The cattle market is heading into a downturn

Canadians will have lower inventories and lower prices

A significant drop in North American cattle prices is coming within the next two years, market analyst Anne Wasko told an April 20 livestock producer seminar in Winnipeg.

Wasko said the cattle price cycle peaked in 2014-15 after the U.S. beef herd underwent a major liquidation following a severe drought in 2012. The resulting shortage of cattle drove prices to record highs and encouraged American producers to add over a million cows to their herds when the rains returned.

But aggressive herd expansion in the U.S. will mean a price correction when all these animals start coming to slaughter in 2018, Wasko said.

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While U.S. herds are expanding, Canadian cattle numbers remain static. As of July 1, 2015, there were 13 million cattle on Canadian farms, down 2.1 per cent from 2014, according to Statistics Canada.

Wasko said the Canadian cattle industry has been stuck in a consolidation phase for the last five to six years, due in part to international trade issues and the aftermath of BSE. Canada lost an estimated 33 per cent of its cows and 25 per cent of its producers in the 10 years after BSE was detected in Alberta in 2003.

The recent price spike has been a boon to the remaining Canadian producers. Unfortunately, low cattle inventories won’t help them when the price correction comes because U.S. herd numbers drive the market, said Wasko, an analyst with Gateway Livestock in Taber, Alberta.

As a result, Canadian producers in the coming years will experience a market turned on its head. Even though their inventories are down, they will see lower prices, not the current high ones.

“It’s frustrating,” Wasko told the meeting sponsored by Hi-Pro Feeds.

One positive sign is that Canadians continue to buy beef despite record-high prices at the meat counter. Wasko said retail demand for beef in 2015 was up eight per cent, even though actual domestic consumption fell by five per cent.

However, beef faces stiff competition from other meat protein. Wasko said retail beef prices rose 15 per cent in 2015, compared to only five per cent for both pork and chicken.

The meeting also heard from industry officials about current issues in other agricultural sectors.

Steve Leech, Chicken Farmers of Canada’s national program manager for food safety, animal care and research, said a CFC working group recently presented proposals for limiting the use of antibiotics in broiler chickens to guard against antimicrobial resistance.

The widespread use of antibiotics in livestock feed is raising public concerns about antimicrobial-resistant bacteria being transferred from animals to humans through the food chain.

Leech said CFC is focusing on restricting the use of antibiotics in three of the four antibiotic categories.

The industry has already eliminated the preventive use (feeding antibiotics to chickens that are not sick) of Category 1 antibiotics, effective May 15, 2014. Most of the products in this category were injected into hatching eggs.

Leech said the CFC committee recommends eliminating preventive use of antibiotics in Category 2 by the end of 2018. A date for eliminating preventive use for Category 3 antibiotics has yet to be determined.

Products in these categories may still be used for therapeutic use (treating specific flock diseases).

Category 4 will be left alone. Leech said 60 per cent of antibiotics given to chickens are not used in human medicine. Most are in this category.

The CFC board received the report in March and will consult with industry stakeholders on how to proceed, said Leech.

Bruce Grewar, producer relations manager for Dairy Farmers of Manitoba, said a lack of drying capacity for skim milk powder is preventing the province’s producers from using their full quota.

Grewar said 4.1 per cent of Manitoba’s allowable dairy quota goes unissued because processors lack the capacity to dry excess skim milk. The existing equipment is old and, in one case, goes back to the 1940s.

Meanwhile, the surplus of skim milk powder is growing because of a lack of markets for it. Much of it is sold for animal feed.

DFM this fall will implement a program based on an Ontario model creating a new dairy class for skim milk to stimulate the production of milk protein products.

It’s hoped the move will encourage processors to expand their drying capacity and help stem the growing tide of milk protein imports, Grewar said.

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