History tends to repeat itself and the latest tantrums from the Oval Office are reminiscent of the Fordney-McCumber and Smoot Hawley tariffs of 1922 and 1931 that drove a path of destruction through the Canadian cattle industry. It is now almost forgotten but the Canadian Cattlemen’s Association was created in 1932, then known as the Council of Canadian Beef Producers, largely in response to the devastation caused by these tariffs. So, a little history is appropriate.

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In 1913 the U.S. duty on cattle of all weights was “Free.” In 1922 tariffs were raised under the Republican Fordney-McCumber Tariff Act from “Free” to $1.50 per cwt live weight. This may seem a modest tariff until one realizes that cattle price in 1921 was about $13 per cwt and the tariff knocked them back to about $7 per cwt in Ontario (see chart below), and lower in the west. This amounted to a tariff of roughly 20 per cent of the value of the animal, when converted to an “ad valorem” basis. This was a larger price setback than expected but the sharp price drop reflected the heavy dependency on the U.S. market, and with U.S. buyers no longer bidding, the price fell to the level that reflected only domestic demand.

Then in 1930, with cattle prices already in retreat, the Smoot-Hawley Tariff Act, also imposed by a Republican administration, raised the tariff on cattle weighing under 700 lbs. from $1.50 to $2.50 per cwt and doubled the tariff on cattle weighing over 700 pounds to $3 per cwt. In 1933 cattle prices in Ontario bottomed out at $4.63 per cwt and in that year the tariff, when converted to an ad valorem basis, added 64 per cent to the export cost of the animal.

So, we’ve seen this kind of protectionism before and, irritated as President Trump clearly is by the dairy and poultry supply management regimes and “egged” on by R-Calf, with its continuing demands for the restoration of country-of-origin labelling, there can be no assurance that the cattle and pork industries might not get caught up in this vortex of madness. In fact, it has already begun with a retaliatory 10 per cent duty on some “prepared beef meals” from the U.S. Do we imagine that this won’t escalate? It seems to me that retaliation in a sector completely distinct from the first measures started by Trump is one sure way to ensure continued escalation of this trade dispute.

An enormous amount of work, and not a little bit of necessary compromise, has gone into stabilizing the world trade order in what is now known as the World Trade Organization (WTO). NAFTA has, up until now, been a shining example of what is possible. It is, and should be broadly recognized that long-term and stable trade agreements are necessary to give businesses, including agricultural businesses, the confidence they need to invest and prosper. National governments obviously have the job of negotiating these agreements but equally, the responsibility of honouring those agreements in a manner that is not unnecessarily disruptive to long-term business commitments. Inevitably, there is a need to renegotiate aspects of any agreement but these renegotiations should be both deliberate and respectful of the parties’ interests and not driven by the volcanic eruptions of a tempestuous president.

The chart shows what happens when short-sighted political interests tamper with legitimate international trade agreements.

If cooler heads prevail, a faint hope, we might still negotiate our way out of this mess. One thing that should be apparent to the Americans is that they could not possibly maintain their very healthy export thrust in beef without the imported supply from Canada. Canadian exports of beef and live slaughter and feeder cattle, when converted to carcass weights, have been equivalent to one-third of total U.S. exports. So, if domestic consumption in the U.S. had remained unchanged, U.S. beef exports would have been reduced by over 30 per cent.

Retaliation may be the only response we have but it is a crude weapon that often inflicts its damage indiscriminately on all parties on both sides of the border. So, while there is no immediately apparent alternative to retaliation, industry leaders and thoughtful politicians should be considering other options, the first of which should be to build into trade agreements protection against abrupt and capricious interventions for temporal political gain. National governments that do the marvellous and essential work of creating long-term trade agreements should respect, defend and preserve their handiwork.

At the producer level, one begins to understand the fragility of these agreements when they fall into irresponsible hands. In the Canadian cattle industry this year, assuming there is no further retaliation, approximately 50 per cent of the entire output of the industry will find its way into the U.S. market either as feeder cattle, slaughter cattle or beef. That’s more than the 42 per cent that will be consumed in Canada. This creates a huge amount of uncertainty and risk and maybe explains the hesitancy across the land to start any expansion in the national cow herd. Because of its long-term time horizons, five years from a decision to expand until increased production reaches the market, is sufficient reason for caution. It is also sufficient incentive to work harder to diversify the export market.

Charlie Gracey is an independent analyst of the beef industry living in southern Ontario.

The post Here we go again appeared first on Canadian Cattlemen.

In his June editorial, Gren Winslow drew attention to the disparity between the recently released census numbers and the July 1, 2016 numbers. With regard to beef cows, the July 1 beef cow inventory stood at 3.8 million head while the 2016 census set the number at 3.7 million head. Which of these numbers is closest to correct? We don’t know and have no way of knowing since both are based on estimates which are themselves based on sampling.

In this analysis I am only concerned with beef cow numbers since all other kinds, (steers, heifers, calves, etc.) are direct derivatives of beef cow numbers. I will, however, insert this short comment on bull numbers just to get them out of the way. Because of the extensive use of AI in the dairy industry, 95 per cent of all bulls reported are beef bulls on beef farms. This per cent is highly stable and the actual number varies with changes in beef cow numbers.

