By Brandy Harrison
GUELPH — Beef farmers can count on market leverage with tight cattle supplies propping up prices at grocery store checkouts through 2016, says a Guelph-based agriculture and food market analyst.
“It’s the cow-calf guy holding all the cards. For everyone in the beef supply chain, he’s got the biggest prize,” says Kevin Grier, who won’t predict the future of farmgate prices but says there is little doubt low cattle numbers will keep consumer prices steady.
The North American herd has been in decline for 15 years, Grier says.
“This has been coming at us for a long time and it really hit home in 2014 and 2015 how short we are at plants,” says Grier, adding that many processors are down to four days per week and union agreements are forcing them to pay employees to stay home. “It shows you how tight the situation is. We’ve had a handful of plant closures in the last two years.”
It all comes back to cow-calf producers, he says.
Farmers culled their herds or got out altogether when money wasn’t coming in. While declining demand for beef, farmer age, BSE, and Texas droughts all contributed, the bigger factor is ethanol policies on both sides of the border, says Grier. “It drove the price of corn through the roof.”
Rebuilding will take time. U.S. farmers are starting to retain cows — making supplies even shorter — but the inventory report hasn’t shown any Canadian growth so far. Dry weather on the prairies may be forcing cows to market and high prices are hard to resist, says Grier.
“It’s hard to pencil out keeping them back when you’ve got that money you can get right now. We won’t get back to 2013 slaughter levels until the end of the decade.”