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Cattle Cycle Has Bottomed Out, Says Wright

“Miraculously, in the last year, producers have found every record they had since March of 1999, and are age verifying cows at an alarming rate.”

– RICK WRIGHT

Cow-calf producers take heart, better times may be on the way.

A mass sell-off of cattle around the world driven by years of low prices has finally ground herd numbers down to levels where demand is set to outstrip supply, according to cattle market analyst and order buyer Rick Wright.

“Barring any natural disaster such as drought in the corn-producing areas, if everything stays normal, we are on the verge of turning this thing around,” said Wright, who presented his views of the cattle market outlook at Farm Focus 2010 in Boissevain.

“We’re going to see slightly higher calf prices in the fall, and that’s going to convince producers to stay in the game a little bit longer.”

Reports say beef prices in Britain are at record highs, and Argentina is restricting exports to supply their domestic market. Apart from Brazil, in most countries the global cattle herd is shrinking, and if an economic rebound occurs it will boost demand for beef.

In their modelling of the cattle cycle, CattleFax is predicting $1.40 per pound for calves by 2014, he noted. Some even predict 400-pound calves at $2 per lb. within the same time frame.

“We have the potential for the cattle market to get back into some very good times,” said Wright. “But the question to you guys is, can you guys wait, and will you be in a position to take advantage of it when it does come?”

POSITIONING

The United States may be struggling with the worst economic recession since the 1930s, but at the same time, their cow herd fell by nine per cent last year. At 32 million head, it is at the lowest level since 1954.

“That’s the fourth consecutive year their cow herd has contracted,” said Wright.

There are signs that bred cow prices are rising, and demand for cull cows to turn into hamburger will help to keep prices higher by as much as $50 per head this year, he added.

With a cull rate of 12 per cent in 2009, Canada’s beef cow herd was down to 4.58 million head, the lowest it’s been in 15 years, according to the January StatsCan numbers.

Heifer retention was down 3.8 per cent, and although a continued reduction in the herd is expected, inventories are predicted to stabilize in 2011, he said.

In Manitoba, cow numbers have dropped from 680,000 in 2006 to 558,000.

AGE VERIFIED

Canadian packers will have to compete more aggressively with their counterparts south of the border for age-verified cattle, even as the strong dollar keeps more cattle in Canada, he said.

A year ago, some 60 to 70 per cent of the cattle in sales rings weren’t age verified and couldn’t be shipped south unless they passed the dentition test. But the change since then has been dramatic.

“Miraculously, in the last year, producers have found every record they had since March of 1999, and are age verifying cows at an alarming rate,” he said.

“Every cigarette package, every napkin from the restaurant, everything that they wrote a birthdate on seems to have been recovered. So now we’re seeing 70 per cent age verified, and 30 per cent not.”

U. S. cattle imports were down eight per cent last year, but still 1.92 million head managed to

make it across the border before the loonie started its climb later in the year. Packers down south, however, are picking up more Mexican cattle as the peso devaluation continues.

FEED PRICES

Grain prices, with corn at an expected range of $3 to $4.45 per bushel in the U. S., and feed barley in Manitoba at somewhere under $2.70 should help to prop up the cattle market.

“We’re expecting 2010 prices to be slightly lower, but of course the weather will influence the price, the yield, the grade and what’s available on the market.”

After the first full year of COOL, Canadian cattle on the rail were discounted three to five cents per hundredweight, and feeder cattle exports to the States were down 55 per cent on the year.

Beef has had a tough time competing with pork and chicken, particularly since it sells at an 80 per cent premium over the other protein sources, he added.

Per capita beef consumption on both sides of the border stands at about 58 pounds, but 42 per cent of that was hamburger, driven mainly by cheap burger-based deals offered by fast-food restaurants. [email protected]

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