Highlights of report on Beef Pricing
Demand side of the equation is packer capacity. Beef Packer capacity is around 72,000 head per week in Canada. Higher may be possible but unlikely sustainable. Figures quoted Lakeside 22,000 Cargill 22,000, XL Foods 10,000 Better Beef 9,000 and Other 8,000.
Supply side, Canadian cattle marketings pre BSE averaged around 90,000 per week or less. This means that 20,000 per week went south as live cattle (in normal years, about 70% of live cattle exports are fed steers and heifers, the rest are cows and some feeders). Therefore, those 20,000 cattle/week are now having to find markets and kill capacity in Canada, indicating a sever over-supply of Canadian cattle.
Pre BSE Canadians consumed about half of Canadian packer production, the rest was exported. "Imports, in turn, filled specific but significantly large market requirements. If Canadian packers operated to supply only the pre'May 20 Canadian, they would be running at about 40,000 head/wek or less. That is roughly what they did last summer."
Since the border opened in September to boned beef, "Canadian packers are able to supply retail and foodservice requirements in the US, Canada and Mexico." resulting in packer operating at 90 to 100% capacity.
They argue that as the packers market is all North American, the would sell product and prevailing prices into these markets. The fact that there is no surplus of beef in the market would explain why there is not a reduction in beef price.
On the other hand, there is a surplus of live cattle relative to the kill capacity of existing plants and, therefore, dropping consumer price would not increase demand (capacity)for live cattle.
As a lot of this oversupply of cattle is in culls which were normally shipped to US where some of the ground beef would have been shipped back to Canada, there is a shortage of ground beef in Canada (US imports were impeded by the latest BSE case in December). It was also noted that ground beef that would be coming from Australia has been diverted to Asia since the US exports were halted.
Demand side of the equation is packer capacity. Beef Packer capacity is around 72,000 head per week in Canada. Higher may be possible but unlikely sustainable. Figures quoted Lakeside 22,000 Cargill 22,000, XL Foods 10,000 Better Beef 9,000 and Other 8,000.
Supply side, Canadian cattle marketings pre BSE averaged around 90,000 per week or less. This means that 20,000 per week went south as live cattle (in normal years, about 70% of live cattle exports are fed steers and heifers, the rest are cows and some feeders). Therefore, those 20,000 cattle/week are now having to find markets and kill capacity in Canada, indicating a sever over-supply of Canadian cattle.
Pre BSE Canadians consumed about half of Canadian packer production, the rest was exported. "Imports, in turn, filled specific but significantly large market requirements. If Canadian packers operated to supply only the pre'May 20 Canadian, they would be running at about 40,000 head/wek or less. That is roughly what they did last summer."
Since the border opened in September to boned beef, "Canadian packers are able to supply retail and foodservice requirements in the US, Canada and Mexico." resulting in packer operating at 90 to 100% capacity.
They argue that as the packers market is all North American, the would sell product and prevailing prices into these markets. The fact that there is no surplus of beef in the market would explain why there is not a reduction in beef price.
On the other hand, there is a surplus of live cattle relative to the kill capacity of existing plants and, therefore, dropping consumer price would not increase demand (capacity)for live cattle.
As a lot of this oversupply of cattle is in culls which were normally shipped to US where some of the ground beef would have been shipped back to Canada, there is a shortage of ground beef in Canada (US imports were impeded by the latest BSE case in December). It was also noted that ground beef that would be coming from Australia has been diverted to Asia since the US exports were halted.