(Resource News International) — The size of Canada’s cattle herd has declined steadily in recent years, and could continue to do so as the current economic downturn has thrown a wrench in the recovery process, according to an official with the Canadian Cattlemen’s Association.
“It’s pretty clear that supplies of cattle in North America are at relatively low levels,” said Travis Toews, vice-president of the Canadian Cattlemen’s Association and a cow-calf producer in Alberta’s Peace River region.
Following the initial discovery of BSE in the Canadian cattle herd in 2003, and the subsequent restrictions placed on Canadian beef and cattle moving into many markets, the country has seen a steady exodus of producers.
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While the country has since regained access to many markets, high feed costs and the stronger Canadian dollar have continued to make it difficult to make money in the Canadian cattle sector, said Toews.
Compounding that is the recessionary environment, which has led to a decline in demand for the higher-end cuts of meat, said Toews.
Given the low supply numbers in Canada and the U.S., analysts see cattle industry pricing recovering as North America moves out of its recession, said Toews. However, nobody knows the timing of the recovery.
In terms of the supply/demand equilibrium, “we likely won’t see really meaningful improvements in pricing until North America starts moving out of its recession,” said Toews.
Generally speaking, he said, the more competitive operations are currently “treading water at best,” while operations that aren’t quite as competitive are losing money.
Middle meats
“We don’t’ have an oversupply problem, but we have a slack demand for the middle meats, which are the high-valued parts of the animal,” said Toews. “As long as pricing remains really soft, I think we’ll see the herd continue to shrink.
“The longer it stays difficult, the more our supplies will shrink. So when demand does turn around, it will have a larger effect.”
While much hinges on the economic recovery, Toews said other factors would also help improve the profitability of the Canadian cattle sector. For example, Canada would benefit from expanded market access to a number of key countries.
Japan, for instance, currently only allows boneless beef from cattle under 21 months of age, and a move to bone-in beef from cattle under 30 months would be helpful, said Toews.
Mandatory country-of-origin labelling (COOL) rules in the U.S. have reduced the demand from U.S. packers and livestock buyers for Canadian cattle, and that creates a further complication for the Canadian sector, Toews said, noting a World Trade Organization case was currently in the works.
While there are problems to overcome, Toews said it was not all doom and gloom for Canadian cattle producers.
“For those of us in the business, that are continuing in the business, we believe that there are better days ahead, or we wouldn’t continue,” said Toews.
There are still new entrants into the business, he said, while others are expanding their operations as they can benefit from a lower cost structure than operations that expanded when the Canadian dollar was weaker.
Statistics Canada will release its biannual livestock inventory report, as of Jan. 1, 2010, on Feb. 16, providing detailed information on the size of the country’s cattle herd.
