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CME: Livestock Imports from Canada Trend Lower

by 5m Editor
9 December 2010, at 12:39am

US - Cattle and hog imports from Canada have trended lower in recent years as a combination of a strong Canadian currency, declining livestock inventories and changes in US rules for handling imported livestock have negatively impacted trade flows, write Steve Meyer and Len Steiner.

It is important to recognize that following the NAFTA agreement, the US and Canadian livestock industries became increasingly integrated. In part this was supported by geography. It is much more efficient to have Canadian cattle flow into Western US packing plants from Alberta and Saskatchewan and have US beef flow into the populated centers of Eastern Canada. Also, Canada invested heavily in building feeder pig operations that quick quickly and efficiently service Midwest hog operations, many of them built when the Canadian dollar was trading at a significant discount to the US currency.

Because of some technical difficulties, USDA stopped the release of import data in September and October but recently the data flow has resumed and USDA did provide the numbers for the missing weeks this falls. As the top chart show, feeder cattle imports from Canada remain quite limited and at some of the lowest levels in years. In the last six reported weeks (11 October - 20 November), USDA pegged imports of Canadian feeder cattle at 9,111 head, some 46 per cent lower than the comparable period a year ago and 82 per cent smaller than in 2008. Canadian feeder cattle supplies are quite tight and given the strong currency and good demand from domestic feedlots, there is very little incentive to ship feeders into the US market.

Also keep in mind that barley prices in Canada have not appreciated as much as corn prices in the US, making Canadian feedlots more competitive for Canadian feeder supplies. Omaha cash corn prices are currently running some 45 per cent ahead of last year’s levels, compared with Alberta barley which is currently up about 15 per cent compared to a year ago. More recently we have also seen a notable reduction in the number of Canadian slaughter cows coming into the US market. This is important as we see a developing shortage of grinding beef in the US due to very light shipments from Australia and New Zealand.

Canadian slaughter cow imports to the US in the last six reported weeks were 22,634 head, 7,096 head or 24 per cent lower than a year ago. Shipments of Canadian slaughter cows in January and February of 2010 were very strong, which helped offset the shortage of imported beef at the time. If current trends continue, imported beef will continue to be very tight in Q1 of 2011 and slaughter cow supplies, both US and Canadian, likely will be more limited. Shipments of Canadian feeder pigs also have drifted lower in 2009 and so far in 2010. In the last six reported weeks (11 October - 20 November), imports of Canadian feeder pigs were pegged at 516,667 head, 4 per cent lower than a year ago and 26 per cent lower than in 2008.