Beef prices will drop for both farmer and consumer as Canadian cattle arrive

URBANA, Ill. – The party is over for U.S. beef producers.
With the Canadian border opened to live beef cattle, more cattle in the feedlot pipelines, and more heifers saved back to increase the size of the brood cow herd, “some would say the party is over for high cattle prices,” said Purdue University Extension marketing specialist Chris Hurt said.
Beef supplies may rise by as much as 7 percent in the last half of 2005.
Depress prices. “Even though beef demand has been solid in the past year, supply increases of this magnitude will likely depress prices,” Hurt said.
In the last 12 months, finished steers averaged $86.44 per hundredweight, but that number may be closer to the high $70s in the next 12 months, he added.
The specialist said consumers should be happy because retail prices should moderate soon. Retail beef prices hit a record high of $4.19 per pound this year, he noted.
Canadian cattle. How many cattle may come from Canada now that the border has been opened?
It will likely take some time for flows to adjust, but prices have been depressed in Canada and animals will quickly flow to the U.S. unless additional constraints are placed on their movement, Hurt said.
As an example, at the start of July, Ontario finished steers were about $9 per hundredweight lower than similar cattle in the U.S., while Alberta steers were $16 lower.
Prices. Canadian and U.S. prices should be comparable with an open border with Canadian cattle several dollars lower to cover transportation costs to U.S. packers, he said.
“The year 2002 was the last full calendar year of live imports from Canada, and the U.S. imported 1.7 million head, approaching 5 percent of U.S. slaughter.
Increased crop. Since then, the size of the Canadian calf crop has increased by 300,000 head, but their slaughter capacity has grown by 900,000 head.
This may mean something close to a million head of cattle could flow to the U.S. annually, increasing U.S. beef supplies about 3 percent,” Hurt said.
Total U.S. cattle inventory numbers on June 1 were up about 1 percent as well.
“The cattle herd continues to expand with nearly 1 percent more beef and dairy cows in the herd.
“Even more growth appears to be on the way with 4 percent more beef heifers being retained to go back to the broad herd and 3 percent more dairy heifers,” he said.
On-feed numbers at the start of July were up 3 percent.
Summer lows. According to the specialist, finished steer prices have dropped to about $79 and may have a few more dollars to go before reaching their lows by the end of the summer.
Fall and winter prices should recover into the lower $80s and perhaps the mid-$80s by early spring, he said.
Reduced price expectations for finished cattle and higher feed prices will continue to put downward pressure on feeder calf and calf prices this fall as well.
However, one unresolved mad cow issue could change these potentially lower prices.
“In 2003, beef exports were nearly 10 percent of our domestic production. While we would not be able to initially regain all of our export business, the clearest solution to our beef supply woes is to move toward a resolution with the Japanese on BSE (mad cow) testing,” he said.
World beef market. “Prospects for settling these differences do not look promising. But lower cattle prices will cause the U.S. cattle industry to put increasing pressure on the USDA to accept testing protocols that will meet Japanese standards.
“Opening world beef markets to our exports will be the final leg of a long BSE journey. Unfortunately, we cannot yet see when the last leg of that journey will be completed,” he said.
Canadian cattle subsidies ‘unfair to U.S. producers’
WASHINGTON – The National Farmers Union is urging the USDA to take immediate action to ensure subsidized Canadian cattle production does not compete with the U.S. beef industry.
Canadian subsidy. In response to U.S policy to protect the domestic cattle herd from bovine spongiform encephalopathy, the Canadian government instituted $200 per head subsidy payments to Canadian cattle producers.
Now that the border has been re-opened to Canadian cattle and beef imports, the farm group said these payments constitute an “unfair subsidy of Canadian exports to our country.”
“We need to ensure we are not giving foreign producers a competitive advantage over U.S. producers,” said Dave Frederickson, National Farmers Union president .
Although this program has been suspended, subsidized cattle are coming into the United States and are in direct competition with domestic cattle, Frederickson said.
Action. The union has asked USDA to take the following action: