Cattle producers are struggling, but beef suppliers are doing very well

FarmMedia Glacier – The good news is that beef prices are extremely high, even in the face of record beef production in North America.

“We currently have record wholesale beef prices,” said Brian Perillat, CANFAX director and senior analyst, at the recent (and virtual) Canadian Beef Industry Conference.

Unfortunately, livestock prices are simply not responding.

“It has been frustrating for many producers and for the industry,” he said. “But the tides will change. The typical cycle in cattle is this: we overproduce, block the system in terms of bottlenecks in processing, and then downsize. This will rebalance over time as the market readjusts. “

For most of the year, the price of beef cuts relative to pork was cheaper than it has been for several years (largely because pork prices have gone up as well).

“Overall, the prices for red meat have been extremely high,” Perillat said.

And the strong demand is expected to continue. The impact of African swine fever, which has decimated China’s pig herd, continues as the country tries to expand its domestic supply. In addition, the drought has severely affected Australian production (dropping it from the world’s second largest exporter to fifth).

These and other factors mean that there has been a drop in global meat supplies in 2019 and 2020, which has never been seen before, Perillat said.

“We are seeing changes globally. All of this supports the beef market and supports our wholesale meat prices. “

One of the main factors is the decline in the number of cattle in the United States, where the herd peaked in 2019.

“As we head into 2022, this will be the third year in a row that we will see a smaller number of cows and a smaller number of cattle in the United States,” Perillat said. “We’re going to have about a million fewer breeders by mid-year and about half a million fewer cattle off feedlots in the United States.

American beef production will be stable this year but “we’re going to start seeing the herd decline. Their number of replacement heifers is declining, ”he said.

Drought and very high grain prices are major factors, although the need for supplies has attracted some dairy cattle.

“Some of these dairy calves and crossbreds come into the Canadian industry and are fed, finished and processed in Canada,” he said.

In recent years, the United States has shifted from a net exporter of beef to a net importer.

“It’s back to being a net exporter again this year,” Perillat said. “China went from being a small importer 10 years ago to being the world’s largest importer of beef. We continue to see the impacts of this. “

Canada continued to have strong exports, well above 2020 levels, although last year was an anomaly due to supply chain issues.

“Even last year, when we saw exports drop slightly, we had record values. Volume was down three to four percent last year, but the value was slightly higher.

Canadian exports increased $ 1 billion from 2015 and 2016 (and 10% since 2019) due to strong international demand.

This is also true at the national level.

“We have experienced some of the strongest demand levels that we have seen in the past 30 years,” he said.

“Despite all the rhetoric around livestock, beef production, beef production and markets, consumers continue to spend a large chunk of their protein dollars on beef.”

However, don’t take these customers for granted, he warned.

“We see these prices going higher and we have to watch how consumers start to react to these higher prices.”

This year, prices have remained high but consumption has stabilized.

There was no pullback from the price increase last year, but consumption levels remained stable.

The other important factor to watch out for is whether the steadily declining Canadian herd is experiencing a sharp decline in numbers due to the drought. The late-season rains may have kept so many cows from going to the market, and some producers may have found food, he said.

Aside from the massive decline of the herd in Canada, beef production is strong and healthy, he said.

The industry has the highest slaughter rates in a decade with higher carcass rates. The feedlot industry has continued to grow and there are about 15% more feedlots than in 2015.

Alexis Kienlen is the reporter for the The Alberta Farmers’ Express. His article appeared in the September 20, 2021 issue.

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