There are few surprises and some disappointments at the end of Q2. Total slaughter cattle numbers are up 5.1 per cent and tonnage is up approximately nine per cent over the same period in 2015. The larger increase in tonnage is due entirely to increased carcass weights. Further, the increase in the percentage of AAA carcasses from 58 to 63 per cent of the total is persuasive evidence that most of the increase in carcass weights is due to over-finishing.
The total number of steers processed domestically and exported for slaughter appears to be 10 per cent higher than a year ago. This is difficult to explain since these 2016 steers came from a smaller beef cow herd. A partial explanation may be that the steer supply has been increased by an increased number of dairy and dairy cross steers, drawn into the cattle feeding stream by record high replacement prices.
Assuming that heifer exports for slaughter were in the same ratio to steers as in the domestic slaughter, total heifer slaughter is down only 2.1 per cent. Meanwhile cow slaughter is up five per cent. Putting those figures together means there is no chance at all that the beef cow herd has begun to grow. More likely it has continued to decline. Another point worth noting is that since 2013, 60 per cent of the exported feeder cattle were heifers, a fact that has further reduced the supply of heifers for breeding.
Total productive capacity has increased nearly three per cent mid-year but, again, the increase is due largely to increased carcass weights. Meanwhile slaughter steer and heifer exports are up 44 per cent.
Beef imports at mid-year are down nearly four per cent while beef exports are up over eight per cent. The combination of increased exports of both beef (8.5 per cent) and slaughter cattle (44 per cent), and reduced imports (three per cent) means that supplies available for domestic consumption in 2016 will be almost two per cent lower than in 2015.
The Canadian beef industry appears stalled. Despite recent record high replacement prices in 2014, that were surpassed greatly in 2015, nothing has induced herd expansion either of existing herds or newly established herds. Of course, record cattle feeding losses have been largely the consequence of record replacement prices and those feeding losses will put a damper on future replacement prices. This alone will tend to discourage expansion.
The industry remains hugely export dependent, but the lion’s share, 90 per cent of total live and product exports, continues to flow into the U.S. Americans consume substantially more beef originating in Canada than do Canadians.
Canadians consume just one-third of industry output. Another third of Canadian beef consumption is imported product. Meanwhile per capita consumption continues to decline and is on track to fall below 50 pounds per capita on a carcass weight basis this year, which translates into just over 36 pounds on a boneless retail basis. This will be the lowest level of beef consumption since 1950 when the dairy herd was the main source of a generally tough and unappetizing product.
Nothing in this picture can change until three years after beef herd expansion resumes. Significant expansion will not occur in 2016 so the earliest data any significant supply increase can occur is now 2020. Determined and generally successful and laudable efforts have been made to open and expand export markets, but even this enlarged market access has not given producers the confidence to expand. Perhaps they haven’t forgotten how fickle market access can be after the prolonged and unjustified closures following the BSE incidents more than a decade ago.
It is worth noting as well that the present attitude and stance of the nation’s cow-calf producers are in stark contrast to the upbeat strategic plan and the alleged Canadian Beef Advantage touted by industry leadership.
As of yet cow-calf producers seem unpersuaded and they alone hold the future of the industry in their hands.