February 27, 2008

 

Struggle continues for Canadian cattle industry while US prospers

 

 

The Canadian cattle industry will continue to struggle in the 2008 calendar year, but losses will be tempered by a tightening supply situation, an industry analyst said Tuesday (February 26, 2008).

 

On the other hand, things are expected to look brighter for the US cattle industry due to better exports and tighter supply. 

 

Kevin Grier, with the George Morris Centre in Guelph, Ontario, said that pricing and financial viability for 2008 in the Canadian cattle industry will depend on improved local supply and demand conditions, which are likely to come about only as feeder cattle disappear from the prairie provinces.

 

Canadian cattle demand in 2008 is expected to be "tepid" or "lukewarm" due to lower packer profit margins, Grier said at the Canadian Wheat Board's annual Grain World conference.

 

Canadian packing companies will continue to bear the burden of mad cow disease bans, regulations, higher transportation costs, labour shortage and a strong Canadian dollar. Under-utilization of capacity is also expected to negatively impact profit margins.

 

Canadian cattle supply, however, is forecast to tighten in 2008 as a result of the declining Canadian cattle herd.

 

The price of Alberta/Saskatchewan fed steers for the first half of 2008 is forecast by Grier at US$85.00/cwt. He expects the price will increase in the second half of 2008 to US$87.00/cwt.

 

Grier also said country-of-origin labeling, or COOL, would weigh negatively upon the Canadian livestock industry. But he said he is optimistic packers and feedlots will find an efficient and low-cost method of implementing the legislation when it takes effect.

 

In the US, Grier expects to see a "robust" cattle market in 2008. Two of the main factors supporting the industry will be steady to stronger domestic demand and gradually increasing beef exports.

 

He cautioned, however, that US demand could be tempered in the coming year by an economic slowdown, unwillingness by packers to share profit with producers and competition from the pork industry.

 

Grier predicted US fed cattle prices during the first half of 2008 will average US$92.00 before moving to US$95.00 in the second half of the year. US feeder cattle prices for the second half of 2008 were pegged by Grier at US$106.00 for 700-to 800-pound feeder cattle.