There were no surprises in the January 1 cattle inventory numbers released last month by Statistics Canada. Despite current prices and a general feeling of optimism bubbling through the industry, producers see no need to expand the cattle population now.
We started the year with fewer beef cows (3.8 million), fewer replacement heifers (531,000) and fewer beef calves (99,400) than last year.
By comparison the Americans are in a more expansive mood. When North Dakota livestock economist Tim Petry recently lined up the two reports it painted two very different pictures.
Total cattle numbers in the U.S. were up 1.4 per cent compared to a 2.5 per cent decrease in Canada. Beef cows increased two per cent in the U.S. and declined two per cent in Canada, beef replacement heifers increased four per cent in the U.S. and declined 1.5 per cent in Canada, cattle on feed in the U.S. increased 0.6 per cent but decreased 8.7 per cent in Alberta and Saskatchewan.
U.S. cattle slaughter declined 7.1 per cent in 2014 while Canadian cattle slaughter increased 3.3 per cent. Cattle prices were record high in both countries in 2014 but with the lower Canadian dollar 2014 beef imports from Canada increased 11.9 per cent and U.S. beef exports to Canada declined 22 per cent.
In other words the Americans are starting to expand while Canadians are content to keep selling while the getting is good.
It’s not hard to understand why this is happening.
Living with BSE for more than a decade left many producers battered, bruised and needing to rebuild the equity lost on their herd through the years. This latest BSE case only stretches out the time the cloud will remain over Canada which doesn’t exactly give the industry a shot of confidence for the immediate future.
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The heavy discounting that has gone on at the border due to the American’s country-of-origin labelling legislation is another ding to the confidence. The promised final decision is coming down from World Trade Organization next month, but even assuming Canada and Mexico are successful Ottawa would not be in a position to post retaliatory tariffs on U.S. goods overnight. Pressure is building in the Congress to fix this mess but so far the Obama administration shows no sign of giving up on it.
Market analyst Kevin Grier who publishes the Canadian Cattle Buyer points to the more erratic returns for Canadians while the American cow-calf man has been posting positive returns since 1999, with the exception of ’08 and ’09, and massive profits in the past year as a key to the difference in attitude.
Age is another factor. Many producers are simply too old to stick it out for another turn. The young ones may want to expand but at the moment the sheer cost of buying your way up is enough to test the nerves of any stockman.
Even if they wanted to expand, Grier says there may not be enough uncropped pasture and rangeland around to handle an expanded herd.
One way or another all these factors came into play when cow-calf producers across the country made their choice to hold or sell heifers last year. On a net basis more went than stayed.
With 100,000 fewer calves in the West this year compared to last and nearly 110,000 fewer steers and slaughter heifers available the implications for the packers and feedlots are rather bleak, according to Grier.
“It is difficult to see anything other than feedlot capacity downsizing and business rationalization. The argument is similar for packer plant capacity.”
If there is one bright spot in the January report it was found in Ontario which has a couple of thousand more cows than last year and a similar bump in replacement heifers. Ontario’s cow numbers are still down 90,000 from 2002, but for the moment they seem to have stopped the slide.
Beef Farmers of Ontario is actively encouraging an increase in the cow herd by promoting a plan to allocate Crown land to producers starting farms in the northern Clay Belt. Land is still priced low enough there to make beef production feasible, according to a study done for the BFO. It all hinges on the province’s willingness to release some Crown land. So far, as reported elsewhere in our April 2015 issue, they have the ear of Premier Kathleen Wynne for their concept.
The addition of 30 economically viable farms per year, each requiring 2,500 acres, over the next 20 years would result in another 100,000 more cows in Ontario. If this seems a tad ambitious, remember what Ontario farmers did with their Corn Fed Beef program.
Canada’s National Beef Strategy doesn’t really address our declining herd numbers. It calls for a 15 per cent increase in production efficiency over the next five years along with an improvement in competitiveness, beef demand and connectivity across the industry.
All are worthy goals but they won’t mean much if we don’t have enough cattle to reach them.