So another way of looking at the number of beef cows is to ignore the cows themselves and count lagged steer marketings per 100 beef cows. (By lagged I mean relating steer numbers to the weighted average size of the beef cow herd one and two years previous). In the analyses that I have done, I find that the average number of beef steers marketed per 100 lagged beef cows since 2000 is 40.2 plus or minus 2.6 head. This presumes that I have properly accounted for the relatively small number of dairy steers in the slaughter mix. The relative stability of this number allows one to say that the industry produces about 40 to 41 beef steers annually per 100 lagged beef cows.

What is more important than the actual number of beef cows is the unmistakable long decline in the reported number of beef cows and the equally obvious long-term decline in the number of beef cow herds.

In this analysis there are some problems with the data. The number of beef cows and farms reporting are taken from the censuses of 2001 and 2006 and from 2010 onward the numbers come from the 2016 census. The missing years are 2002 to 2005, and 2007 to 2009, and I drew the beef cow numbers from the January 1 inventory estimates for those years and simply extrapolated the number of herds. I then calculated average herd size for all years. The apparent discrepancies represent the difference between census figures and January 1 beef cow number estimates.

The census shows that beef cow numbers have declined from 4.75 million head in 2003 to 3.8 million head in 2017. A decline of 950,000 head, or 20 per cent. A higher rate of decline is found when one calculates the decline from the 2007 peak of 5.28 million head but, as noted above, all of the growth in cow numbers between 2003 and 2007 was caused, not by deliberate herd expansion but by the forced reduction in cow culling.

• The number of farms reporting beef cows has declined from 90,000 in 2001 to 63,066 in 2017, a decline of 26,934 herds or 30 per cent. The decline has been rather steady averaging a little over two per cent per year.
• Beef cow numbers have declined 17 per cent from the pre-BSE peak in 2003. The decline since the forced peak in 2007 has been quite erratic and may reflect inaccuracy in estimates, such as the huge 14 per cent decline between 2009 and 2010. Nonetheless the overall decline in beef cow numbers since 2003 cannot be ignored.
• As herd numbers declined there was some significant consolidation as average herd size increased to 62 cows in 2017 from 53 cows in 2001. As would be expected, average cow herd size increased during the years immediately after 2003 and peaked at nearly 65 head in 2007 and again in 2009, before adjusting downward in 2010 and then slowly growing to 63 head in the 2017. The abrupt spike in herd size in 2005 again reflects the forced growth following BSE.

The Provinces

The analysis for the provinces encompasses the years 2010 to 2017 inclusive.

As a benchmark, the Canadian industry in the past seven years:

• Lost 16 per cent of its cow herds.
• Lost nine per cent of its beef cows.
• Average cow herd size grew from 57 to 62 cows.

ATLANTIC CANADA

• Lost 15 per cent of its cow herds.
• Lost 35 per cent of its beef cows (the largest per cent loss).
• Average herd size grew from 20 to 26 cows (largest per cent increase).
• Share of industry in 2016: producers eight per cent, cows 1.1 per cent.

QUEBEC

• Lost 15 per cent of its cow herds.
• Lost 18 per cent of its beef cows.
• Average herd declined from 35 to 34 cows (the only province where herd size decreased).
• Share of industry in 2016: producers eight per cent, cows four per cent.

ONTARIO

• Lost 17 per cent of its cow herds.
• Lost 11 per cent of its beef cows.
• Average herd increased from 20 to 22 cows (the smallest average herd size).
• Share of industry in 2016: producers 20 per cent, cows seven per cent.

EASTERN CANADA

• Lost 18 per cent of its cow herds.
• Lost 14 per cent of its beef cows.
• Share of industry in 2016: producers 30 per cent, cows 12 per cent.

MANITOBA

• Lost 17 per cent of its cow herds.
• Lost 21 per cent of its beef cows.
• Average herd increased from 67 to 71 cows.
• Share of industry in 2016: producers 10 per cent, cows 11 per cent.

SASKATCHEWAN

• Lost 15 per cent of its cow herds.
• Lost seven per cent of its beef cows.
• Average herd increased from 79 to 86 cows.
• Share of industry in 2016: producers 22 per cent, cows 30 per cent.

ALBERTA

• Lost 14 per cent of its cow herds.
• Lost six per cent of its beef cows.
• Average herd increased from 76 to 84 cows.
• Share of industry in 2016: producers 31 per cent, cows 41 per cent.

In practical terms, the Saskatchewan and Alberta experience since 2010 is identical.

BRITISH COLUMBIA

• Lost 13 per cent of its cow herds.
• Lost six per cent of its beef cows.
• Average herd increased from 40 to 45 cows.
• Share of industry: producers seven per cent, cows five per cent.

WESTERN CANADA

• Lost 15 per cent of its cow herds.
• Lost eight per cent of its beef cows.
• Share of industry: producers 70 per cent, cows 87 per cent.

The most salient observation at the end of the second quarter of 2017 is that there are no signs of herd expansion and indeed it is certain the cow herd has continued to shrink. Though solid information on sex of exports may not be available until year-end it appears now that heifer slaughter, including slaughter heifer exports, is up at least eight per cent. Meanwhile cow slaughter is up 16 per cent domestically, but sharply lower exports has total cow slaughter essentially unchanged from a year ago. The picture is pretty clear. Cow-calf producers continue to maintain a low cow culling rate while selling off a higher proportion of their heifers.

This pattern is worryingly consistent and suggests some, or many, producers intend to exit the industry.

It is now obvious that any future growth in supply now depends on a higher rate of weaned heifer retention in the fall of 2017. Even if that happens their marketable offspring will not reach market until 2020.

