Bleak 2024 seen for Canadian beef sector

A recent report by the United States Department of Agriculture paints a grim picture of Canadian beef cattle numbers in 2024.

According to a western Canadian market analyst, most of that forecast checks out.

The report, published by the USDA’s Foreign Agricultural Service office in Ottawa in late September, predicted the Canadian cow herd and calf crop will continue to shrink next year. The FAS suggested beef cow numbers will fall by almost 3.7 per cent, to 3.43 million head from 3.56 million, while calf stocks are expected to see a smaller drop, to 4.2 million from 4.25 million.

“Improved feed conditions in 2022-23 following the 2021 drought did not encourage any meaningful expansion or significant heifer retention amongst cow-calf producers,” the report read.

“The 2023 beef cow herd was the smallest in recent years, and drought conditions in certain regions on the southern prairies led to increased cow slaughter and a lack of signals for heifer retention.”

Those numbers are the latest step in Canada’s years-long slide in cattle numbers. In July 2022, Statistics Canada reported the beef cow herd at 3.71 million. At the time, the agency noted those numbers were Canada’s lowest since 2015.

High cattle prices may help the sector’s outlook, said Anne Wasko, an analyst with Gateway Livestock Marketing in Taber, Alta.

“We know we’re going to have record strong cattle prices. That’s going to lead to some profitability that we haven’t seen in the industry for a long time. It’s a key peg to incentivize cow-calf producers to start retaining heifers,” she said.

The question, added Wasko, is how producers are going to benefit from those prices with the prospect of ongoing drought and struggles to find feed.

“You’re still looking at high feed costs; there’s a lack of availability in many areas, and so, again, it’s water and feed. If you can’t put those two pieces together, you just can’t keep cows. You can’t grow your herd.”

Wasko also noted the heifer population is an indicator of future health in the beef industry.

“We can watch the number of heifers getting placed [in feedlots], then we can watch the number of heifers our packers are processing as heifer slaughter, so we’ve got some pretty good data points to tell us what’s going on with heifers,” she said.

The U.S. has an advantage over Canada when it comes to this year’s rainfall. Moisture increased in all key cattle-producing states except Texas, giving the U.S. a head start on herd rebuilding efforts.

“They had a 2021 drought, as did we, but their moisture conditions substantially improved in 2023, along with that record cattle and calf prices,” said Wasko. “Most of the analysts that I work with in the U.S. are suggesting that some of the 2023 heifer calf crop will be retained.”

Even if Canada sees greater heifer retention, it will be some time before it makes an impact on the national cow herd, she said.

“The U.S.A. will start to retain heifers this winter and breed them next year, which will produce a calf in 2025. So they appear to be making that first start, but it’s because they had moisture along with the profitability.”

That doesn’t mean all U.S. producers are breaking out the party hats. Texas, which suffered the most from drought among major cattle-producing states, also has the biggest beef herd.

Where the USDA report falls apart, in Wasko’s view, is its forecast that Canadian beef production will be stable in 2024. As much as she wishes that could be true, the numbers do not bear it out.

“We’re down six per cent in total tonnage produced, mostly because we’re so down in steer and heifer numbers,” she said. “And I would argue that 2024 will be down at least a couple of per cent.”

Even if Canadian ranchers get the needed feed and moisture and want to rebuild, it will take time for the national herd to recover production. More heifer retention will shrink feedlot and slaughter supply and reduce production volumes.

“I would argue that we’ve got some declines in production ahead versus stable or static,” said Wasko.

“In [Canfax’s] heifer replacement data, and especially looking at June, July and August, the last month for which we have data, heifer replacements in the feedlots in Western Canada, most of which are in southern Alberta, are up 54 per cent from last year,” said Wasko.

“They’re making their way into feedlots pretty aggressively in the last three months.”

The USDA report predicts Canadian fed cattle numbers will be propped up by importing U.S. feeder cattle.

Wasko agrees. Data shows feeder cattle imports from the U.S. into Canada in 2023 are running 38 per cent above 2022.

If production is down, exports will likely follow, creating a bigger market in Canada for imports. Wasko said beef exports are down five per cent in 2023 so far, which is in line with the beef sector’s production deficit of six per cent.

“As we go forward in the next few years, I would expect beef exports to be down and beef imports to be up. That’s how we keep the equivalency in the prices among trading nations,” she said.