Meat&Poultry - August 2011 - 28

CANADIAN UPDATE

Canadian cattle] from the 2005 peak. We had nearly 16 million head of cattle in 2005 and this year we’re down to just about 12.5 million. There are fewer players and they’re getting bigger at all stages. And when the margin players, such as the packers and feedlots, start controlling their input costs, it all gets passed down to the cow-calf producer in terms of the price they receive. “Many have really been unprofitable and left the industry,” he adds. “But, some have consolidated and clamped down on costs of production. We’ve got a more efficient industry now than we did prior to BSE.” But, it’s cow-calf producers that ultimately drive the total supply of cattle in Canada over the long term and with the present situation, it would take a long time to build the herd back to pre-BSE levels. So far this year, Canada has imported more US beef into Eastern Canada than usual, Perillat says. “There are very tight supplies in Eastern Canada so we’re importing more beef into Eastern Canada than last year,” he adds. When it comes to export partners besides the US, he says it’s taking longer than expected to build, or rebuild, markets since the BSE scare, but they’re slowly returning and, are “absolutely critical to the overall success of the industry.” Travis Toews, president of the Canadian Cattlemen’s Association, says the fact that Canadian cattle supplies are tightening is the most significant trend in the industry and the numToews ber of people in the industry is also shrinking. He says the value of the Canadian dollar vis-àvis the US dollar is a major issue that most economists say will be part of the beef business for awhile. “We’re going to have to live with that reality,” he says. “One thing is clear, we can no longer hide behind

Canada’s marketplace by increasing exports to countries other than the US are having an effect, Toews points out that for the fi rst quarter of 2011, exports to the US and Mexico were down by 27 percent while exports to the rest of the world were up six percent. “I’m quite optimistic about the next five years,” he says.

Hog depopulation
Both sectors of the red-meat industry have suffered from the lower US dollar, high feed prices, COOL and animal health issues. However, the hog industry’s depopulation has also been assisted by major efforts in Ottawa to empty barns. Called the Hog Farm Transition Program, the federal government offered producers C$75 million (US$80 million) to exit the industry for at least three years. And according to the Canadian Pork Council, the agency that administered the program, it has resulted in a 10 percent reduction in the national breeding herd. In addition, in the spring of 2008, with the industry teetering on the brink of collapse, the federal government offered producers $46 million (US$47.5 million) to kill off 150,000 breeding sows with a target of reducing the population by 3 million animals. As might be expected, these programs, together with the sinking US dollar and the advent of COOL, were responsible for the dramatic slippages in both the beef and hog herds north of the border, to the point where packers have found themselves experiencing a shortage of supplies. As a result, a number of plants have closed including: • The XL Foods Inc. beef plant in Calgary, Alberta, which closed its doors in April, 2011 citing the decrease in the Western Canadian cow herd and challenging competitive conditions in the marketplace. The XL Foods Inc. beef plant in Moose Jaw, Saskatchewan, previously closed its

(Photo courtesy of The Beef Information Centre)

the cheap currency to mask any regulatory or production inefficiencies that we have in this country.” The higher Canadian dollar is making US exports more competitive globally, Toews says. And because the US is such a large consumer and

“We can no longer hide behind the cheap currency to mask any regulatory or production inefficiencies that we have in this country.”

producer of beef products, it’s a major player in setting prices. Toews believes Canadian producers are emerging as a more competitive industry. Operations have become a little larger through this period and that usually results in some efficiencies through economies of scale. He adds that over time, the industry’s cost structure will adjust to the higher dollar and costs will be reduced as well. Asked if initiatives to diversify

28 • Meat&Poultry • August 2011 • www.MeatPoultry.com

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