6 percent from the same point the year before.

The tonnage of product going to the dominant U.S. market in the 11 months dipped 2.7 percent, but the value rose five percent to $2.27 billion, accounting for 76 percent of the total exported.

But tonnage and value dropped in secondary markets.

By value, sales to Japan were down 15.5 percent, Mexico down 26.9 percent, Hong Kong down 29.3 percent and China down 4.6 percent.

But big gains were made with Vietnam, with sales up 372 percent to $35.7 million.

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