This is one of the most significant and least appreciated realities about the industry and its future prospects. The commercial cow-calf herd is the foundation of the entire industry and its long and continuing decline should be a matter of the most urgent importance to industry leaders. The current situation is clearly unsustainable.

The post What the latest Census tells us about Canada’s beef herd appeared first on Canadian Cattlemen.

This observation may appear logical on the surface but, as with so many easy assumptions, it requires closer examination. Recently food scientist Sylvain Charlebois of Dalhousie University commented that cattle require “more than 10 pounds of feed and eight gallons of water to produce one pound of edible beef.” The inference most readers would draw from his comment would be that this placed the beef animal in direct competition with humans for a supposedly limited supply of food grains and water.

The debate about the role of beef in our diet should begin with the facts.

So I would offer a more realistic picture of how the bovine, with its marvellous ruminant digestive system, greatly increases and enhances the human food supply by converting plants indigestible by humans into high-quality protein foods from land entirely unsuitable for any purpose other than grazing.

Grain consumption

Let us begin with some basic “factual” information on grain consumption by beef cattle.

The general public often doesn’t realize that the cow herself spends her entire life eating grass or stored forage in winter, although she may receive small amounts of grain as a growing heifer. Her calf is weaned at about 40 per cent of its mature weight on a diet of mother’s milk and grazing. Whether they enter the feedlot as weaned calves, yearling or short keeps, it is fair to say an “average” animal goes on feed at about 55 per cent of its final mature weight having consumed mainly pastures, stored hay and silages, and little or no grain.

In a feedlot its ration consists of a mixture of forages or silages and a grain ration consisting of corn or barley with a small amount of protein supplement. Based on Trends data from Canfax, I calculate cattle in the feedlot consume, on average, 7.2 pounds of grain per pound of live weight gain.

If this grain is applied to the final weight of the animal, as it should be, grain consumption works out to 3.3 pounds of grain per pound of final live weight.

This ratio of usage is expressed in terms of live weight and must next be converted to actual boneless beef. An average beef carcass weighs 60 per cent of the live animal weight but the amount of boneless beef in a carcass averages 42.6 per cent of the live animal weight.

The rest is not wasted, tighten your belt or look at your shoes… I’ll leave it there. So, if it took 3.3 pounds of grain to produce one pound of live weight gain, that converts to 7.7 pounds to produce one pound of boneless beef.

Even though this is well below the “more than 10 pounds” commonly mentioned, it’s not the whole story. Annually 16 per cent of the total beef supply is produced from culled cows and bulls that consume negligible amounts of grain, aside from that consumed by dairy cows to support milk production. Therefore our figure of 7.7 pounds applies to only 84 per cent of the boneless beef when spread over total annual production, so the correct figure for grain usage by the beef sector is about 6.5 pounds of grain to produce one pound of boneless retail beef. That indeed is a far lower ratio than is commonly used to describe grain consumption in beef production.

Water usage

What about the allegedly high water use in beef production? Drinking water requirements for cattle vary from a low of about 20 to a high of 65 litres per day depending on the type of cattle and the temperature. Recognizing this variability, a generous overall average daily consumption of 45 litres per day for a steer or a heifer means that at an average slaughter age of 18 months the animal has consumed 25,000 litres of water. The mother cow, meanwhile, would have consumed an additional 18,000 litres, which I will round up to 20,000 litres to accommodate the sire. Recall that the sire is sire to approximately 20 offspring per year so his water consumption can be spread over that number of offspring.

So the water requirements to produce a finished steer or heifer totals roughly 45,000 litres. The output is a steer or heifer carcass weighing approximately 380 kg. (I am ignoring the fact that the culled cow and bull also contribute to the beef supply). So that means that 45,000 litres of water were consumed in the production of a 380-kg carcass. That works out to about 118 litres of water per kg of carcass weight or 162 litres per kg of boneless beef.

So it is apparent the claim that eight gallons of water is needed to produce one pound of beef (equates to 80 litres per kg of edible beef) is a considerable underestimation. Probably the lower estimate of 80 litres referred only to water consumption in the feedlot and did not include the water consumed by the animal before it arrived in feedlot or the water consumed by the dam and sire.

But what does this mean? Certainly a large volume of water is used in beef production and, as I have shown, in almost exactly double the amount claimed. But so what? Water, especially water used in agriculture is the ultimate renewable resource and every drop of it is returned to nature to be used again and again. All of the water used to produce that pound of beef, except the moisture content of the beef itself, was back in nature before the animal was marketed. Not one drop was destroyed or wasted. Water usage in beef production becomes an issue only where it is scarce and is needed for other more urgent purposes and that is not a problem in any of the beef-producing regions of Canada.

With the math explained we can move on to the main question. Does the production of feed grain for livestock compete with food grain production in Canada?

The approximate total annual grain and oilseed production in Canada presently is 75 million tonnes. Coarse grains production, which includes feed grains, contributes roughly one-third of that supply. About half of the coarse grain supply is used for industrial purposes, such as malting, and the other half, about 14 million tonnes, is used as feed grains for cattle, hogs, poultry and all the minor livestock species. Currently, the prices of all grains are somewhat depressed and would be even lower were it not for the demand for feed grain exerted by the livestock sector. In addition to consuming feed grains, livestock are the only outlet for the significant but variable quantities of weather-damaged food grains. Without the livestock industry these off-grade food grains would be wasted.

