Alberta cattle producers have a few reasons to be optimistic as they head into the fall.
“We’re still on the profitable side for the cow-calf guy,” said Charlie Christie, chair of Alberta Beef Producers.
“I’m hearing some optimism on the market side. Whether that will translate into good calf prices in the fall remains to be seen, but I’m cautiously optimistic.”
Right now, Alberta cattle producers are seeing record basis levels for both feeders and fat cattle, and that’s helping prices, said Christie, who farms near Trochu.
“The fat cattle side has turned and is on the rise again,” he said. “Usually, we have a July or August low, so whether we’ve hit the bottom isn’t clear. But right now, we have very strong basis in Alberta.”
Beef demand is strong. Canfax says that for the week ending June 23, the total national cattle slaughter was 67,975 head — the largest weekly slaughter in eight years. It was the same story south of the border, with weekly slaughter levels topping 660,000 head, said the agency, the market information arm of the Canadian Cattlemen’s Association.
Strong prices are partially a result of the slow Canadian cow herd expansion, said Christie. The herd has expanded by just one per cent over the past year as a result of drought and higher feeding costs.
“It’s a supply-and-demand thing — there are only so many calves to go around, so that helps the price,” said Christie.
And that’s not likely to change any time soon. Barring any “crazy high” cattle prices, Christie suspects that the trend toward putting ranchland into crops will continue.
“As long as the grain sector is profitable, I don’t think we’re going to see a huge herd expansion on the beef side.”
Heavy death loss from the calf crop in southern Alberta has also limited supply, he added.
“We had a really tough spring. It will definitely put upward pressure on calf prices.”
But the price of feed could temper some of that optimism. Parts of Alberta are still dry, so finding affordable feed could become harder as the season progresses.
“I was pretty concerned about feed going into this summer and whether there would be any to spread around come winter,” said Christie. “It could still be a real challenge but right now, people have taken a deep breath because there has been some rain.
“With some rain and the feed prices dropping or levelling off, things will look stronger for the fall.”
Another worry is the growing threat of a trade war, and Christie is eyeing our neighbours to the south after Ottawa imposed a retaliatory tariff of 10 per cent on U.S. beef products in early July.
“Whenever you hear that your commodity is having a tariff put on it for import, it worries you that there may be some retaliation the other way. That could really hurt us,” he said.
“The administration in the States is very unpredictable, so it’s impossible to say what will happen. It’s definitely a concern. But hopefully cooler heads will prevail.
“At this point, we’re just holding our breath to see what happens.”
The news in coming weeks may not be good as China imposes tit-for-tat levies on U.S. products, including both American beef and soybeans. That could potentially lower U.S. demand for Canadian cattle or prompt higher beef exports despite the Canadian tariff (with rock-bottom soybean prices partially offsetting that cost on the feed side).
But even with a few storm clouds on the horizon, things look bright for the Alberta cattle industry.
“There are young people entering our industry more and more, and that’s a result of profitability,” said Christie. “As long as that profitability hangs in there, I think we’ll see a very measured, even, steady growth in the industry.”