May 29, 2009

Canada's beef herd should shrink for about another year before rebuilding starts, according to a cattle trade source.

 

"I think for the beef herd, we're almost to the end of the downturn in herd size," said Martin Unrau, cattle producer and vice-chair of foreign trade for the Canadian Cattlemen's Association.

 

Unrau estimates there will be roughly one more year of herd shrinking before the numbers begin to grow again.

 

The normal expand-contract cattle cycle is "alive and well," but the size of the Canadian beef herd was artificially inflated after 2003. That's when the discovery of bovine spongiform encephalopathy in an Alberta cow shut out Canadian cattle from many international markets, said Unrau.

 

A Statistics Canada report released in February showed low farm inventories of cattle in Canada, which the government agency said reflected market uncertainty and rising input costs.

 

The report confirmed a continuation of a long-term downward trend in Canadian cattle numbers. Canadian cattle inventories fell to 13.2 million head, down 5.1 percent from Jan. 1, 2008, with smaller dairy and beef herd sizes reported.

 

On the beef side specifically, herds declined in all four major beef-producing provinces - Alberta, Saskatchewan, Manitoba and Ontario - and showed no signs on rebuilding, as indicated by lower cow and heifer numbers.

 

At that time, the market became so depressed that producers were forced to hang onto cattle until prices rebounded enough to make a decent return.

 

The current herd liquidation only really took off in the past 24 to 28 months, around the time when the US border reopened to over-30-month cattle and the market improved, he said.

 

It is difficult to estimate what level the Canadian herd size will shrink to given the number of factors that influence producers' decisions to hold onto or sell their cattle, said Brenna Grant, a research analyst with Alberta-based CanFax.

 

"One of the major factors this year is that we already have producers in Alberta talking about drought, which would impact water availability for cows," he said. "The other thing is consumer response. There was a bid drop in demand in 2008 and until we see some market improvement, it is hard to say what will happen."