So if one looks at the situation in a balanced way, one can see that by utilizing forage crops, pastures and a modest amount of feed grain, beef cattle provide high-quality, protein dense beef to augment the human food supply. It is true that they consume quantities of feed grains during the feedlot stage but much less than is commonly supposed. As well, they make beneficial use of lower-quality or spoiled food grains and other crop residues that have no other use or value.

It is possible to finish cattle solely on forages but it takes longer, and would take up much of the land currently devoted to feed grain production, with little if any reduction in cost. The grain portion makes up only about 23 per cent of total cost of production in the feedlot.

So should beef production be reduced in an effort to increase the global food supply? Far from improving either the quantity or the nutritional quality of the human food supply, this would result in a lower supply of high-quality protein and a sharp reduction in the total supply of human food.

To understand this apparently illogical observation one has only to recognize that vast areas of land on every continent are unsuited to the intensive cultivation necessary to produce food grains, fruit and vegetables. Even better farming land benefits from crop rotations with forages and applications of livestock manure to improve soil tilth and fertility. So, to reduce or eliminate beef production would mean that the large acreages of land that are suitable only for grazing could no longer make any contribution to the human food supply. Of the 160 million acres of agricultural land in Canada, 50 million acres are described as pasture land, meaning tame and natural pasture land. An additional 17 million acres are devoted to tame hay.

It might be prudent to recall the devastation visited upon vast areas in Canada and the United States during the Dirty Thirties when millions of acres of fragile soil were put to the plow in response to temporarily high wheat prices. The lesson learned then that some land should remain in grass should not be so quickly forgotten. Humanity has centuries of experience with balancing livestock and crop production and only very recent and localized experience with agriculture without livestock.

Charlie Gracey is a beef industry analyst living in Ontario. More detail on this topic is available on his website at www.charlesgracey.net.

The post Musings on how much cattle eat and drink appeared first on Canadian Cattlemen.

Cattle feeders might be excused if they are not quite as optimistic about the state of affairs in the industry as some industry spokespersons appear to be. According to data from Canfax cattle-feeding losses since August of 2015 have been extremely large and painful, averaging about $18 per cwt (live wt. basis). On the one million steers and heifers marketed in the last five months of 2015 and weighing an average of 1,450 lbs. this works out to a loss of $260 million last year. Continuing losses in 2016 up to October averaged about $21 per cwt and were expected to continue at that rate to year-end, adding another $760 million in the red. So by year-end the cattle-feeding industry will have absorbed a total loss of roughly one billion dollars — a huge destruction of capital for this industry.

Broadly speaking the losses in 2015 may be attributed mainly to the record prices paid for feeder cattle, and, to be fair, much of this total loss was largely preordained the day the cattle were placed on feed. The losses in 2016 were compounded by sustained declines in the market price of fed cattle approximately $50 per cwt when you average it from the short-lived peak of $200 per cwt in May and June of 2015 to October 2016 of $132 per cwt.

This sheds some light on the collective decision by cow-calf producers not to expand their herds just yet. The July 1 beef cow inventory increased less than 0.5 per cent, by a mere 12,000 head, over the year previous. Since Statistics Canada often revises its numbers this increase must be regarded as negligible.

The decline in the national beef cow herd has primarily been the result of a mass exodus of producers while those remaining held their herds nearly static. This exodus is worrisome.

It primarily began in the fall of 2011, and continued in 2012, when the price of steer calves in the fourth quarter climbed to $156 per cwt, a price not seen since the previous record year in 2000. After a decade of low prices producers apparently decided that they were better off selling a high proportion of their heifers instead of expanding their herds. Prices were, after all the best they had seen in a decade.

But 2011 and 2012 were merely prologues of what was to come. In 2013 a new record fourth-quarter average price of $163 per cwt reinforced the view that they were better off again to cash in on heifer sales and once again any latent plans to expand the herd were put on hold.

Then along came 2014 and the average price of steer calves shot up to $282 per cwt and the previous record was utterly smashed by $120 per cwt on weaned calves, or something like $600 per head. Two related thoughts must have entered the minds of many cow-calf producers at that time. One, such prices could not possibly last, followed quickly by the related thought that one might as well cash in while they lasted.

Even as cattle-feeding losses began to pile up replacement prices remained very strong throughout 2015, due primarily to tight supplies that were made tighter still by continuing export demand from U.S. cattle feeders.

So, despite four successive years of strong and rising replacement prices the beef cow herd continued to shrink and the best that can be said is that numbers appear now to have stabilized.

In 2016 feeder calf prices have more or less been in a steady and sometimes rapid decline, retreating nearly $100 per cwt and just beginning to approach a break-even price for the cattle feeder.

It is difficult to imagine how cow-calf producers will be persuaded to expand their herds under conditions of rapidly falling prices when rapidly rising prices over the past three years failed to elicit any response.

So a closer look at cow herd statistics is in order.

Between 2006 and 2016 the beef cow herd declined by 27 per cent and, since the average herd size increased only slightly from 61 to 63 head, it is certain that the number of beef cow herds has declined at least 30 per cent from 83,000 to about 62,000 in 2016. That’s a loss of 21,000 herds. This rather huge exodus of entire beef cow herds from the industry has received surprisingly little comment despite the irrefutable fact that the commercial beef cow herd is the essential foundation of the entire industry.

