CANFAX bullish on beef market outlook

The forecast is for solid prices in 2015

The Canadian beef market will likely continue to see bulls in the new year, according to a CANFAX forecaster.

“We’re looking at very solid prices for 2015. At the risk of saying it, there’s potential for even higher prices,” Brian Perillat, manager and senior analyst for CANFAX, told a group of producers at this year’s Manitoba Forage and Livestock symposium in Portage la Prairie.

He said the next six months will be a good marker, but the steady rise in beef prices bodes well for the industry. Low beef production in the country set the prices high while strong local and global demand maintained strong prices.

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Ground beef sales — with prices increasing 50 to 70 per cent in the last few years — have played a large role in this, according to Perillat. Middle meats, including steaks, have also gone up 20 to 30 per cent.

“Consumers are willing and able to pay for beef and that’s brought prices to extremely record-high numbers,” he said.

Cow-calf producers will likely be the biggest beneficiaries in this market, thanks to tight calf supplies and strong competition.

Factors, including high fed cattle prices, cheaper grain, a lower Canadian dollar and tight cattle supplies, mean these market signals are bid into calf prices, giving cow-calf producers higher profits from the high-priced calves they sell.

Manitoba producers will particularly benefit, since calf prices rose 70 per cent in the fall. Perillat projects there will be even fewer calves around in 2015, which is good news for cow-calf producers, but remains a challenge for the industry, which is in need of expansion.

Labour shortages are causing packers to choose between killing more cattle and doing more processing. This puts them at a disadvantage, causing many producers to export their cattle elsewhere, often to the United States. In 2014, Canada will have exported over 1.2 million head of cattle out of the country. Last year this country doubled feeder export numbers and this year is 50 per cent higher again.

“We’re probably going to have the third- or fourth-biggest export number in 20 years,” he said.

High export numbers combined with labour shortages have created a perfect storm for packing companies.

There has been a substantial drop in the national slaughter number, leading three Canadian plants, one in Quebec, one in Moose Jaw and one in Calgary, to close their doors in the last three years.

Utilization rates in slaughter facilities hang just over 80 per cent, which Perillat said, “is OK, not great.”

He forecasts slaughter numbers will be tighter in 2015 and hopes the consistently good prices will lead more producers to expand. “Somehow we’ve got to be competitive and keep cattle in Canada,” he said.

What’s it going to take to expand the beef industry in Canada? Perillat said the key is confidence.

“Rightfully so, there’s still a lot of people skeptical of how long this will last. They’ve tried it and been kicked a few times.

“We’re still a little hesitant while the U.S. is a lot more aggressive. We need to keep a heifer. Otherwise she’s going to go to Nebraska and be put on feed and never seen again.”

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