New SRM Subsidy Expected To Raise Cow Prices

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Cattle producers should see improved prices for cull cows as a result of a federal slaughterhouse program launched last month.

Ottawa will spend $25 million, or $31.90 per animal, to help packing plants cover the extra cost of removing specified risk materials (SRMs) from beef carcasses.

That’ll encourage Canada’s packers to bid more for cows, which are currently going in record numbers to slaughter plants in the U.S., where SRM removal costs are lower, according to the Canadian Cattlemen’s Association.

Ultimately, that’ll mean better prices for producers, said John Masswohl, CCA’s government and international relations director.

“For the packers to get the $31.70 from the government, they have to kill the cattle. To kill the cattle, they have to buy the cattle. And to buy the cattle, they have to bid more for them than the Americans are bidding for them,” said Masswohl.

“Canadian bids have been depressed because of the cost of this SRM removal. So too many of these cattle have been going to the U.S.”

The federal government released details of the the Abattoir Competitiveness Program July 5. The one-year program, which ends March 21, 2011, pays eligible packers for the volume of SRM materials produced from cattle over 30 months of age (OTM) during 2010. The calculation is based on 58 kg of SRM per OTM animal at 55 cents/kg.

“To buy the cattle, they have to bid more for them than the Americans.”

JOHN MASSWOHL

CCA

Masswohl said cow prices have already gone up since the Conservative government announced plans for the program in its March 4 budget. Packers anticipating the measure have upped weekly bids for Alberta D1,D2 cows from around $40/cwt at the start of the year to $60/cwt by early May.

Under national regulations implemented as a BSE control measure in 2007, plants processing OTM cattle must remove the brain and other nervous tissue that could contain the disease-causing prion.

But Canadian plants have to remove more material than U.S. plants do, which results in a higher cost.

For example, U.S. plants must remove the brain but can retain the skull. Canadian packers must discard the skull. U.S. plants must take out the spinal cord but may leave the backbone in place. Canada requires removal of the entire backbone plus a minimum one-inch depth of meat on all sides.

Besides the SRM subsidy program, a $40-million companion program will research ways to reduce costs or gain profits from using SRMs instead of just disposing them, which is what packers do now.

Masswohl said the programs come close to meeting an industry coalition’s request last year for financial aid to keep beef processors competitive.

However, the group asked for a permanent SRM removal subsidy, which means it may have to renew its call in another year, Masswohl said.

“My gut would be that we’re going to have to make another ask again next year.”

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