A Canfax Research Services fact sheet, sponsored by Merck Animal Health, is now available.
From bottom to bottom, it could be argued that the last cycle went from July 2002 to 2015 (13 years) with a slight increase seen in beef cow numbers in 2016 (+0.8%) and 2017 (+0.9%) before continuing liquidation. The decline has persisted even with rising beef demand, counter-intuitive to what the market would suggest. This has created conditions for a two-stage cycle while the cow herd remains stable and feeding operations began expansion in 2015.
As beef cow numbers declined between 2005 and 2014, feedlot capacity shrank alongside until 2015. In 2015, feedlot capacity began to expand after several years of strengthening fed cattle prices in Alberta. At this point of feedlot expansion, the domestic feeder supply remained the same or shrank, keeping prices high on tight domestic supplies. Fewer calves increased the competition for feeders and supported feeder prices. Tight supplies meant that navigating international live cattle trade could provide a competitive advantage to feedlots if the right deals were struck. The pressure necessitated the unlocking of new routes to supply feeders into Canada.
Feeder imports have been growing over the last five years, from just 10,545 head in 2015 to 271,412 head in 2020. In 2019, Canada became a net importer of feeder cattle, meaning it imported more feeder cattle from the U.S. than it exported. These imports are fueling the expansion in the feedlot sector.
How will the U.S. cattle cycle and supply of feeder cattle impact Canadian feedlots moving forward?
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