The cost-of-gain advantage in Canada has kept feeder cattle exports to the United States down for the last couple years, but in the last five months, Canadian feeder cattle exports have begun to climb back up because of a shift in grain economics between Canada and the U.S.
Slaughter cattle exports, on the other hand, are down slightly, according to livestock analysts.
Canadian feeder cattle exports from January to June 2012 were at 93,000 head, a 92 per cent increase from the same time last year. The total export number for feeder cattle in 2011 was only 76,000, said Anne Dunford, general manager and marketing specialist at Gateway Livestock Exchange.
Feeder cattle exports are so high because of a significant shift in the cost of feed grains between Canada and the U.S.. Because of decreasing corn prices and increasing barley prices, the U.S. has had a lower cost-of-gain advantage. Because feed is cheaper in the U.S., they tend to import more feeder cattle, she said.
Finished steer and heifer exports were down by two per cent from the previous year to sit at 188,000, while 65,000 cull cows were exported for slaughter, down eight per cent from 2011.
Dunford attributed the decrease in slaughter exports to low supplies in Canada. With low supplies, Canadian packers have to work harder to keep cattle in Canada to "keep their kill floors viable," she said.
Up until June 16, 1.3 million cows were slaughtered in the country, down two per cent from the same time last year. A steady pace has been set for slaughter cattle exports this year, which means slaughter cattle export numbers will likely continue below last year’s pace. The lower rates are also negatively impacting Canada’s slaughter capacity, Dunford said.
"We’re most certainly not running at full capacity, and that’s been the case all through last year and again this year," she said.
Canada’s cattle industry has excess capacity at both the feedlot and packing levels. In fact the capacity was so high that it forced one packing plant in Eastern Canada to shut down this year, said Brenna Grant, research analyst at Canfax in Calgary.
"There’s an over-capacity issue all over. Everyone’s running at reduced utilization levels, which obviously has strain on the industry. It’s a question of (which plant) closes first. None of us want that," said Grant.
In 2011, beef exports in Canada were down 14 per cent from the year before because of reduced production. However, Grant said production is up slightly in 2012, between seven and eight per cent, with the expectation for that increase to continue for the rest of the year.
About 85 per cent of Canada’s beef exports are being sent to the U.S. and Mexico because transportation costs are the cheapest there. However, Dunford said Canada is beginning to send more beef to Hong Kong, Russia, Japan and Poland.
– Ryan Kessler writes for Commodity News Service Canada, a Winnipeg company specializing in grain and commodity market reporting.