There’s just one way to describe the beef market over the past five years — volatile.
Benjamin Hamm, farm management specialist with Manitoba Agriculture, says that’s the only thing that comes to mind when he looks at the market.
“In 2015 we had some crazy highs, up to $3.75 and even a few spikes to up to $4 a pound,” Hamm said. “If anyone has been watching the market, the market fundamentals sure have changed in the past few months. They are significantly off of what they were in the past two years, so a little bit challenging for a lot of producers to get used to.”
Hamm says that 2016 did start off with relatively high values but prices have been dropping every week.
“There have been some significant swings. We had awesome profitability in the cow-calf sector and backgrounders were definitely making some money in 2014 and 2015. But now we are seeing prices moving and are at a low of $170 on steer prices,” Hamm said.
According to Hamm, prices spiked close to $270 for the 800-pound steers, but now appear to be on a down cycle.
“Typically we see about two or three years of profitability and then a few years of not-so-great profit and then a few more years of profitability,” Hamm said. “2014 and 2015 held great profitability and amazing returns, which was good to see, but now we are in a different position.”
For 2016, Hamm expects to remain on the positive side, just not as positive as the past two years.
“We should still be about $100 above covering operating and labour on the cow-calf side. Backgrounding, a little bit more volatility. We did definitely see profitability in 2014, some profitability in 2015, but we are definitely having some losses on the backgrounding side and predicting to have some more in the future here,” Hamm said. “The longer you feed the calf the more risk you are exposed to and if you did buy on the high end and selling them out at a lower price. The math just doesn’t add up and we are seeing some significant losses.”
Hamm reports the beef cow herd in Canada sits at about 3.8 million head, with Manitoba holding about 11.5 per cent of the nation’s total at approximately 440,000 head.
“That number is significantly down from the highs we did see in 2003. Our numbers peaked in 2003 and 2004. And in 2004 and 2005, we were expecting expansion with the pricing and the profitability in the cow-calf and backgrounding side, yet we didn’t see it,” Hamm said. “I guess producers were skeptical that prices wouldn’t last too long and they definitely didn’t.”
Alberta continues to hold the majority of the national herd at 1.56 million, about 41 per cent.
The U.S. beef cow inventory sits about 10 times Canada’s at 30 million head of beef cows and Hamm reports that they did see some expansion in 2015 and 2016.
Some had predicted that Manitoba may see some expansion in 2016, but that did not come to fruition.
“We did think we might see some expansion in 2016. But all we did was cull more. So, we did some good production practices, it just didn’t help with the herd expansion in Manitoba,” Hamm said.