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Cdn Cattle Slaughter Capacity Still Growing
Winnipeg, MB, Jul 26, 2005 (Resource News International via COMTEX) -- Canadian cattle slaughter capacity will continue to expand despite the resumption of live cattle shipments to the US, said an industry official.
Live Canadian cattle had been shut out of the US for more than two years, as a result of the discovery of BSE in Alberta cow in May 2003. Without the steady flow of Canadian cattle into the US, processors in Canada were dealing with a glut of animals and have been working to expand their capacity over the past two years. While Canadian cattle under 30 months of age are once again free to cross into the US following a July 14 US appeals court ruling, that shouldn't stop the continued expansion of the domestic slaughter capacity, said Ted Haney, president of the Canada Beef Export Federation.
Capacity expansion has largely been the efforts of individual companies, which appears to be continuing as all of the companies have noted their intent to finish expansion or continue with new plants, said Haney.
Prior to BSE, Canadian packers processed about 3.5 million head of cattle a year and the country exported roughly 900,000 cattle to the US, according to the five year averages, said Haney. As a result, Canada would need to process about 4.4 million to be self sufficient. However, supplies in the country have also grown in the past two years.
The domestic slaughter capacity has increased and will continue to do so. Canada should move from its current slaughter capacity level of about 4.5 million cattle per year, to 5 million by the end of 2005 and reach 5.2 million head by the end of the first quarter 2006, said Haney.
Running at 90%, an expected utilization rate of 4.7 million cattle per year would account for the increase in overall herd size, taking the domestic processing sector to full utilization, said Haney.
"Even with the current restricted access that Canada has to the US, there are a number of economic signals that will continue to encourage beef processing capacity in Canada to increase above self-sufficiency levels," said Haney. He felt the fundamental lesson learned over the past two years was that the risks are too high for the Canadian industry to be dependant on another country for cattle feeding or beef processing. "We need to be able to convert live animals to food in Canada, . . . because the movement in live cattle is the most vulnerable to trade action," said Haney.
Canadian packers also continue to have an advantage in procuring Canadian cattle compared to their US competitors, said Haney. Current border crossing protocols do not allow movement of any cattle over 30 months, which account for 15% of the available supply, he said. In addition, for the animals under 30 months, the protocols represent additional expense, complexity and risk in the form of extra fees, paper work, and other regulations, said Haney. Those extra costs and risks are not incurred by selling to Canadian packers, giving them an advantage, he added.
The capacity of the Canadian livestock hauling sector has also declined over the past two years, and will take some time to increase, said Haney. Fuel costs have also risen sharply since 2003, making it more expensive to haul cattle long distances, he said, adding that it is much more efficient to transport finished product than live animals.
While Canadian packers should be able to handle all of the country's cattle, it is still important to have access to the US market, as it provides a base below which Canadian cattle prices will not fall, said Haney. "Anytime Canadian cattle fall below US prices, minus the cost to deliver cattle to that market, cattle will flow to the US," he said.
Canadian packers will have more competition both amongst themselves and with the US, helping keep the prices seen by producers strong, said Haney. He said the goal now is to normalize beef trade with Asian clients and develop new sales into Europe. Together with domestic sales and beef sales to the US and Mexico, Canadian packers should be able to see equal value as their US counterparts as they move to a more self sufficient environment, he added.
Ranchers Choice Beef Co-op, a group working to build a slaughterhouse in Manitoba, originally started working to increase slaughter capacity in the province as a response to the closed US border. "Our producer/members have clearly told us that we should never again be in a position where we, in Manitoba, are dependant on the US for the slaughter of our animals," said Ranchers Choice president Ken Yakielashek in a press release. He added that the movement of cattle to the US should alleviate some of the financial pressures on producers in the province, which will allow for more investment in the Ranchers Choice slaughterhouse currently being built.
Winnipeg, MB, Jul 26, 2005 (Resource News International via COMTEX) -- Canadian cattle slaughter capacity will continue to expand despite the resumption of live cattle shipments to the US, said an industry official.
Live Canadian cattle had been shut out of the US for more than two years, as a result of the discovery of BSE in Alberta cow in May 2003. Without the steady flow of Canadian cattle into the US, processors in Canada were dealing with a glut of animals and have been working to expand their capacity over the past two years. While Canadian cattle under 30 months of age are once again free to cross into the US following a July 14 US appeals court ruling, that shouldn't stop the continued expansion of the domestic slaughter capacity, said Ted Haney, president of the Canada Beef Export Federation.
Capacity expansion has largely been the efforts of individual companies, which appears to be continuing as all of the companies have noted their intent to finish expansion or continue with new plants, said Haney.
Prior to BSE, Canadian packers processed about 3.5 million head of cattle a year and the country exported roughly 900,000 cattle to the US, according to the five year averages, said Haney. As a result, Canada would need to process about 4.4 million to be self sufficient. However, supplies in the country have also grown in the past two years.
The domestic slaughter capacity has increased and will continue to do so. Canada should move from its current slaughter capacity level of about 4.5 million cattle per year, to 5 million by the end of 2005 and reach 5.2 million head by the end of the first quarter 2006, said Haney.
Running at 90%, an expected utilization rate of 4.7 million cattle per year would account for the increase in overall herd size, taking the domestic processing sector to full utilization, said Haney.
"Even with the current restricted access that Canada has to the US, there are a number of economic signals that will continue to encourage beef processing capacity in Canada to increase above self-sufficiency levels," said Haney. He felt the fundamental lesson learned over the past two years was that the risks are too high for the Canadian industry to be dependant on another country for cattle feeding or beef processing. "We need to be able to convert live animals to food in Canada, . . . because the movement in live cattle is the most vulnerable to trade action," said Haney.
Canadian packers also continue to have an advantage in procuring Canadian cattle compared to their US competitors, said Haney. Current border crossing protocols do not allow movement of any cattle over 30 months, which account for 15% of the available supply, he said. In addition, for the animals under 30 months, the protocols represent additional expense, complexity and risk in the form of extra fees, paper work, and other regulations, said Haney. Those extra costs and risks are not incurred by selling to Canadian packers, giving them an advantage, he added.
The capacity of the Canadian livestock hauling sector has also declined over the past two years, and will take some time to increase, said Haney. Fuel costs have also risen sharply since 2003, making it more expensive to haul cattle long distances, he said, adding that it is much more efficient to transport finished product than live animals.
While Canadian packers should be able to handle all of the country's cattle, it is still important to have access to the US market, as it provides a base below which Canadian cattle prices will not fall, said Haney. "Anytime Canadian cattle fall below US prices, minus the cost to deliver cattle to that market, cattle will flow to the US," he said.
Canadian packers will have more competition both amongst themselves and with the US, helping keep the prices seen by producers strong, said Haney. He said the goal now is to normalize beef trade with Asian clients and develop new sales into Europe. Together with domestic sales and beef sales to the US and Mexico, Canadian packers should be able to see equal value as their US counterparts as they move to a more self sufficient environment, he added.
Ranchers Choice Beef Co-op, a group working to build a slaughterhouse in Manitoba, originally started working to increase slaughter capacity in the province as a response to the closed US border. "Our producer/members have clearly told us that we should never again be in a position where we, in Manitoba, are dependant on the US for the slaughter of our animals," said Ranchers Choice president Ken Yakielashek in a press release. He added that the movement of cattle to the US should alleviate some of the financial pressures on producers in the province, which will allow for more investment in the Ranchers Choice slaughterhouse currently being built.