After its ninth consecutive herd population decline, the United States cattle cycle appears to be starting a rebuilding phase.
When the U.S. border reopens to Canadian breeding cattle, it should mean strong demand and high prices.
University of North Dakota livestock economist Tim Petry said 2005 could deliver the highest prices for breeding stock that will be experienced in the next decade.
Record high American feeder cattle prices and near record high consumer beef prices are sending the market signal to cattle producers to expand their herds. However, this takes time.
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Petry said market signals have been sent to American producers for several years, but drought in the U.S. West limited expansion in the beef cattle states of Kansas, Oklahoma, Nebraska, Montana, Wyoming, Colorado, Idaho and the Dakotas.
Heifers that might have been retained in ordinary years were pushed into the high priced beef market instead.
A lack of Canadian supply over the past 15 months has compounded the issue south of the border, and added further, although minor, price pressure to the replacement market, say U.S. economists.
Rain this season has turned the cattle fortunes around in most of those states and replacement heifer numbers are starting to rise. They climbed 4.3 percent over 2002-03 populations, according to the United States Department of Agriculture July statistics.
The strongest demand for replacement heifers, according to Petry, is in southern plains and the Appalachian states, while the weakest is in Colorado where drought persisted until last month.
U.S. replacement heifer numbers rose to 4.8 million head, up 200,000 head. At the same time in Canada, replacement heifers were the only segment of the national herd to decline, dropping 6.8 percent to 881,000 animals, according to Statistics Canada’s July report.
Anne Dunford of Canfax said this may have been due to producers selling their heifers into the feeding industry last fall in an attempt to replace late season cash flow lost from low-priced cull cows.
The U.S. replacement heifer population remains about one million animals lower than in the early 1990s when the last rebuilding phase of the cycle was under way.
Petry said additional signs of recovery in the cattle cycle include a 15 percent drop in U.S. cow slaughter and a two percent drop in feeder heifers over the past two years.
Canadian cow inventories jumped 8.6 percent over 2003, to 5.3 million head when BSE negatively affected the market for cull cows.
For now, the Canadian cattle breeding industry can only stand on the sidelines of the hot American market.
Doug Fee of the Canadian Angus Association said the U.S. demand for Canadian purebreds and commercial replacements would be strong if the border was open.
“Not being able to take part in that market really hurts the Canadian industry, both financially and emotionally,” he said.
Bruce Holmquist, a Simmental breeder from Kinistino, Sask., expects that when the U.S. border does open, it will be staged first to slaughter animals, then feeders and finally breeding stock.
“Ironically, not only is there a huge demand for breeding animals and they will be last to cross, but these are typically the one and two year olds that are born long after the feeding ban was in place,” said Fee.
“Right now, we’re hoping the government will help us convince the Canadian banks to stick this thing out until their cattle producing customers can take advantage of that rising American market.”
Herb McLane of the Canadian Beef Breeds Council said the breeding industry hopes slow re-entry to the U.S. will not be a stumbling block for the purebred industry.
“If the new rule doesn’t specify what will happen to breeding cattle, then we expect the (Americans) will rapidly create a rule that does open up that trade as well,” he said.
“There will be some tough times ahead for the (purebred) industry to re-establish the markets and the relationships. Hopefully a peak in demand in the U.S. will help that along,” he said.
