While Canada’s beef industry has suffered a nightmare summer, producers and processors in the United States have had a dreamlike season that is wrapping up with a delicious dessert of record high prices.
Live steer prices at the end of last week were topping $91 US per hundredweight, the highest in 10 years. American packers are reaping rich margins thanks to record high prices for the beef they sell.
Several supply and demand factors have come together to cause this bull market.
As we know only too well, Canadian cattle and beef have been out of the U.S. market since May and only now has a trickle of beef from younger cattle started to cross the border.
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Canada is also out of the overseas export market and the U.S. has been able to pick up some of that demand, boosting its exports by about four percent.
But even before Canada’s problems with bovine spongiform encephalopathy, U.S. cattle supply was tight after years of drought in several regions forced producers
to cull herds.
With cattle in short supply, packers have had to pull forward younger, lighter animals to slaughter, resulting in less meat per animal.
At the end of
August, carcasses were about 25 pounds lighter than at the same time in 2002.
These factors increased beef prices, but surprisingly, Americans so far haven’t balked at the money they are paying in the store.
However, the latest cattle price increases have yet to make their way to the retail level.
When they do, some analysts last week speculated, it will cause grocery stores to boost their prices and restaurants to either cut some beef dishes or mark up their menu prices.
This could cause consumers to turn to other, less expensive meats.
But that won’t necessarily cause U.S. fed cattle prices to fall. Packers can stay on a profitable footing even if they squeeze their margins to maintain competition for scarce market-ready animals.
With American beef prices so high, Canadian packers will make good profits on the meat they are able to move south.
But even with Canadian beef returning to the U.S., prices there shouldn’t fall much.
With no live cattle moving and limits on the age and type of cuts that can go south, only small amounts of Canadian meat will enter the U.S. for the next few months.
