Canadian cattle producers ready to beef up exports
As beef and cattle prices set record highs, U.S. consumers may begin to see Canadian beef on grocery store shelves.
Canada can start to regain some ground in the U.S. beef market by shipping beef cuts into the country on a permit basis, administered by the United States Department of Agriculture. How quickly Canadian beef cuts are allowed to flow into the United States will be one of the factors that will determine price direction this fall, said Chris Hurt, Purdue University professor of agricultural economics.
"Muscle cuts from Canadian cattle under 30 months of age may start being imported because bovine spongiform encephalopathy (BSE) doesn't develop in this short of a time," Hurt said.
On May 20, the Canadian government announced that a cow had tested positive for BSE, resulting in the border between Canada and the United States being closed to both live ruminant animals and ruminant meat products, primarily beef. This left U.S. beef producers to make up for the more than 8 percent of beef normally supplied by Canada annually.
In 2002 Canadian live cattle accounted for 4.7 percent of the cattle slaughtered in the United States, and 4 percent of U.S. beef consumption came as processed beef imports from Canada.
Hurt said the U.S. beef industry was in a unique situation this summer.
"The U.S. beef cow herd was already at the lowest level since 1989, Canadian supplies were curtailed and feedlot managers are selling cattle at very light weights trying to keep up with consumers' desire for beef," he said. "As a result of these supply limiting factors, U.S. retail beef prices, live cattle futures and prices for live cattle have all risen to record highs."
Hurt said packing plants in Canada will gear up this fall to process more live cattle and ship beef products to the United States. It may take some time before Canada can regain its 8 percent share, but Hurt said he believes Canada may only regain 6 percent with beef cuts. Pork and live hog exports to the United States could account for the other 2 percent of demand, he said.
Due to uncertainty about the border situation, Hurt said it is difficult to have much confidence in fall price forecasts. Participants in the futures market continue to watch the situation and adjust prices based on each day's information
Hurt estimates choice steers to average about $80 this fall, with the highest prices coming soon while the Canadian beef supply still represents a small percentage.
Still, with tight U.S. supplies continuing, Hurt said prices will remain strong into 2004, at least by historical standards. Fed cattle prices in early 2004 could fall back into the higher $70 range but could likely move back toward the mid-$80 range in early spring.
The price bonanza will be felt by everyone holding cattle, including cow/calf producers, Hurt said. Steers weighing 500-550 pounds are already selling at more than $1 per pound at Plains auctions, he said, and it remains likely that calf prices this fall could be $10 to $12 per hundredweight higher than last fall. This should allow cow/calf operations to be profitable in 2003 and 2004.
"Clearly, this is one of the most exciting periods for U.S. cattle markets, but unfortunately it has come, at least partially, at the expense of a devastated cattle industry for our northern neighbors," he said.