Manitoba Cattle Producers Association president Martin Unrau believes his industry has hit rock bottom and has nowhere to go but up.
“I’m optimistic. My son is currently buying some cows, and we’re retaining more heifers than last year,” he said.
“I think we’re going to see huge opportunities in the next three to five years and we just have to hang in there.”
Unrau noted that top tier calves are still bringing good prices, and in the coming years, producers who can improve the quality of the stock that they bring to market will be able to reap the rewards.
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A presentation by Bart Holowath from Canfax at the MCPA annual general meeting showed that fed cattle prices bottomed out at 72 cents in November as the Canadian dollar peaked above $1.10 US.
Since then cattle prices have edged up to 85 cents in recent weeks as the dollar slumped back toward parity.
“I believe there are a lot of feeders out there yet to come,” said Holowath.
“Unless you have a very cheap feed source and your positive feeding margin is low enough, maintaining inventories from 2007 into 2008 may not be profitable.”
Holowath said he made a similar prediction last year that later turned out to be wrong as prices rose in the first quarter.
Unrau said that although there seem to be no profitable segments of the industry right now, the bottom of the cattle cycle has probably already been plumbed.
The number of herd dispersals is “huge,” but the better cows are being bought by ranchers hoping to catch the next cycle upswing. He noted that lenders are still backing producers who are willing to stick their necks out.
With a large percentage of Canadian production traditionally going to the United States, Unrau said that market has been built upon the low Canadian dollar.
“We have to adjust and create some new markets. We have to start building on the merits of our industry and not just on the exchange rate,” he said.
Future industry hopes lie with diverse factors including the ongoing World Trade Organization negotiations, which could open up market access to Europe and Asia and bode well for premium quality beef. And closer to home, better marketing strategies to women aged 25 to 45 with children, who buy most of the beef in Canada, could give the industry an edge over its main competitors of chicken and pork.
Some say that U.S. mandatory country of origin labelling might come as a blessing in disguise, but Unrau is not so sure.
“To count on COOL being positive at this time would be a little premature,” he said. “But there is the possibility that we might be able to move some superior product to the U.S.”
The next 18 months will be tough, he added, with the Canadian dollar likely to hover near parity with the U.S. greenback, and biofuel demand south of the border pushing up prices for feed grain.
“There is only one way for the grassroots producer to survive and that is to tighten your belt and not spend a lot of money,” he said.
“One of the things my dad always told me was, ‘Don’t buy that new tractor.’ But when things went well, I bought a new tractor. The price of steel is huge. It’s one of those things that I never learned.”
