2022 01 11 | Bob France | Canadian Beef Industry Amidst Covid
Jan 11, 2022
Our Bob France, a retired General Manager of the BC Cattlemen’s Association, gave a very interesting presentation about the impact of Covid on our beef industry. Sectors include ranching, feedlot, packers & distributors / retailers. Unlike dairy & poultry, this is an “uncontrolled” market, meaning prices are determined solely by supply & demand, where Canada is a small part of the North American market, under NAFTA rules. Of approximately 60,000 Canadian beef ranches, many are still modest family operations.
Alberta & Saskatchewan dominate, with BC having about 5% of the national herd. Feedlots are concentrated in southern Alberta, where +/-160 operators have a 1.7m head capacity, near feed supplies of mainly barley. In the US, corn is the primary feed, & feedlots are mostly in the Midwest (NB, KS, CO, OK & TX). Packers, located mostly near feedlots, are highly dominated by four large multi-national companies. Distribution & retailing is also increasingly dominated by large grocers (Walmart, Costco, Loblaws, etc.) & Hotel, Restaurant & Institutional (HRI) suppliers, like Sysco & Gordon.
All prices are market-driven, subject to the influence of the US – Canada $ exchange rate, & an inverse relationship between feed grain & calf prices. Ranchers have no control over prices they receive. In mid-March 2020 panic buying increased demand for beef, while Covid-related absenteeism hit packers hard. Packing production dropped, causing reduced supplies, higher prices to consumers, huge backlogs in feedlots, & lower prices to both ranchers & feedlots for finished cattle. Though restaurants bought less beef, home consumers made up the difference, so packers & retailers benefitted from higher prices. Feedlot backlogs were finally cleared in late 2021, but retail prices remain high, encouraged by strong export demand, even though returns to both feedlots & ranchers were depressed. Ranchers have also been hit by drought, meaning they need to buy winter feed which they normally would have produced on their operations.
Covid impacts could continue to stress the industry overall, but demand for beef will keep prices high for consumers. Hopefully over time we’ll return to a more normal market and these high beef prices will be reflected in higher prices for feedlot operators and finally reach down to the ranch level with higher prices being paid for calves.