Thus, if the industry is not doomed to become a permanently shrunken industry there needs to be some serious thought given to measures that might stimulate herd expansion or, at the very least, quell the current long-term decline.

Since most herds are sized to the carrying capacity of the farm or ranch on which they are located the exodus of producers is more troubling than the decline in cow numbers. Until the land owned by exiting producers is bought or rented by a new or expanding producer that production base is lost to the indusry. So it comes to this: if a way can’t be found to use the land withdrawn from cow-calf production the national herd cannot expand significantly.

A smaller production base also means we cannot fully exploit the increased market access for Canadian beef that has recently been achieved with so much effort. To fully enjoy the benefits of the “Canadian beef advantage” we require adequate supplies to meet the growing export demand for our product. The reality, however, is that no increase in salable beef supplies can be expected before 2020.

Is there a way back?

One factor frequently mentioned to explain this herd attrition is the steadily advancing age of cow-calf producers. This is caused, obviously, by the entry of insufficient younger producers to stabilize and even reduce the average age. This creates some unique problems for the industry, and possibly some real opportunities.

On the downside the advancing age of producers means fewer may be inclined to do all the things necessary to optimize the output of their cow herd and new industry initiatives such as “sustainable beef” and “verified beef production” that require more intensive management and documentation of the practices involved. These procedures that range all the way from prudent sire selection to procedures involving vaccinations, implanting (or the lack of), pregnancy testing and health surveillance generally involve more intensive individual animal management.

The necessity of these tasks undoubtedly figures into the decision of some to exit the industry. Undoubtedly there have been other provocations, as well; the cost and inconvenience of national ID, for example, which to date has failed to deliver the promised direct benefits associated with information. I do not question the necessity of a national identification program. The failure has been in using it to deliver tangible benefits back to the producers who bear the cost of the program.

In the last decade we have lost at least 20,000 producers, which severely restricts the future potential of the industry. While diminished in number these aging cow-calf producers do own grazing lands and still maintain the necessary fencing and provide the basics necessary to maintain our current commercial cow herd. However, they may be less inclined to carry out the more intensive practices mentioned above.

Earlier I noted that the industry has just come through a period where cow-calf returns were exceptionally high and feedlot returns disastrously low. The industry has been through cycles before where one sector enjoyed success while the other languished. Is this the only way a modern industry can function?

I believe we have reached a point where feedlot operators could consider a more proactive role, offering a mutually beneficial agreement with some of these cow-calf operations. This could range from some advice on breeding or animal health practices, and maybe even some assistance, in exchange for an informal or formal undertaking that the feedlot would purchase the weaned calves.

This could be a mutually beneficial arrangement. It would allow the aging herd owner to remain fully current on all of the procedures now recommended, and hopefully allow him or her to continue in the business for a few more years. Ideally, it might excite some interest as well in the next generation to continue in this vein while maintaining ownership of an appreciating land base. For the feedlot operator the advantage of a reliable supply of cattle bred and backgrounded to his needs are obvious. They could also share the savings in marketing and transportation costs.

Ideas like this would surely need some fleshing out but it strikes me some sort of co-operation will be needed if we are to halt this continual erosion of the industry.

Two obvious hurdles are the likely reluctance of cow-calf producers to share their decision-making autonomy with anyone and the fact feedlot operators may not have much interest in the output of small herds.

The first difficulty might be addressed by some sort of contractual arrangement where the cattle would be placed on feed at an agreed break-even price for the weaned calf that specifies the sharing of profits and losses. The second will take more ingenuity. The average western herd has 70 cows (50 in the East) producing an average 30 steers a year and, in a static herd, about 18 heifers, and yet the majority of cows is in smaller herds.

Another problem with this approach is that at various times either the cow-calf producer or the feedlot operator would be reluctant to commit to a contractual agreement when, in the case of the cow-calf operator, weaned calf prices were very high or, in the case of feedlot operators, very low.

Still it should be apparent that the ultimate returns to the entire sector are expressed as the final market price and, to date at least, one sector benefits at the expense of the other, as has been so very recently demonstrated. The question is whether the industry can find a way to work around these boom-and-bust cycles by establishing a closer working relationship and information exchange between the cow-calf and feedlot sectors.

Such arrangements have been made very successfully within the pork industry but neither of the problems noted above are apparent in that sector where contract pricing is well established and herd size is not remotely a problem where a small breeding herd of 100 sows will produce over 2,000 weaned pigs per year.

It is not my purpose, or within my competence, to outline how these arrangements might be made. What I am sure of is that the status quo hasn’t worked out very well over the last few decades and a continued decline in the number of cow-calf producers, if not somehow reversed, will continue to blight the prospects of the entire industry.

The post An industry in crisis appeared first on Canadian Cattlemen.

“Now the industry has the opportunity to move forward. All the necessary pieces are in place. Electronic identification tags make it possible to link carcass data to the individual animal. Computerized camera grading technology is available to assess marbling and lean yield. The beef information exchange system (BIXS) can be used to relay that information right back to the original producer,” he told delegates at the Saskatchewan Stock Growers Association convention earlier this summer.

While poor feeding practices can ruin a potentially good carcass, Gracey says it is much more difficult to produce an excellent carcass out of a genetically inferior animal.

The only way to make genetic progress on carcass quality is to get carcass information back to cow-calf producers so that they can produce calves with superior genetics for quality and yield in the same carcass.

