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  • Some surprising twists in beef turnaround
    By Jeff Esau - AgriNews Contributor

    Ask local cattleman John Newman what's new in the beef sector and he'll start rhyming off all kinds of stats, trends and events - most of them positive.

    Newman is a director of the Ontario Cattleman's Association and he runs a cow-calf operation in North Gower. "Well, where do I start?" he said to the offer of giving The AgriNews a run-down of the sector from his neck of the woods.

    The first item he mentioned is that stocker prices this fall have been "very good, so the beef farmers should have no complaints about that."

    Unfortunately, the export of over 30-month product to the U.S. is still prohibited, resulting in "lousy" cow prices. "They will stay lousy until we can export over-30-month beef and live cattle."

    He said the market in Canada is flooded with older cattle, depressing prices in a buyer's market.

    "We have the slaughter capacity now," Newman says, but farmers are still "playing catch-up." They have held back almost two million older cows and bred them, so they'll come to market later on. These trends mean "the price is tanking every day." Nonetheless, the backlog is decreasing due to greater processing capacity that has resulted from rule changes at slaughter facilities. Some plants can now kill cows and steers where they couldn't before due to U.S. regulatory requirements. "They have to do some clean-up (in the plant) between kills, so that‚s made a difference," Newman says.

    Indeed, Statscan figures show that Canadian slaughter volume has increased approximately 30 percent over the previous year, so the surplus is being reduced.

    For Ron Bonnett, OFA president and cow-calf operator in Brice Mines, Canada's increased capacity has produced a surprising twist. Bonnett recently attended a meeting of the American Farm Bureau of New York State in Buffalo. He told farmers there that Canada's slaughter and processing capacity was significantly strengthened because of the border closure.

    "Some of the producers were concerned that their government had left the border closed for too long," he said. "A lot of their big plants are now closing because they don't have the capacity going into them (from Canada) and they're concerned they'll have to start shipping some of their cattle to Canada for slaughter."

    Bonnett says Canada has not only developed extra capacity, but has significantly modernized plants with new technology, making Canada doubly more attractive because it's closer than the main U.S. killing capacity, which is located in the western states.

    Bonnet says that the growing focus on food safety and cattle identification and tracking has put pressure on producers on the farm to record more information about each animal. "The big challenge now is to get an additional return for that work," he said.

    In terms of exports, senior Statscan analyst Robert Plourde said that between July 19, 2005 - when the US border re-opened - and December 3, 440,105 cattle went south, 58.2 percent of which were fed steers and heifers. "The price improved, but it's still not at the prices we saw before the border closed in 2003," Plourde said.

    That's the type of trend Steve Spratt, chief auctioneer at Leo's Livestock in Greely is seeing on the sale barn floor. He says the price for culled cows has jumped 10 cents in the past month, and sellers of top-end dairy cows for breeding are reaping $1,300 to $1,400. "That's a significant increase, because a year ago we were struggling to get $1,000 for top animals," Spratt said. He said price increases overall may be in part because of the re-opened U.S. border, but notes that he doesn't sell directly to American buyers. "It's not something I really follow," he said.

    Statscan's full analysis of the cattle industry for 2005 is being prepared now for release on Feb. 16. "The big issue for 2006 will be: when will the U.S. border be opened to breeding cattle - including dairy animals - and cattle over 30 months," Plourde said.

    Bonnett sees the recent opening of the Japanese market to 20-month-old cattle as a positive start to 2006. Newman agrees, and believes the Japanese market portends an increase of carcass value for farmers.

    "Eventually, demand for some of the products not eaten in North America - offal and tongues, for example - should increase carcass value somewhat, which will hopefully trundle back to the producer in some way," Newman said.

    For Newman, the recent corn countervail, however, has put a damper on what

    would otherwise be a sunny and hopeful picture for beef producers. "That's a huge factor to the pork, beef and feed industry," Newman said, though he says he understands why corn producers needed the support of the duty increases.

    "Unfortunately, (the countervail) backfires in the long run," he said, "because we can import U.S. corn and get a remission on the duty, or we can send the cattle to the U.S. and to get fed with cheap corn there."

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