Welcome to the Online Edition of Cattle Country!

Updated with every new issue

Past issues will be available in the archive. If you are interested in reading Late Breaking News between paper deadlines, scroll down to the bottom of the page. The most recent information will be posted first.



Friday, March 13, 2009

COLUMN - The Bottom Line



by Rick Wright

“Enough is Enough Already!”
Just when we thought we had seen it all in this business, something that defies all reason and common sense comes to the surface.

The National Farmers Union of Canada’s reported support of R-Calf has betrayed the Canadian cattle industry. And while the NFU has worked overtime to deny any alliance with R-Calf (regardless of their official stance) the damage has been done.

R-Calf has reported in a press release that NFU director, Neil Peacock, stated:
“NFU no longer views R-Calf as a threat because our cattle producers are facing the same challenges as the independent, U.S. cattle producers.” Peacock was also quoted as saying, “Just like R-Calf members in the U.S., we are fighting the packers, the mega corporations and the ramifications of NAFTA and the WTO.” NFU director Jan Slomp was quoted as saying, “We need to be allies with R-Calf.”

If R-Calf is not a threat to the Canadian cattle business then who is? For the past ten years they have worked very hard to close the border to imports of Canadian cattle and beef products. They have been a major supporter of M-COOL in its most stringent form. R-Calf seems to have the ear of Tom Vilsack, Secretary of Agriculture and the last thing Canada needs is R-Calf claiming support from a national farm organization in Canada.

Since the press release, the NFU claims that they do not support R-CALF. Maybe they learned a lesson that most of the Canadian cattle industry already knew —in the past R-Calf has stretched the truth to further its own goals, and cannot be trusted!
The NFU turned its attention to the beef business in an effort to recruit more members from an industry in crisis. Their report on the packing industry contains nothing new. It is long on criticism and short on realistic solutions.

In other news, the Competition Bureau announced that it would not challenge the acquisition of Lakeside Packers in Brooks, Alberta by XL Foods Inc. This should clear the way for XL to take over the packing plant and other assets in the very near future.
The interesting part of the story is that the Competition Bureau found that after interviewing 50 industry representatives, that those interviewed were more concerned about keeping the packing plant open and operating than the reduction of competition in the meat processing business. It is no secret that there has been very little interest by other parties in purchasing the Lakeside operation. Even though we all want more competition the industry, it is good that Nilsson’s took the chance on the Lakeside operation. Another plant in mothballs will do nothing to increase the chances of opening overseas markets in the future. If the Competition Bureau had stopped the sale, the plant could have closed, making Canadian cattle feeders even more dependant on the U.S. market.

The fear factor of the unknowns surrounding M-COOL has surfaced again.
The rules as published by the Bush administration will come into effect March 16, 2009. However, U.S. Secretary of Agriculture, Tom Vilsack, has strongly suggested that if the packers do not segregate the cattle and products and label accordingly, he will pursue changes that will force them to do so. It will be very interesting to see how the packers react over the next six months. U.S. packers and cattle feeders had asked the Bush administration to lighten up on COOL so that they could remain cost competitive. Meat industry representatives feel that there will be a big enough percentage of product labelled “product of USA” to meet consumer needs.

Protectionist groups like R-Calf are using M-COOL as a trade barrier. Fear tactics over BSE and food safety are being used to encourage the U.S. government to tighten rules like M-COOL. The fact is, country of origin labelling has nothing to do with guaranteeing food safety. Independent inspection at processors and retailers, along with enforced food safety production protocols throughout the food chain, will help address food safety concerns—not a label stating where the product was born!
Canadian imports for direct slaughter account for a very small percentage of the weekly U.S. kill, however the affects of COOL on the feeder cattle business could be severe.

In 2008 we exported 573,000 feeder cattle to the U.S, up 6.4% from the previous year. As of February 21, 2009 we had already exported 56,200 feeder cattle south. We exported 649,000 fed cattle south last year, the equivalent of one week’s USDA reported average kill in the U.S., down 23.3% from last year.

Last year we exported 157,000 cull cows and 43,300 bulls to the U.S. The total number of cattle exported was 1.432 million head. One interesting fact is that 24% of the beef exported from the United States came back to Canada.

Even though we think we are short on cattle, the shortage has yet to arrive. Cow cull was running about 15% last year, while the 15-year average was 10%. The beef herd shrank about 6.6% last year with Manitoba losing about 6.1% of its base cowherd. These numbers put inventory close to the spring 2003. If that is a fact, then we have finally gotten rid of the extra inventory created during the BSE crisis. The beef cow cull projections for 2009 are estimated at 927,000 cows - a huge decrease in the number of Canadian beef cows. In comparison, the U.S. beef cowherd declined 764,000 head last year, resulting in the smallest cattle population in 50 years.

Combine the cattle supply ratio with projected cheap grain prices and it looks like there could be a very bright light at the end of the tunnel. Even though consumers are not purchasing as much beef as before— and U.S. exports are down due to the high value of their dollar—the current demand-driven market could easily change back to a supply driven market in the next two years.

The two keys for a successful Canadian market will be free access to export to the U.S. and a Canadian dollar worth under 80 cents.

As far as price projections go, expect steady prices on the cattle between 700 - 900 pounds, providing American feedlots do not lose interest due to COOL. Grass-type cattle will remain strong, as demand will outlast supplies of green feeders less than 650 pounds. Kill cows should remain strong, while bred cows look like a good buy. Finished cattle prices will continue to struggle in the second and third quarters as beef retailers compete with cheap pork in the stores and consumer spot purchases.
Until next time . . .

No comments: