February 27, 2006

 

US sees long-term growth in Canadian cattle imports

 

 

Increased imports of Canadian cattle into the US may not be a short-term anomaly and may instead be more of a long-term affair, market analysts said Thursday (Feb 23).

 

For the week ending Feb 11, the US Department of Agriculture reported 16,431 heads entered the US, well ahead of the same week in 2002 and 2003, before the US closed the border because of BSE, or mad cow disease, was discovered in an Alberta cow on May 20, 2003.

 

It all has to do with the price of cattle on each side of the border, the analysts said.

 

David Hales of Hales Cattle Letter quoted USDA figures when he talked of price differences. As of the week ended Feb 18, slaughter-ready steers in Alberta sold at US$76.68 per hundredweight after Canadian prices were converted to US dollars. Cattle in Ontario were US$81.41.

 

Hales said the higher price for Ontario probably represented lower freight costs to packing plants.

 

But the difference between Alberta and Ontario prices is not the point, market analysts said. It's the discount to US prices, which during the same week were trading at US$89.00.

 

Market analysts said Canadian price pressure stems from higher inventories of cattle in feedlots north of the border.

 

CanFax's monthly cattle-on-feed report for Alberta and Saskatchewan that was released Friday showed the number on hand was about 3.1 percent larger than a year earlier.

 

It's not that Canada doesn't have the capacity to slaughter more cattle than it's doing, the analysts said. But CanFax numbers show markedly lower slaughter rates of fed steers and heifers, while showing an increase in cow slaughter.

 

The Canadian beef industry invested heavily in its cattle slaughter capacity while the US had its border sealed to Canadian cattle, the analysts said. The US was importing boneless beef, but not the cattle, and Canada had to increase its slaughter capabilities to accommodate the cattle.

 

The fact that the cattle are being shipped to US plants for slaughter and processing now is a function of what works better for the market, Hales said.

 

Canadian slaughter capacity is up, but US buyers are paying higher prices for the cattle than local packing firms, said Jack Salzsieder, president of K and S Financial Marketing.

 

None of the market analysts contacted thought the imbalance would correct itself any time soon, although one analyst said exports to the US would resume pre-2003 levels once prices level out.