Canada's semiannual survey has cattle down 2 percent

Feb 24, 2012
by WLJ

As a part of their series of joint livestock inventory reports, USDA and Agriculture and Agri-Food Canada show the U.S. and Canadian cattle inventory on Jan. 1 was 103.3 million head, a 2 percent decline from the 105.1 million head on Jan. 1, 2011. All cows and heifers that have calved totaled at 44.3 million head, also down 2 percent from the previous year.

The U.S. supply accounts for most of the total at 90.8 million head, a 2 percent year-to-year decrease, with cows and heifers that have calved also declining 2 percent at 39.1 million head.

According to reports, Canadian cattle supplies have been shrinking since 2005. Beef supplies will likely be even tighter in the short term, as producers try to hold back heifers and rebuild the herd, according to CME reports.

Canada released its semiannual survey of cattle operations last week, and the data contained a sobering, although somewhat disorienting, view of current conditions, according to CME. Probably the more surprising result from the survey was that the number of beef cows on Jan. 1, 2012, was down 1 percent from the previous year. The Canadian beef cow herd is down 20 percent from its peak in 2005.

The smaller beef cow inventory is a surprising result considering:

- Shipments of slaughter cows to the U.S. in 2011 were down 24 percent from the year before;

- Canadian cow slaughter (based on weekly data) declined about 13 percent from the previous year; and

- Producers on Jan. 1, 2011, indicated heifer retention for beef cow replacement was up 2.9 percent from the previous year and the Jan 1, 2012, beef cow replacements were up 4.3 percent.

So if the industry in Canada is slaughtering fewer cows, it is exporting fewer cows, and it is holding back more females to replenish the herd, how is the beef cow inventory going down? According to CME, the best answer is that the data is coming from different sources and year to year, the numbers will not jive well. It is likely that the upcoming July and January surveys will capture the shift in cow numbers in Canada. Canada shipped a lot more breeding females to the U.S. in 2011, some 7,500 more head ( 170 percent), but that still does not explain the decline in the Canadian cow herd.

Total Canadian cattle inventories on Jan. 1, 2012, were pegged at 12.515 million head, 58,000 head or 0.5 percent higher than the previous year. While the increase will likely capture some headlines, it is relatively small and mostly the result of fewer feeder exports to the U.S. The inventory of steers and bulls under 1 year old was up almost 66,000 head, or 1.6 percent from the previous year.

It is an inconsequential result since overall North American cattle supplies remain limited and overall beef production in the continent will likely remain limited in the next few years. The combined U.S. and Canada calf crop for 2011 is currently estimated at 39.975 million head, some 546,000 head or 1.3 percent smaller than a year ago. The Canadian calf crop for 2011 was estimated at 4.661 million head, 174,000 head or 3.6 percent smaller than a year ago.

The decline in the Canadian calf crop accounted for about a third of the reduction in the combined calf crop, a significant number considering that the Canadian cow herd is only about 5.2 million head compared to about 40 million head in the U.S. The combined U.S. and Canada calf crop has declined about 9 percent in the past 10 years, a dramatic change considering that both countries are striving hard to recover the beef export market share they lost after the outbreak of BSE.

As trade normalizes and exports return to pre-BSE levels, this implies significantly less beef supply available for U.S. and Canadian consumers. Beef demand in both countries struggled during the recession. A recovery in demand combined with the smaller supply will likely underpin significantly higher beef prices both in the U.S. and Canada, not just in 2012 but in the next few years. — WLJ