Southbound cattle flow seen shorting U.S. beef supply

U.S. livestock market analysts see a shortage of grinding beef in that country’s future, due in part to significantly slower southbound shipments of Canadian slaughter cattle.

Steve Meyer and Len Steiner, authors of the Chicago-based CME Group’s Daily Livestock Report, noted in Wednesday’s edition that Canadian slaughter cow imports to the U.S. in the last six reported weeks were 22,634 head, down 24 per cent from the year-earlier period.

Shipments of Canadian slaughter cows in January and February 2010 were very strong, which helped offset the shortage of imported beef at that time, Meyer and Steiner said.

But “if current trends continue, imported beef will continue to be very tight in (the first quarter) of 2011 and slaughter cow supplies, both U.S. and Canadian, likely will be more limited.”

Such a “notable reduction” in southbound Canadian slaughter cows “is important as we see a developing shortage of grinding beef in the U.S. due to very light shipments from Australia and New Zealand,” the analysts wrote.

The U.S. Department of Agriculture has also pegged imports of Canadian feeder cattle from Oct. 11 to Nov. 20 at 9,111 head, down about 46 per cent from the year-earlier period and 82 per cent below the 2008 level, the report’s authors wrote.

“Canadian feeder cattle supplies are quite tight and given the strong currency and good demand from domestic feedlots, there is very little incentive to ship feeders into the U.S. market,” said Meyer, who heads livestock consulting firm Paragon Economics, and Steiner, head of New Hampshire-based Steiner Consulting.

“Also, keep in mind that barley prices in Canada have not appreciated as much as corn prices in the U.S., making Canadian feedlots more competitive for Canadian feeder supplies.”

Omaha cash corn prices now run about 45 per cent above last year’s levels, while Alberta barley is up just 15 per cent, they said.

Generally, they noted, cattle and hog imports from Canada “have trended lower in recent years as a combination of a strong Canadian currency, declining livestock inventories and changes in U.S. rules for handling imported livestock have negatively impacted trade flows.”

The latter is a reference to mandatory U.S. country-of-origin labelling (COOL), which requires U.S. retailers to notify their customers through labelling of the sources of imported foods such as beef, pork, lamb, goat, fish, fruits and vegetables.

Canadian livestock groups say the law, launched in 2008, has forced unnecessary costs on U.S. meat processors, who now must either segregate Canadian animals and meat for labelling purposes, or curb their imports from Canada.

Oral hearings wrapped up last week on a challenge of U.S. COOL from Canada and Mexico at the World Trade Organization.

Shipments south of Canadian feeder pigs also “drifted lower” in 2009 and so far in 2010, the CME report noted. In the same Oct. 11-Nov. 20 period, imports of Canadian feeder pigs were pegged at 516,667 head, down four per cent from the year-earlier period and 26 per cent beneath the 2008 level.

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