Beef producers are hoping that 2010 will prove to be a better year than 2009, after being battered by a climbing Canadian dollar over the past 12 months.
When the Waterloo Cattlemen’s Association holds its annual general meeting in Linwood Jan. 20, market volatility will be one of the topics on the agenda. The biggest challenge for cattle feeders in 2009 was the Canadian dollar, which was not only high but unpredictable.
“With an export market like we have, we’re tied so closely to the United States that when the dollar changes, our market goes up and down automatically,” said Steve Foster, president of the Waterloo Cattlemen’s Association. “When you take it over a six or eight month feeding period … you can lose 15 per cent without the markets ever changing.”
The Canadian dollar rose 15.9 per cent versus the American dollar in 2009. If the loonie would drop, or at least stabilize over the coming months, it would be a boon to producers.
The instability forced Breslau-area beef producer Graham Snyder to change the way he sells his cattle. He and his father move about 500 cattle per year, which they used to sell directly to the Cargill beef plant in Guelph. When selling direct, they had to book their cattle seven to 10 days in advance at a price that was locked in: if the price increased, it wasn’t passed on to the producer. Now they sell their cattle at the stockyards in St. Jacobs to take advantage of any changes in price.
“It’s a quicker reaction at the stockyards as opposed to selling direct,” Snyder said. “The margins that we’re keeping are very slim and we’re struggling to break even on cattle right now.”
The economic downturn has also hurt beef producers, as people tighten their belts and opt for hamburgers over prime rib.
“Prime cuts aren’t selling as well. People aren’t going out to higher-end restaurants and buying the steaks and fillets,” Foster said.
While lower-end cuts like hamburger have picked up in value, it hasn’t been enough to compensate for the losses on choice cuts.
One issue that the Cattlemen’s Association faced in 2009 that will continue into 2010 is the regulations introduced by the Canadian Food Inspection Agency regarding specified risk materials or SRMs.
SRMs – the brain and spinal cord – from cattle more than 30 months old have to be removed and disposed of in a way that ensures no part of them ends up in animal feed. Contaminated feed is believed to be the source of the BSE that was discovered in Canadian cattle in 2003.
Foster acknowledges that the regulations make sense from a food safety perspective, but farmers are paying the cost. The CFIA regulations add $50 to $70 to the cost of slaughtering an animal in Canada. The problem is that the United States doesn’t have the same regulations or costs, putting Canadian producers at a disadvantage.
“The CFIA is trying to hold us to a higher level than the rest of the world, and while doing this they will probably drive us out of business,” Foster said.
The Cattlemen’s Association is asking the government to pick up the tab for the extra costs, to level the playing field.
There are a few positive indicators for 2010. The number of cows in North America has dropped significantly over the past two years, meaning better markets and prices should be on the horizon. However, those higher prices will only offset the pressures of economic malaise.
“If everything was normal in the economy, we’d be in for a banner year in the cattle business,” Foster said. “Right now the way it looks I’d say we’re probably just going to be treading water for another year.”
The Waterloo Cattlemen’s Association annual general meeting will be held Jan. 20 at the Linwood Community Centre. To register, contact Steve Foster at 519-746-0258.