WINNIPEG (Dow Jones)--Canadian cattle slaughter capacity will continue to expand despite the resumption of live cattle shipments to the U.S., said Ted Haney, president of the Canada Beef Export Federation.
Live Canadian cattle had been shut out of the U.S. for more than two years as a result of the discovery of bovine spongiform encephalopathy, or mad-cow disease, in Alberta cow in May 2003. Without the steady flow of Canadian cattle into the U.S., processors in Canada were dealing with a glut of animals and have been working over the past two years to expand their capacity.
While Canadian cattle under 30 months of age are once again free to cross into the U.S. following a July 14 U.S.appeals court ruling, that shouldn't stop the continued expansion of the domestic slaughter capacity, Haney said.
Canadian companies have noted their intent to finish expansion or continue with new plants, he said.
Prior to the BSE cases, Canadian packers processed about 3.5 million head of cattle a year, and the country exported about 900,000 cattle to the U.S., according to five-year averages, said Haney. Based on those numbers, Canada would need to process about 4.4 million head to be self-sufficient. But supplies in the country have also grown in the past two years.
Canada looks to move from its current slaughter capacity level of about 4.5 million cattle per year to 5 million by the end of 2005 and reach 5.2 million head by the end of the first quarter 2006, said Haney.
Running at 90%, an expected utilization rate of 4.7 million cattle per year would account for the increase in overall herd size, taking the domestic processing sector to full utilization, said Haney.
"Even with the current restricted access that Canada has to the U.S., there are a number of economic signals that will continue to encourage
beef-processing capacity in Canada to increase above self-sufficiency levels," said Haney.
He felt the fundamental lesson learned over the past two years was that the risks are too high for the Canadian industry to be dependent on another country for cattle feeding or beef processing.
"We need to be able to convert live animals to food in Canada ... because the movement in live cattle is the most vulnerable to trade action," said Haney.
Canadian packers also continue to have an advantage in procuring Canadian cattle compared to their U.S. competitors, said Haney. Current border-crossing protocols do not allow movement of any cattle over 30 months, which account for 15% of the available supply, he said.
In addition, for the animals under 30 months, the protocols represent additional expense, complexity and risk in the form of extra fees, paper work and other regulations, said Haney. Those extra costs and risks are not incurred by selling to Canadian packers, giving them an advantage, he added.
While Canadian packers should be able to handle all of the country's cattle, it is still important to have access to the U.S. market, as it provides a base below which Canadian cattle prices will not fall, said Haney.
"Anytime Canadian cattle fall below U.S. prices, minus the cost to deliver cattle to that market, cattle will flow to the U.S.," he said.
Canadian packers will have more competition among themselves and with the U.S., helping keep prices strong, said Haney.
He said the goal now is to normalize beef trade with Asian clients and to develop new sales in Europe.
Ranchers Choice Beef Co-op, a group working to build a slaughterhouse in Manitoba, said in a news release: "Our producer/members have clearly told us that we should never again be in a position where we, in Manitoba, are dependent on the U.S. for the slaughter of our animals."
Ranchers Choice president Ken Yakielashek added in the release that the movement of cattle to the U.S. should alleviate some of the financial pressures on Manitoba producers, which will allow for more investment in the Ranchers Choice slaughterhouse being built.
-By Phil Franz-Warkentin, Dow Jones Newswires; 204-947-1700;
resnews@compuserve.com