Typically, the more fat in a carcass, the lower the lean meat percentage, so shooting for marbling that brings top prices often results in excessive external fat. Gracey and others contend Canadian fed cattle have become too fat resulting is higher feed costs in the feedlot and trim losses for the packer.

The genetics for both marbling and yield from the same animal are available, but it’s not the norm, says Gracey. In a Saskatchewan plant he found one-third of 665 Canada AAA carcasses had between four and 7.5 mm of backfat, another third were between 7.5 and 10 mm, and the last third 10 mm or more. The carcasses ranged from 2.5 mm backfat all the way up to 20 mm.

“Without carcass information you will do it sometimes by accident. With carcass information you will be able to do it by design,” he says.

Lean yield has value

The first grading standards in 1929 promoted quality and eventually resulted in overly fat cattle. Revisions in 1972 led to a focus on lean at the expense of quality. The current version adopted in 1993 was intended to help producers balance quality and lean yield.

While there have been strong market signals to improve marbling, a market signal to improve lean yield hasn’t been there, Gracey says. The cattle feeder has no incentive at all to seek out and pay more for cattle with the genetic capability to deliver a carcass that has both high quality and high yield.

As a result Canada AAA and Prime quality grades increased from approximately 20 per cent in 1995 to over 60 per cent last year, while the percentage of Y1 yield carcasses decreased from near 70 per cent in 1996 to little more than 40 per cent last year. According to Canada Beef, lean meat yield in Canada averages 73 per cent with a range from 64 to 78 per cent.

Canada’s present yield grade system groups lean yield into three classes. Y1 is 59 per cent and over; Y2 is 54-58 per cent; and Y3 53 per cent and under. In effect, these groupings result in owners who sell higher-yielding cattle subsidizing those who sell lower-yielding cattle, he explains.

The reason for establishing yield classes in the first place was because there wasn’t a way to accurately predict lean yield. Now with camera grading, Gracey questions why we even bother with yield classes when we can have actual yield per cent.

He feels industry’s push to move to a five-class yield grade system, along the lines of that in the U.S., would at least be a good starting point because it would narrow the range for each class.

His calculations show that packers wouldn’t end up paying more in total than if they paid a flat price for lean yield. At a recently quoted price of $250 per hundredweight (cwt) for a 750-pound carcass in North Dakota, the prices paid for each yield class based on lean yield should have been $269.70/cwt for Y1; $255.41 for Y2; $241.12 for Y3; $231.83 for Y4; and $217.19 for Y5. That’s with no premium/discount grid involved. It’s simply paying for what the carcass yields.

A new five-class yield grade system for Canada is outlined as part of the “Beef, Bison and Veal Carcass Grade Requirements” document prepared by the Canadian Beef Grading Agency (CBGA) in consultation with industry. It is expected to be incorporated by reference in the Canadian Food Inspection Agency’s (CFIA) consolidation of food regulations being prepared as part of the agency’s modernization process. The advantage of incorporating a document by reference is that requirements can be updated as needed without having to go through the lengthy process of changing a regulation. Details are posted under the news tab on beefgradingagency.ca.

This proposal was submitted some years ago but CBGA manager Cindy Delaloye says there are indications it could be published in Canada Gazette I this fall and possibly finalized sometime in 2017.

The new proposed yield grades Canada 1 through 5 will be based on a formula that includes adjusted back-fat, rib-eye area and carcass weight.

Camera grading

Only youthful carcasses that meet marbling and other criteria to qualify for the Canada A, AA, AAA and Prime grades go on to be assessed for yield. The quality grade is based on the degree of marbling present in the rib-eye. The yield grade is currently determined using an equation and ruler developed at Lacombe Research Centre and implemented in 1992.

Gracey says the ruler is notoriously inaccurate and was intended to be a temporary tool until the computer vision system (CVS) became available.

CVS was approved by the CFIA as an aid for grading in 1999, but commercial uptake was low and the technology was sold.

A cold-carcass camera developed by e+v Technology GmbH in Germany was tested in Canada and approved by the CFIA in fall of 2010 as an aid for grading beef carcasses for quality and yield.

The three plants with moving rails — Cargill at High River, Alta., and Guelph, Ont., and what is now JBS at Brooks, Alta. — which process approximately 90 per cent of fed cattle in Canada, have installed e+v cameras. The Brooks plant was the first to use the technology for grading beginning in fall 2011, although the CBGA graders have the final approval of the camera’s assessment. Cargill plants still only use the cameras as the first step in their internal processing systems.

Given that carcass grading is voluntary, so is the use of computer technology, Delaloye explains.

So far, the e+v camera has performed up to expectations. She says the majority of overrides by CBGA graders are due to yield, either because the fat covering the rib-eye area has been torn during dressing and/or the technology mis-traces the rib-eye area when capturing the image.

The camera measures grade-fat thickness, length and width of the rib-eye, and calculates the estimated lean yield per cent and marbling score to arrive at grades for each carcass, so dressing as well as camera placement are critical to measuring yield accurately, she explains.

The operator has to place the camera flat over the rib-eye because it can only assess the rib-eye in two dimensions and can’t adjust for any tilt.

CBGA graders are incredibly consistent because they have two eyes and a whole lot of experience, Delaloye adds. The camera only sees the rib-eye, whereas graders see the entire carcass and decide whether the camera image is representative. As of yet, camera technology isn’t able to assess other carcass quality factors such as maturity, conformation, as well as meat and fat colour.

