Cattle industry experts are in general agreement that the long-term outlook is bright for the beef industry. However, the short term remains troubled.
A substantial list of long-term positives were listed by presenters at the recent Saskatchewan Stock Growers Association annual meeting in Moose Jaw.
Pork, poultry and beef supplies are all dropping in North America. Eventually the supply shortfall will spark price increases.
As the world economy improves, demand and prices will improve for many beef products, including the hides. The automobile industry is the biggest market for leather and Government Motors (GM) and the other manufacturers are in a huge slump. Hides that were worth $40 to $50 per animal are now selling for $10 or less.
An improvement in the economy will also see consumers buying more of the high-end beef cuts and consuming more of these cuts in restaurants.
Gradually the stigma of the 2003 BSE (mad cow disease) outbreak is subsiding and more countries are opening their borders to Canadian beef.
It’s important to have markets for the cuts that most North Americans don’t want to consume. Good returns on products such as livers and tongues increase the overall value of the carcass.
As our beef herd shrinks, the domestic market is becoming more important to the industry. That means less reliance on exports. Your domestic market is usually your best market.
Unfortunately, the longer-term optimism is being clouded by short-term reality.
Brian Nilsson, co-CEO of XL Foods was the highlight speaker at the Stock Growers convention. By purchasing the Tyson Foods packing plant at Brooks, Alta, XL has become the largest beef processor in the country. Two companies, XL and Cargill, now absolutely dominate the Canadian industry.
Nilsson believes there are great times ahead. But XL has temporarily closed its beef slaughter facility in Moose Jaw, a facility that specializes in cull cows.
U. S. packing plants face much less onerous rules on how they must deal with Specified Risk Materials such as the brain and spinal cord.
Far more tissue has to be removed under Canadian rules for over-30-month cows. Those same cows sent live to U. S. packing plants have about a $30-a-head advantage.
Nilsson says he plans to reopen the Moose Jaw facility in September, but without a change in the overly stringent Canadian rules governing SRMs, it’s tough to see how the plant will attract enough cows to be viable.
The rapidly rising value of the Canadian dollar relative to the U. S. greenback is hurting price prospects on both live animals and our beef. A 90-cent dollar is not helpful.
Another short-term problem is the drought in western Saskatchewan and into Alberta. A huge region has had less than 40 per cent of normal precipitation since April 1.
Hay and pasture land needs early growing season moisture. There has been irreparable damage to yield potential. Already there are reports of producers culling their cow herds because they won’t have enough feed. A continued sell-off of breeding stock will increase beef supply and weight on price levels.
Most observers believe that calf prices this fall should be a bit better than last year, but cow-calf producers could still end up working for little or no net return. Faith that the longer term should be better is all that’s keeping many producers in the business.
Kevin Hursh is a consulting agrologist and farmer based in
Saskatoon. He can be reached at [email protected]