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AUGUST 2019 • COUNTRY LIFE IN BC


Global demand set to buoy


cattle prices Calves should continue to fetch $2.00 a pound


by TOM WALKER WILLIAMS LAKE – BC


Cattlemen’s Association members received a humorous and largely positive update on the cattle market from Canfax manager and senior analyst Brian Perillat at their annual general meeting in May. “Five years ago, people


were really happy to see me,” quips Perillat, referring to strong cattle prices during 2014-15. “In the last couple of years, they have not been so happy.” Overall, he sees strong


worldwide demand for protein, including beef, which should continue to support prices. While pork and chicken production have both grown worldwide, beef production remained relatively flat from 2010 to 2016 despite growing demand. “Without a change in


production, we saw the increase in cattle prices,” notes Perillat. Producers responded to the higher prices by increasing inventories, which have increased 2%. However, the increase in Canadian inventories hasn’t been as significant. “We may start to see that


slow down a bit,” says Perillat. “We have seen prices come down, but I think if we can hold some of this production at a slower growth rate and


continue to see strong demand, I think the big picture for beef looks pretty good.”


Demand isn’t being driven


by mouths to feed but dollars to spend, explains Perillat. Asia’s growing middle class has been a key driver, and China has displaced the US as the largest importer of beef. “They used to import 10%


of the world’s beef supply but now that is up to 14%,” he says. With production in China unable to meet domestic demand and US production flat, Perillat expects prices could stay above $2.00 a pound.


Beef producers could benefit from an epidemic of Asian Swine Fever (ASF) in China that has drastically reduced the country’s pork production. China eats more than half the pork in the world. To give some perspective of what that could mean for cattle producers, Perillat explains that a 20% to 30% decrease in China’s pork production would work out to 120 billion pounds of meat. US meat production – beef, pork and poultry, and all the rest – totals 100 billion pounds annually. “That potential drop in the Chinese pork production would offset all of the US meat production,” he says. “That’s pretty darn exciting


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FILE PHOTO


news for the marketplace.” Canada exports 45% to 50% of its meat, or about $2.75 billion worth last year. Its biggest export market is the US, which takes about 72%, followed by Japan at 8% and China with just below 8%. Those exports are also


increasing. Year-to-date exports are up 24% in volume and 40% in value, notes Perillat. “There is no better


marketplace than when you can sell more product at a higher price (the price usually goes down with more supply),” he says. Participation in the CP-TPP


(Comprehensive and Progressive Agreement for Trans-Pacific Partnership) has helped Canada sell more beef


to Japan. US withdrawal from the agreement and Australia’s smallest herd in 30 years has opened doors for Canada. First-quarter beef exports to Japan doubled versus last year, Perillat says. Following the price peak for


Canadian producers in 2014- 15, Perillat says there has been massive volatility. “In 2016, we saw fat cattle peak at $3,000 a head and then drop to $2,300,” he says, referencing Alberta prices. “If we take that back to selling a 600 lb calf, depending when you sell it, that would translate to a drop of $1.00 a pound.” Perillat is seeing prices


stabilize but he is cautious in the near term. “We could see more


pressure this summer,” he says.


“There is a big crop to slaughter – the largest numbers in almost a decade.” He says feedlots aren’t


making any money feeding cattle and they aren’t likely to make money over the summer. “They aren’t going to want to spend a lot on calves,” he says.


Nevertheless, he expects global demand to drive futures prices higher, and keep calf prices at current levels. “The $2.20 mark seems to


be a pretty good place and $2.00 calves seems to be a pretty good base,” he says. “I see a lot of opportunity for calves to be over $2.00 this fall based on what the market is telling us today.”


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