The advantage of the camera is that it is even more consistent than the grader because it assesses each rib-eye independently and objectively without memory of the previous carcass. The camera always illuminates the rib-eye in the same way, whereas a grader’s height and angle to the carcass can affect how light hits the rib-eye when evaluating marbling. It’s quick and the image with the accompanying data can be easily stored and shared.

Sharing is the glitch

“The original purpose of grading was to serve as a common language to meet the interests and needs of the entire industry and for the benefit of consumers. The grading system and the individual carcass grades weren’t intended to be owned by anyone, but now packers want to make it a profit centre,” he says.

He could have never imagined this kind of debate 20 years ago when electronic tag technology and camera grading were still in development and BIXS was only a dream. Through the years, the common excuse for not sharing carcass information with cow-calf producers was that they wouldn’t know what to do with it anyway!

Gracey concludes his message with a stern warning. “If the industry hopes to produce animals that produce carcasses that combine high quality with high yield and animals that convert feed more efficiently, it all has to begin with the person who makes the breeding decisions. An industry that does not recognize this and does not do everything possible to relay information back along the supply chain cannot and will not prosper.”

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Analysis of grading results from 2005 and 2015 indicate that the average carcass in 2015 contained 19.3 pounds of fat per cwt compared to 16.7 pounds per cwt in 2005. That increase of 2.6 pounds per cwt comes to an extra 22.5 pounds per 2015 carcass. On the 2.78 million cattle slaughtered in 2015 this is an extra 62.6 million pounds of fat.

The real question, though, relates to the cost of all of that fat. Current reported average cost of feedlot gain is $0.76 per pound. We know, however, that feed efficiency drops dramatically as an animal fattens, and so adding one pound of fat to an animal is significantly more expensive. Using an estimate of $1.50 per pound of gain for fat, the cost of the excess fat in 2015 was a rather staggering $93.9 million. To put that in perspective, it is equivalent to a $33 discount on every steer and heifer fed in Canada. This could be justified if feeders received a significant premium for AAA carcasses; however, there are now so many AAA carcasses that there is, in fact, no premium at all.

As Gracey noted in his article, cattle feeders may be making a logical decision to feed to excess as the payment structure and feed costs support this strategy, although barely. But step back for a moment and think like a consumer. They ultimately pay for this excess fat through higher beef prices. Like all rational consumers, higher beef prices make you look more closely at chicken as a preferred alternative.

It will take a concerted effort to change the system so that this inefficiency can be dealt with. The Canadian Cattlemen’s Association recently launched a National Beef Strategy. The strategy has four pillars, including three that can be assisted by dealing with this issue:

Beef demand pillar: The goal under this pillar is to enhance beef demand and, as a result, enhance carcass cutout value by 15 per cent over five years.

The figure below lays out in stark terms the challenge we face with regard to demand: beef consumption has continued its 30-year decline, replaced with chicken, which has enjoyed a healthy 30-year run. By feeding excessively, adding fat that is then trimmed and tossed aside, we are in reality making beef less and less competitive.

Chicken has been winning the war and at this point, we’re handing them the bullets.

How does excess fat relate to carcass cutout value? Well that $33 in excess fat is a little over one per cent of the value of a carcass. This alone will not meet the 15 per cent target of the strategy but it could make a good contribution toward the goal.

Productivity pillar: The goal here is to increase production efficiency by 15 per cent. Fat is added to an animal at a cost of feed roughly 2.5 times that of adding muscle. To make the math simple, if we use a feed efficiency of 5:1 for muscle (12.5:1 for fat), this additional 62.6 million pounds of fat equates to 391,000 tons of grain. It also results in a tremendous amount of both more manure and greenhouse gas. For both industry efficiency and industry sustainability, excess fat is a problem.

Connectivity pillar: Through efforts in this pillar, the goal is to enhance industry synergies, connect positively with consumers, the public, government, and partner industries by actively addressing industry issues. The beef industry suffers from a disjointed supply chain that results in confused (or lack of) market signals. This is where the problem of excess fat arises: each player making logical moves that add up to something that really makes no sense.

There are several initiatives now underway that can help. Data systems such as bioTrack can help to connect the information dots. The caveat, of course, is that people must get on the systems and that data is shared freely or at a reasonable cost, particularly grade data. A powerful but highly underutilized tool available to the beef industry is genetics. By selecting the right bulls, we can get the marbling desired without the excess feeding and fat. We simply do not need to sacrifice yield in the pursuit of marbling.

Mike McMorris is the general manager of BIO

The post The real cost of fat appeared first on Canadian Cattlemen.

In 2015 the output, or productive capacity of the national herd was reduced: almost 13 per cent in numbers of animals marketed and 10 per cent in tonnage. Most of that reduction, however, is explained by an almost 20 per cent decline in heifer marketings and a 16 per cent decline in cow marketings. Inasmuch as dairy cow culling rates are quite stable one can be confident that all of the decline in cow marketings was out of the beef herd so I have recalculated the decline in beef cow culling to be 21 per cent. This is quite conclusive evidence that the long decline in the beef breeding herd has at last ended. The heifers that did not appear in the market in 2015 had obviously been retained from the 2014 calf crop and were bred in the summer of 2015. Alas their calves will not reach market until 2017, but one can be quite confident that the long decline in the national herd has been ended and growth has begun.

