Lower inventory hasn’t translated into higher profits; no shortage of challenges facing industry
By Dave Edgar
After one of the worst droughts Alberta cattle ranchers have experienced in a long time, producers are optimistic the industry will continue its slow-but-steady improvement, even in the face of a growing number of challenges and a continual recovery from the residual effects of the BSE crisis a few years ago, according to industry experts.
Overall in North America, cattle numbers have decreased in the past year. However, that hasn’t translated into higher prices, since demand fell significantly as consumers snapped their wallets shut in the face of the recession of the past 18 months, says Chuck MacLean, chairman of the Alberta Beef Producers (ABP).
“You would think that by having less product, you would increase demand, but that hasn’t happened,” says MacLean, who has been a feed-lot operator, farmer and cattle producer. “In Alberta, we had one of the biggest droughts we’ve had for a long time.” That caused problems related to feed prices and availability for ranchers last year into 2010.
It is a tough, resilient industry, but margins are thin and there is no shortage of challenges. ABP is currently embroiled in a World Trade Organization (WTO) battle over the Country of Original Labeling (COOL) program that wound its way through the U.S. legislature and came into effect, requiring all cattle that go into the U.S. from Canada or Mexico to be segregated and identified as Canadian or Mexican product, even after it has been processed in American plants.
MacLean estimates Canada sends about 25,000-30,000 live cattle to U.S. packers each year. “All of a sudden COOL came along and it made the packers have to segregate the cattle out of Canada and Mexico away from the U.S. cattle and actually identify them,” says MacLean. “What turned out to look like a good thing from a U.S. perspective turned out it wasn’t … and the consumer didn’t really appear to care. There is a push on now for any live cattle going into the U.S. to exempt them.”
He predicts it will be at least a year or two before the WTO challenge to the COOL legislation is resolved – one way or another. It costs Alberta producers three to four cents per pound as a result of COOL.
There is also something of a catch-22 at work for the industry when it comes to the Canadian dollar’s rise of about 15 per cent in the last 18 months as the recession subsided. The rise in the dollar has cost producers on one hand: “Every time the Canadian dollar goes up a penny against the U.S. (dollar), it basically takes a penny off the price of cattle,” says MacLean.
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