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COUNTRY LIFE IN BC • OCTOBER 2019


Canadian beef herd sinks to 30-year low Global factors make beef market "a moving target" right now


by TOM WALKER


CACHE CREEK—Anne Wasko just stood and shook her head. “It’s one of those years,” she said. “The market is a


moving target right now, and it has nothing to do with supply and demand.” Wasko is a market analyst with Gateway Livestock


Exchange based in Saskatchewan and was providing an update on current market conditions to delegates at the annual general meeting of the BC Association of Cattle Feeders in Cache Creek on September 6. “Where do you find an opportunity when things


go haywire like this?” she asked rhetorically as her first slide flashed a collage of pictures showing African swine fever, drought, floods, mug shots of Trump, Trudeau and the Huawei logo. Derisive chuckles rippled around the room. Domestic cattle numbers in Canada are currently at an all-time low, Wasko says. “We currently have the smallest national herd in the last 30 years. That’s down 2% from last year, with replacement heifers down 5%.” A dry start to spring across Western Canada meant producers were worried they wouldn’t have enough feed for their cows and as a result, didn’t retain heifers to grow their herd. Wasko calls 2019 “another liquidation year like 2018,” which saw a 14% cull rate.


The number of cows being killed in Canada and the number being exported are both up 4%, Wasko notes. Fed cattle exports are up 48%. “I know that does not jibe with the low herd numbers but we have a lot of cattle on feed in Canada right now,” Wasko says. “We have more heifers on feed, we are importing feeders, and we


have a lot of young Holsteins from the US that stay on feed longer.” Those young Holsteins are keeping feedlots in


Alberta and Saskatchewan busy, and are even increasing their capacity to handle inventory from the US. (More than 15,000 feeder cattle a month are coming north, she notes.) “The US has been expanding their herd since 2014 and I expect they will round up to 32 million by the end of this year,” she says, noting that pasture conditions across the US have been phenomenal this year, supporting further expansion. “At the end of the day, there is lots of beef around and that is weighing heavily on the market.” However, a strong economy has kept beef demand up. “We’ve had a hell of a run over the last two years in terms of beef demand,” she says. This has buoyed wholesale beef prices in Canada,


which are up 4% over last year, even as volume has increased 7%. “Anytime you are able to sell more for a higher


price, it is a phenomenal story,” she says. But most of that profit, she notes, is going to the


packers and retailers. There are also some bright spots for Canadian beef exports. The first six months of 2019 saw exports rise 17% in volume and 28% in value. “Again, it’s a great story that we are getting bang


for our buck in marketing,” says Wasko. Those exports go to three main markets, led by the US at 72%. Approximately 10% ships to Japan, which has burst open thanks to the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP), and 9% to Hong Kong and Mainland China.


China closed its doors to Canadian meat this


summer, a move Wasko attributed to the Huawei affair. (Chinese officials allege a forged certificate was found with a shipment of meat that arrived from Canada.)


“But Japan is so hot right now, we are able to send some of that extra export beef there,” she says. While Wasko says that trade pacts like CPTPP and


CETA with Europe have been good for Canada, she says packing plants across North America are full with contracted animals. “The market has dried up; cash cattle have no place to go right now,” she says. The packing plant crunch was made worse with a


fire at the Tyson Fresh Meats packing plant in Kansas on August 9. The plant was processing about 6,000 fed cattle per day, or 6% of US feeder capacity. “They have an incentive to get the plant back and running as fast as possible because all the profit is going to their competitors,” she says. Wasko says if she had been giving her talk before


the Kansas fire she would not have predicted the fall market to bottom out at less than US$1.00 to US$1.05 per pound for US fed cattle. “I can easily see that at $0.95 to a buck and I


worry I am even short at $0.95,” she says. “It could be lower than what we think. Be careful there.” She also worries about the impact the US-China trade war will have on the global economy and consumer spending on beef. “The market is very volatile right now,” she says.


“It was down for two days after the plant fire and now it is up; it doesn’t know where it wants to be.” The price trend is down right now, says Wasko. “If you are a buyer, there will be opportunities,”


she says. “It might not happen until March or April, but I do think there will be a rally, so be aware.”


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