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COOL blunts U. S. packers’ need for cattle

“They’re going to need cattle but COOL is standing in the way.”

– Kevin Grier, George Morris Centre

The U. S. is feeding fewer beef cattle but country-of-origin labelling will likely restrict opportunities for Canadian cattle exports.

Uncertainty over COOL will override the U. S. industry’s need to make up for a shortfall of cattle on feed by importing them, analysts say.

“I think they’re going to need cattle but COOL is standing in the way,” said Kevin Grier, a livestock analyst with the George Morris Centre.

Supply down, demand up

The U. S. Department of Agriculture last week reported the number of cattle and calves on feed for slaughter in the United States fell over the past year.

In its monthly cattle-on-feed report, USDA said the number of cattle in feedlots on October 1, 2008 totalled 10.4 million, down five per cent from Oct. 1, 2007 and nine per cent below Oct. 1, 2006.

U. S. feedlots placed 2.28 million head of cattle during September 2008, six per cent lower than a year before.

While placements were down, demand was up. Fed cattle marketings during September were 1.81 million head, seven per cent above 2007, USDA reported.

Normally, this would be good news for Canadian cattle exports. But the North American cattle market is no longer normal because of COOL, which came into effect Sept. 30 and requires U. S. retailers to label meat according to its country of origin.

“I think it’ll be minimal. I don’t think we’ll see a dramatic effect on our industry at all,” said Rob Leslie, a CanFax Research Services senior analyst, referring to the lower U. S. cattle-on-feed numbers.

Some U. S. beef plants have stopped taking cattle from Canada until uncertainty about labelling rules is sorted out.

Tyson Fresh Meats is not taking Canadian cattle at its Midwest plants in Lexington, Nebraska, Dakota City, South Dakota and Jocelyn, Illinois. Tyson has dedicated its Lexington plant to supply Korea solely with U. S.-born and -bred beef.

JBS Swift plants in Greeley, Colorado and Hyrum, Utah are reportedly still taking Canadian cattle. So is Tyson’s plant in Pasco, Washington. But those plants are considering taking cattle from Canada only on certain days, adding to transportation and logistics difficulties.

Tyson and Cargill had previously planned to stream all their slaughter animals, including those born and raised exclusively in the U. S., into the “multi-country” labelling category to help reduce the expense of implementing COOL rules.

But USDA last month cracked down on lumping everything into a multi-country label.

Costs of COOL

U. S. plants may continue to avoid Canadian cattle, despite needing them, while they figure out how to deal with COOL, said Leslie.

“We might even see a lower demand for Canadian cattle in the near term until everybody figures out what the effect of COOL is to the packer and what the costs are to them,” he said.

“If the costs are too high, rather than kill Canadian cattle, they might just mothball a plant if they have a negative margin on kill.”

Rick Wright, a buyer with Cattlex Ltd., said the cattle market is volatile enough as it is, what with the global financial crisis, futures bouncing around and the Canadian dollar on a roller-coaster ride.

“What we need is some stability in the marketplace, especially as to how COOL’s going to play out and how the packers are going to handle Canadian-origin cattle that are being fed down there,” said Wright.

“That’s the biggest concern to half the guys wanting to buy cattle. They haven’t got clear direction from the packers as to how those cattle are going to be handled and if there’s going to be any discount applied to them at the time of marketing.” [email protected]

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