Three questions from Alberta cattle producers: Question #1

What’s the fallout from COOL?

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EDITOR’S NOTE: We asked a sampling of producers what was on their mind as they were headed into the growing season, and then reporters Alexis Kienlen and Jennifer Blair went looking for answers.

COOLing prices

Man with snowy beard
Andrew Goodrich

Lethbridge-area stockman Andrew Goodrich asks, “Given the strong cattle prices and ongoing exports to the United States, is country-of-origin labelling (COOL) hitting cattle producers as hard as we’ve been told it is?”

With Canadian cattle prices north of $2 a pound and exports to the U.S. sitting at over 30 per cent more than the same time last year, the doom-and-gloom predictions surrounding country-of-origin labelling don’t seem to hold much weight.

But producers are being hit by COOL harder than they think, said Brenna Grant, research manager at Canfax.

“If COOL were not there, Canadian cattle prices would be higher yet,” she said.

“Yes, we have high prices. Yes, producers are finally back in the black. But that doesn’t mean COOL is not having the same level of impact.”

The Canadian cattle industry is experiencing a “historically wide basis” right now, and when the per-head prices are this high, the impact on producers is “very significant.”

The Alberta-to-Nebraska cash-to-cash basis averaged -$27.50/cwt in March, which added up to a $357.50-per-head discount for Canadian producers. This is the widest since May 2005.

“The basis right now is wider than it was during BSE,” said Grant. “There is money being left on the table because of COOL.”

Despite strong price signals to expand their herds, many producers are holding off this year. That’s related to COOL, Grant said.

  • More from the Alberta Farmer Express: WTO hears new COOL didn’t reduce grief for Canadian producers

“We’ve got price signals to expand, but if we have lower prices than U.S. counterparts, the U.S. industry is more likely to expand before the Canadian industry.”

Grant expects the national herd will begin to rebound slowly in 2015, but COOL will have widespread consequences for Canada’s cattle herd.

Some cattle producers aren’t being hit as hard by limited export options because of their proximity to the border — but U.S. packers will continue to choose American cattle when given the option.

“The reason we continue to see exports to the U.S. is because those U.S. packers are dependent on Canadian cattle to operate,” she said. “(But) U.S. packers cannot afford to pay as much for Canadian cattle when they have additional costs incurred on them… As long as COOL is in place, Canadian cattle will be discounted compared to U.S. counterparts.” — Jennifer Blair

More answers to producer questions in the April 28 edition of Alberta Farmer.

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