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Several keys may unlock demand for Manitoba cattle

The Manitoba cattle market looks strong heading into the new year. Firm cattle movement in the fall at various Manitoba auction marts was seen as supportive, setting the stage for 2012.

“Hopefully everything will be clear sailing right through 2012 and hopefully we’ll get another two to three years of good marketing for our producers,” said Robin Hill, manager of Heartland Livestock Services at Virden, on the strong ending for producers in 2011 and a promising outlook heading into the new year.

Feeder cattle movement will continue to be solid, with tight supply across North America adding to the firmness in prices, Hill said.

However, while cattle movement will remain steady in the new year, there will be a somewhat smaller volume of cattle moved in the springtime, Hill said. Greater cattle movement this past fall will cause less springtime movement along with fewer big sales in the first part of the year, he said.

While the Canadian dollar has hovered around the US95- to 98-cent mark in recent months, the high value in the Canadian currency has had little effect on demand this year, he said. The Canadian dollar at the end of 2011 was valued at US98.08 cents (US$1=C$1.0196).

Despite the bullish sentiment for cattle, challenges will continue to face Manitoba producers. Global macroeconomic concerns could temper some of the strength in 2012, Hill said, and if problems persist in the global economy, they may weigh on values as demand may soften.

Along with global economic uncertainty, the costs of feeding cattle could also cause some concern, Hill said. Despite corn values falling recently in the U.S., feed costs in Canada remain high with western Canadian barley prices remaining strong, he said. If western Canadian barley prices increase further, it could add to feed costs, he said.

As Manitoba cattle producers had a successful 2011, and look to solidify those gains in 2012, it’s time to take a gander through the crystal ball. Here are some of the trends and stories to look out for in the new year, as well as a wish for all cattle producers, in no particular order.

Southern U.S. drought conditions

Drought caused financial havoc in the southern U.S. last summer, with estimated costs around US$10 billion including cattle and crops, according to industry data. The dry conditions in the southwestern U.S. in 2011 will bring net beef supplies down by a couple per cent, said Brian Perillat of Canfax in Calgary. Canadian feeder cattle prices will increase in the fall of 2012 once the drought cattle from the U.S. have been moved and accounted for, he said.

Expansion into emerging markets, Asia

With middle classes continuing to expand in developing countries, greater emphasis is starting to be placed on more meat-based diets in these regions of the world. The middle class of emerging markets often spends a larger percentage of its income than developed nations, Perillat said. He also sees some potential for new emerging-market business in 2012, including expansion into China and Russia.

Exports to Japan also look promising next year. The BSE scare moved Japanese officials to restrict imports to beef from cattle age 20 months and under, but recently Japan moved to relax those imports to 30 months and under. That will open up the door for Canadian producers to increase Japanese sales.

No news is COOL news

The ruling from the World Trade Organization’s dispute settlement panel on mandatory U.S. country-of-origin labelling (COOL) on meat products favoured Canada, as COOL was seen as a barrier to trade with the U.S., but the ruling will not have any impact for Canadian cattle producers this year, Canfax’s Perillat said. The U.S. will likely file an appeal and the Canadian Cattlemen’s Association expects the decision to be dragged out in the courts next year, with no progress in sight, he said.

The wish: A lower loonie to boost demand

With the Canadian dollar just hovering below parity, a lower Canadian currency would definitely boost demand from other countries, Perillat said. When the Canadian dollar was around US65 cents a decade ago, exports were near record levels, he said. While it’s highly unlikely the Canadian dollar would fall next year to around US65 cents, a weakened Canadian dollar would go a long way in setting record prices for fed cattle next year and show how strong demand for Canadian cattle is, he said.

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