What's behind the decline in Ontario's cow herd?

Wednesday, February 2, 2011

Supply and demand, says one industry insider. Cow-calf operators are cashing in on good prices and exiting the industry

by DON STONEMAN

Stocker cattle and calf prices have taken a jump upwards that hasn't been seen in a long time. Cattle feeders are raising their bids at the auction ring at an odd time, when grain prices are also high.

Calves weighing 500 pounds were selling 10 to 20 cents a pound higher than a year ago at the sale in Keady, says Jim Clark, general manager of the Ontario Cattle Feeders Association. Prices in Ontario are the highest in Canada right now, he says, and cow calf operators deserve it.

Clark sees supply and demand as the reason. I believe that the cow numbers are as low as they've been for nearly 60 years, Clark says. He thinks more cows than ever are going to slaughter. Guys are cashing in and walking away from them, he says. But, while calf prices are up, so are input costs.

Clark says the provincial cow herd has dropped by more than 100,000 in three years and his impression is that the decline is continuing.

Breeding herd numbers are certainly down, but that is across North America, adds Curtis Royal, president of the Ontario Cattlemen's Association (OCA). He says Ontario's cow decline started after the BSE crisis in 2003 and more than 18 per cent of the province's cow herd is gone. He hopes that the numbers won't go down further. We certainly can't afford to lose any more. He says that there is a little spike in prices. But, so far as I am concerned, it is pretty meaningless.

Royal says the roller coaster of prices goes back to the terrorist attacks on New York City, Sept. 11, 2001. Producers now need sustained profitable prices for at least a year or two. He says the fact that the cattle are being purchased at increasing prices means that people seem to want to have ownership, thinking there is money there. I hope they are right.

Clark's view is that producers either had cattle purchased cheap or had already put up feed before cattle and corn prices rose.

A better return does not make the business risk management program sought by the Ontario Cattlemen's Association less needed. It does make it a good time to get in, says Royal.

Alberta has had a support program for fed cattle that put a floor under the prices producers receive, he notes. This fall, the program was expanded to include stocker cattle and there's a plan to extend it to cover cow-calf operators as well. The Business Risk Management program that the OCA put forward to the provincial government is different because it attempts to put our true costs into the formula, Royal says.

With the economy being the way it is, it's going to be hard to get the money out of the meat, says Clark, who has a foot on the retail side marketing Ontario Corn Fed Beef, a premium product.

Inflation in animal product food prices seems to be a trend. On the American side of the border, authorities report that choice grade sirloin steak cost US$6 a pound, up nearly eight per cent from a year ago. Butter cost 30 per cent more than the same time last year and milk cost nearly nine per cent more than a year before, according to the U.S. Bureau of Labor Statistics Consumer Price Index. BF