Large domestic feed-grain supplies should help underpin the Canadian cattle sector by giving it a competitive advantage over the US heading into the New Year, according to an industry analyst.

Market analyst Herb Lock of Farm$ense Marketing in Alberta said burdensome barley supplies in western Canada were helping to keep the costs of grain lower in Canada compared to the US, where corn prices are considerably higher.

"Barley is relatively cheap compared to US corn," said Lock, "and that's the true competitive advantage of the Canadian cattle industry - having access to grain that is cheaper, relatively speaking, than US corn."

But Lock pointed out that cheaper feed grains are unsustainable in the long run, as grain farmers will simply plant less barley if they're not happy with prices.

Uncertainty on the US country-of-origin label, or COOL, legislation also remains one element of concern in the Canadian cattle sector, said Lock, who said he thought the uncertainty was hurting current cattle prices by as much as C$100 per head. However, regardless of how the COOL issue sorts itself out, Lock expected the US demand for Canadian cattle would remain in place. He said the US slaughter and feeding industries were seriously overbuilt and will need Canadian cattle if they want to keep operating.

While cattle on feed in Canada are up on the year due to the favourable feeding costs, the Canadian cattle herd overall is still in the midst of a downsizing period, said Lock. He said one concern was that the pendulum of the market would eventually swing so far that there wouldn't be enough Canadian cattle to meet the domestic demand. He added that in the bigger picture it makes more sense to slaughter the cattle domestically and then export the meat than to export live cattle.