Year End Review - 2019
This “Year End Review” is written with an awareness of COV 19 but that is not relevant to the situation at the end of 2019. This review is based on the data in the accompanying Productivity Analysis and the Supply and Disposition Analysis.
Productivity
The Canadian beef industry consists of the total annual output of the beef cow herd and culled cows and bulls from the dairy herd. It is acknowledged that veal production should be included but it is a small component and I have not found a reliable data source.
This Productivity Analysis is based on carcass weights. The Distribution Analysis is based on retail weights.
Beef cow numbers, as estimated by Statistics Canada, were down 3% at Jan 1st from a year ago. This is the lowest number since 1990. It is necessary to note, however, that since 1990 average cow size has increased 21% while average steer weight has increased by 25%. Thus, as has often been noted, higher tonnages result from larger breeding animals. It seems likely that the increase in size and carcass weight has probably run its course and future supply increase will be more closely related to cow numbers than has been the case in recent years (at my age predictions like this are easy to utter).
The Beef Cow Culling Rate can be derived from knowledge of the Dairy Cow Culling Rate which is reported annually. That data goes back only to 2014 so estimates from 2014 forward are likely more accurate than earlier. Beef Cow Culling Rates remained steady in 2019 at 9.5% compared to 9.5% in 2018.
The number of beef heifer retained for breeding is down 6%. The future size of the Canadian beef cow herd, or any herd always depends on the number of heifers retained for breeding and, to a lesser degree, the cow culling rate. A more precise measure of heifer retention comes a year later when the number of heifers that are marketed for processing is known.
The Total Tonnage or “Productive Capacity” of the industry was 1.5 Million Tonnes. This represents an increase of 8.8% and does not include the tonnage from imported cattle. The tonnage that could be attributed to imported cattle has been netted out. This very sharp increase in productive capacity requires an explanation, especially in view of the continuing decline in beef cow numbers. How does a shrinking herd continue to increase its annual output?
The Data
Steer numbers increased 5.3% and steer tonnage was up 7.4%. Steer and heifer numbers are properly compared to beef cow numbers in the year those steers and heifers were born. The number of steers marketed per 100 cows is not abnormally high at 39.3 head and, and likewise the calculated number of beef steers per 100 beef cows, (44.35) is impressively high. It must be remembered that approximately 50,000 bulls are culled annually and must be replaced. At least 3% of the male births must be left intact for breeding so that would raise the number of male births to 47. Considering post natal death losses, this is close to optimal reproductive performance.
The chart below shows both the number of steers marketed per 100 cows and the number of beef steers marketed per 100 beef cows. This is necessary because the number of steers of dairy origin is not known but there is anecdotal evidence that the number of steers from the dairy sector is increasing. Nonetheless there is in this chart clear indications of improving reproductive performance.
Heifer supply comes almost exclusively from the beef cow herd. This is so because of the strong demand for dairy heifer replacement in the milk line resulting from the high culling rates in dairy herds. In addition, there is usually strong export demand for bred dairy heifers.
Slaughter heifer marketings increased 9.3% and tonnage was up 10.5%. This increase, though large, is not difficult to explain. The very sharp increase can only mean a continuing intent to shrink the cow herd.
The sharp increase in heifer slaughter helps to explain the large increase in productive capacity in 2019.
As noted above, the culled cow and bull supply was virtually unchanged from the previous year.
Domestic slaughter was up 6%, but live slaughter cattle export numbers were up 30% while feeder cattle exports were up 61%.
The increase in heifer slaughter means that the cow herd is continuing to decline and the earliest one can expect a retention of more heifers for breeding will be the heifers born mainly in the spring of 2020 and bred at 15 months of age in 2021 Their calves will not reach market at the earliest before the middle of 2022… rather a long wait.
Another indication of productivity is the number of pounds of beef produced annually per beef cow. The chart below displays this trend. The cautionary note here is that we do not know whether this trend line has been boosted by an increase in steers of dairy origin. Nevertheless, the trend is obvious. What has not been mentioned very often is that this rising trend owes all of its advance to larger cows. The short bars in the chart below displays the pounds of beef per hundredweight of cow and there is no apparent increasing trend line. In simpler words the amount of beef per cow closely parallels cow weight. This analysis however does not and cannot assess whether cow size influences productive efficiency.
Disposition of the Beef Supply
This shorter section deals with the disposition of the total. The basis for this discussion of the Supply and Disposition Balance Sheet and, as such includes imported product. Also, all weights in the S&D balance sheet are expressed on a retail weight basis. The conversion used is:
retail weight = carcass weight X 0.73
The changes from year to year are not often dramatic but the pie chart above accounts for 100% of the beef produced in Canada. It is noted that only 40% of the total herd production was consumed in Canada. This estimate is not seen often because the exports of live feeder cattle is not taken into account and those exports represent 8% of productive capacity.
Of course more beef is consumed in Canada than the 40% of production shown here. Beef imports mainly from the USA, but also from offshore accounted for 24% of consumption.
In 2019 beef consumption in Canada totaled 670,000 Tonnes or 18kg per capita (24.6 Kg on a carcass basis or 54.2 pounds on a retail basis).
Final Comment
The Cattle Industry is an extremely important part of the Canadian Agricultural. It is a successful export industry and exports nearly 60% of its production. However, it seems to have entered a period of uncertainty. Since the shock of BSE exposed a vulnerability where market access was temporarily but disastrously denied, the men and women who run Cow Calf Operations and are are the foundation of the industry have displayed a well justified hesitation to maintain or increase production. For the present, production levels have not declined but this is due to increased carcass weights. However, the cow breeding herd continues to decline, as does the number of cow calf producers and, with them, their entire herds. Unless live cattle imports continue at or near current numbers and/or live slaughter and feeder cattle exports decline the supply of beef will decline. Stated more simply a smaller cow herd will produce less beef.
There are other ramifications. The ability to maintain beef exports at recent levels will also be compromised and can only be achieved if domestic consumption declines and /or beef and live feeder cattle imports increase.
What is behind all of this obvious lack of enthusiasm for industry expansion? I think there may be a long list of factors that combine to discourage, in one way or another, a return to expansion.The first and most apparent of these is the lack of sustainable or reliable profitability.
The disinclination to expand production is worrisome but not surprising. There are more than enough issues to contend with. Calf prices are well below the brief glory days of 2014 and 2015. Some market access issues remain tenuous and the industry continues to be criticized for contributing to climate change and environmental degradation. Even though such charges are entirely unfounded, one can understand the concern such constant disparagement creates in the minds of producers. Finally, it must be conceded that profits in the cow calf sector are never large and always elusive.