As stated often before, a decline in cow marketings is not, in itself, a sign of herd growth. Herd growth can only come from an increase in heifer retentions that exceeds the rate of cow culling. In 2015 approximately 800,000 fewer heifers were marketed than steers and were therefore available for herd replacements. The total cow cull was approximately 600,000 head. Since dairy cow marketings make up about 40 per cent of total cow marketings that means that only about 360,000 beef cows were culled in 2015. That’s a culling rate of about nine per cent, close to the lowest possible practical culling rate.

The data above suggests a very vigorous growth rate with 800,000 replacement heifers replacing 360,000 culled beef cows. Bump that up to about 400,000 to allow for natural death loss in the breeding herd. However, two other factors must be taken into consideration. The first is that the fed cattle slaughter includes a sizeable number of dairy steers and very few dairy heifers. Also my estimate is based on the assumption that heifers and steers in the export data were present in the same ratio as in the domestic kill and this may not be the case. Reliable data on the sex of exported fed and feeder cattle is difficult to find. So, if we allow for 200,000 dairy steers, based on an estimate that I have made, and assume that exports of feeder and slaughter cattle were equally divided between steers and heifers, the spread between steers and heifers marketed would be reduced to about 525,000 head. That suggests a net increase of 125,000 beef cows or a beef herd expansion rate of 3.1 per cent. A more conservative estimate is that the beef breeding herd has expanded by 2.5 to 3.0 per cent. I’ll stand by that estimate for 2016 and we will see what the inventories show.

The declining supply led to a 5.3 per cent decline in domestic slaughter but a much larger 32.4 per cent decline in slaughter cattle exports and a 31 per cent decline in feeder cattle exports.

Despite a decline in overall supply, total beef exports remained unchanged. However, exports to the U.S. increased 5.3 per cent while exports to Mexico and to offshore markets declined 12 per cent. Beef imports rose but only slightly, declining 4.0 per cent from the U.S. and rising 12.4 per cent from offshore for an overall increase of 1.4 per cent.

In 2015 per capita beef consumption has taken the sharpest drop in many years to 17.7 kg per capita on a retail weight basis. That converts to 24.2 kg (53.4 lbs.) on a carcass basis. Per capita consumption or disappearance is now lower than it has been since the mid-1950s.

The industry in Canada has been much slower than the U.S. in commencing herd growth.

Note: The numbers in this analysis that relate to weight are all expressed as “retail weights” which are 73 per cent of carcass weights. I did this to bring domestic production in closer alignment with beef imports and exports. This conversion factor of 73 per cent is used to convert per capita consumption from a carcass weight to a retail weight basis.

Charlie Gracey is an industry analyst living in Ontario.

The post The first signs of beef herd expansion appeared first on Canadian Cattlemen.

On the positive side we see a very sharp increase in AAA carcasses from 57.1 per cent of the total in the Prime to A series to 62.0 per cent. In fact Prime plus AAA now make up almost two-thirds of the total. Wonderful! But don’t stop here.

Before we applaud the increase in “quality” let’s have a look at the yield classification side of the matter. In 2015 the highest-yielding class fell out of bed, dropping from 50 per cent of the total in 2014 to just 41.3 per cent in 2015. As Donald Trump might say, “what the hell is going on?”

What is going on is that cattle feeders, faced with record-high replacement prices decided to market more feed through the cattle they already owned and deferred the purchase of an admittedly reduced supply of replacement cattle. That might make short-term economic sense but it doesn’t say much for the product. A short explanation is needed.

Quality in youthful cattle is determined almost exclusively by the level of marbling. I say almost exclusively only to avoid criticism that I overlook other important factors. But if you look at the B grades those other important factors have excluded only 1.75 per cent of the carcasses from the Prime and A series grades. So I can assert that the level of marbling has increased simply because the cattle got fatter.

If one wishes to dispute that observation you must ignore the yield results. Yield is determined primarily, and again almost exclusively, by fat thickness measurements taken at the ribbing site and, as stated above the Y1s dropped from 50 per cent in 2014 to 41.3 per cent in 2015. Therefore no one can dispute that the cattle were much fatter in 2015 than ever before during the present grade standards regime. Actually the high water mark for yield was way back in 1997 and 1998 when A1s reached 71.1 per cent of the total.

I am being deliberately blunt here because I think it’s time the industry addressed this issue. The consumer is being shortchanged. The industry is supplying more fat and less lean meat than ever to a consumer who is generally unaware. The fat she pays for was removed in the trimming process but somebody, and who else but the consumer, had to pay for that production.

So would I then sacrifice quality for yield? Not in a million years. We have known for at least the last four decades that it is possible to breed, raise, feed and market animals that are of high quality and also high yield. If I were to define the ideal carcass, with the poor tools we have to do that, I would suggest that this should include the top half of the AA grade and all of the AAA and Prime carcasses that had a Yield Grade 1. That definition would have included 43 per cent of the carcasses graded in 2005 but only 29 per cent of those graded in 2015. So we don’t have to look for proof that a better carcass is possible. We just have to look at what was done a decade ago.

So I have to ask again, when is the industry going to implement instrument grading and start paying more attention to carcass yield? Only when producers are paid fairly for both quality and yield will they respond with a better product. The cattle feeder cannot and should not be blamed for responding to a marketplace that sends strong signals about quality and faint beeps about yield. When these signals are better balanced in terms of price offerings producers will respond.

Grading results matter!

The post Beef Grading: Yield is down, fat is up appeared first on Canadian Cattlemen.