Farm Credit Canada (FCC) expects continued high export demand for red meat, resulting in a boost in profitability for the beef and pork industries in 2020.
“2020 Outlook: Canada’s Red Meat Sector” was published on FCC’s Ag Economics website on Feb. 19. The report suggested a decline in the supply of global meat protein due to African Swine Fever (ASF) in the Chinese market; international trade issues dealing with the agri-food industry; a growth in U.S. beef and pork production; and the global impact the Coronavirus outbreak may have on the world market.
While profitability trends upwards at the moment, forecasters expect only slight increases through the year. Cow-calf operations will benefit from strong demand for feeder cattle, and feedlot operators should also see improvements to their bottom-line from 2019.
According to FCC’s preliminary estimates, beef production in Canada grew 2.8 per cent last year with greater numbers of cattle being fed and slaughtered. Meanwhile, activity in the packing industry was brisk.
“Canadian packer utilization rates continued to be strong,” the FCC forecast said. “We estimate that the ratio of beef slaughtered (in federally inspected facilities) relative to capacity increased in the second half of 2019: 94.8 per cent, up from 90.5 per cent during the first six months, and well above the five-year average of 86.5 per cent.”
Several factors were involved in the situation. High beef demand ran alongside strong processing margins, while processing plants in Eastern Canada were closed and a major American plant did not operate for several months. There were also higher imports to Canada of U.S. live cattle, and poor weather conditions in Canada caused an increase in culling rates.
“We expect the Canadian processing sector to continue operating at high capacity as the Jan. 1, 2020, cattle-on-feed in Canada was estimated to be 10.7 per cent higher compared to Jan. 1, 2019, and 20.4 per cent higher than the five-year average,” the FCC report said.
Unfavourable weather also impacted the cost of feed last year, but corn and feed barley prices are expected to fall in 2020. Overall, the FCC forecasts feed costs to remain constant for producers.
The country’s hog industry is projected to rise an average 3.4 per cent from 2019. However, a boost in the American hog sector is leading to concerns for the U.S. slaughter capacity. This is counter-balanced by strong demand due to a decline in China’s ASF-devastated pork supply.
Trends to watch
Farm Credit Canada also suggested producers keep an eye on several issues heading into the 2020 season.
• Food preferences are shifting, but domestic demand for red meat remains strong.
• China’s ability to rebuild its hog industry following a 20 per cent decline there due to the African Swine Fever (ASF). This means a substantial increase to hog imports to meet demand.
“China’s overall impact on global agriculture markets cannot be understated,” the report read. “Consider these statistics: China consumes 27 per cent of all global meat, with 62 per cent of China’s meat consumption being pork. Historically, China only imported three per cent of its pork requirements, given its large production capacity. The pace of the rebuild is essential when anticipating the impact of ASF in demand for red meats.”
• Phase One of the China-U.S. trade agreement and its impact on Canadian livestock producers.
• The impact of the Coronavirus on demand for meat.
• An expansion of the market for Canadian red meat following the implementation of the Canada-U.S.-Mexico Trade Agreement during the second half of 2020.
– With notes from Farm Credit Canada Ag Economics.
