July 15, 2003


Ban On Canadian Beef Exports Raises Feed Demand

The discovery of a single case of bovine spongiform encephalopathy in Alberta and the resulting border closures to Canadian cattle and beef exports has led to Canadian slaughterhouses significantly reducing production. Consequently, cattle producers have had to continue to feed their cattle on-farm until slaughterhouse activity returns to normal levels, according to a U.S. Department of Agriculture attached report posted Friday on the Foreign Agricultural Service Web site.


In the short-term, it is expected that domestic demand for feed grains will increase slightly until Canada resumes cattle and beef exports. With forecast supplies of barley of 12.7 MMT for 2003/04, it is expected that the demand for imported corn from the U.S. will decrease significantly from 4.3 MMT in 2002/03 to 2.2 MMT for 2003/04.


Prior to the U.S. ban of Canadian cattle and beef exports that was implemented on May 20, 2003, according to the Canadian Cattlemen¡¯s Association, Alberta slaughtered nearly 50,000 head of cattle for the week ending May 16. Canadian cattle slaughter reached nearly 69,500 head. For the week ending May 23, 2003, Alberta slaughter dropped to approximately 20,500 head while Canadian slaughter levels dropped to just over 30,500 head. For the week ending June 6, Alberta slaughter reached its lowest level, at just over 18,500 head, while Canadian cattle slaughter was just under 29,000 head. From May 16, live cattle prices for fed steers in Alberta have dropped from C$107 per hundredweight (cwt) to C$47/cwt.


According to the July 5 Winnipeg Free Press, hundreds of bargain-hungry Albertans lined up in grocery store parking lots July 4 in Airdrie, Alberta, just north of Calgary to buy cheap beef from the back of trailer trucks. The article reports that at times, there were more shoppers in the parking lot than inside the store where lean ground beef was triple the discount price.


Several retail food chains, including the Real Canadian Superstore and Costco Wholesale Canada, are beginning to offer beef at bargain prices to help move it through the system. Safeway plans to sell discount ground beef at select locations in about 30 western Canadian communities during the next several weeks.


Canadian cattle industry sources indicate that as a result of the reduced slaughter, cattle producers are not able to send their fed cattle off for slaughter, and must continue to feed their animals on-farm. In order to minimize costs from feeding barley and corn, producers continue to graze their cattle. However, while the export ban is in place, there is a short-term over- supply of fed cattle in Canada. Agriculture and Agri-Food Canada (AAFC) reports that while the disruption in trade from the ban is expected to be short-lived, the impact on feed demand overall for 2002/03 should not be significant, slightly increasing domestic feed use for 2002/03. Due to the drought-reduced production levels of feed grains in Canada for 2002/03, this will further reduce beginning stocks for barley and corn for 2003/04.


The latest estimates as of July 4 from AAFC put 2002/03 put domestic feed, waste and dockage for barley at 6,851 thousand metric tons, up from AAFC¡¯s April 29 estimate of 6,571 TMT, an increase of just over four percent.


Canadian barley imports for 2002/03 have been increased by AAFC to 280,000 metric tonnes, while 2002/03 barley ending stocks have been revised downward slightly from 1,400 TMT to 1,180 TMT.


Barley production for 2003/04 is forecast by AAFC to be nearly 12.7 million metric tons, based on the June 26 Statistics Canada seeded area estimates and yields returning to average levels after two consecutive years of drought. As a result, barley feed, waste and dockage is expected by AAFC to increase from 6,851 TMT in 2002/03 to 9,355 TMT in 2003/04, an increase of almost 37%.



The short-term increase in demand for feed grains due to the over-supply of cattle resulting from Canadian beef importers closing their borders are mostly being met through corn that has already been imported. The increased demand is not resulting in much additional imports, except for barley, which has increased by 80,000 metric tons since the April 29 AAFC supply and demand estimates.


With sufficient supplies of barley, it is expected that the demand for imported corn from the U.S. will decrease significantly for 2003/04. In 2002/03, Canada imported 4.3 MMT of corn, primarily from the U.S. For 2003/04, Canadian corn imports are expected to drop to 2.2 MMT.


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