Livestock and Products Annual

An Expert's View about Animal Husbandry and Support Services in Canada

Last updated: 19 Feb 2011

Canada’s cattle and hog herds are forecast to stabilize in 2011. Rebuilding may emerge in 2012 based on higher animal prices and a strong demand due to current tight markets.

THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S. GOVERNMENT POLICY Required Report - public distribution Date: 09/01/2010 GAIN Report Number: CA0030 Canada Livestock and Products Annual 2010 Approved By: Robin Tilsworth Prepared By: Mihai Lupescu Report Highlights: Canada?s cattle and hog herds are forecast to stabilize in 2011. Rebuilding may emerge in 2012 based on higher animal prices and a strong demand due to current tight markets. Cattle and hog inventories are forecast to be down 5.6 percent and 4 percent respectively from 2010 levels. Beef and veal production is forecast at 1.275 MMT, down 0.8 percent from 2010, and pork production is forecast at 1.725 MMT, down 1.4 percent from 2010. Tight supplies and a strong demand on the U.S. and international markets are expected to outweigh a strong Canadian dollar, creating improved export opportunities in 2011 for both live animals and meat. Beef and veal exports are projected to increase by 1 percent in 2011 to 530 TMT, while pork exports are projected to increase by 0.9 percent to 1.175 MMT. Meat demand in Canada is to be covered through increased imports. Canada Livestock Annual ? September 2010 Executive Summary: With tight supplies and higher prices spurring limited optimism among Canadian cattle producers, the decline in cattle inventories is forecast to stabilize in 2011 with 12.29 million head projected at the beginning of the year and 11.48 at the end of the year. Rebuilding may emerge in 2012. This compares to 14.01 million head on July 1, 2010. Total slaughter is forecast at 3.79 million head in 2011, compared to 3.82 million head in 2010 and 3.7 million head in 2009. Paralleling the evolution of slaughter statistics, beef and veal production is forecast to decline in 2011 by 0.8 percent to 1.275 million metric tons (MMT) compared to 1.285 MMT in 2010. After a significant decline in 2009, cattle exports have stabilized in 2010 and even show signs of recovery. Total 2010 cattle exports are estimated at 1.1 million head, which is 3.1 percent higher than 2009. Reduced inventories in United States are forecast to push 2011 up by 4.5 percent compared to 2010, to a total of 1.15 million head. With production expected to decline in 2011 and a strong Canadian dollar, beef and veal imports are forecast to increase to 245 thousand metric tons (TMT), up 4.3 percent compared to 2010. Beef and veal imports declined 11.2 percent during the first six months of 2010 compared to the year earlier with the total 2010 estimated at 235 TMT. Despite lower production forecast, beef exports are forecast to increase in 2011 by 1 percent in 2011 compared to 2010, to 530 TMT led by increases to Asia. Exports were up 18.3 percent for the first half of 2010 with total 2010 exports estimated at 525 TMT. Hog production for 2011 is forecast at 27.4 million head, down 2.1 percent compared to the estimated 28 million head in 2010 which was down 4.4 percent compared to 2009. Slaughter is forecast at 20.8 million hogs in 2011, down 2.1 percent from 2010. A lower pig crop in 2010 has resulted in lower slaughter numbers. Continued lower hog exports translated into more domestic slaughter, estimated at 21.25 million head in 2010. Mirroring reduced slaughter in Canada, pork production is forecast at 1.725 MMT for 2011, or a further decline of 1.4 percent from the 1.75 MMT estimated for 2010. An increase in 2011 Canadian hog exports by 2.6 percent compared to 2010 is forecast, up to 5.95 million head due to low U.S inventories and strong demand. The decline in hog exports that began in 2009 continued into 2010 with 5.8 million head estimated for 2010. Reduced meat production and increased demand for exports is expected to result in further increases in 2011 imports to a forecast 230 TMT, up from 200 TMT estimated for 2010. Pork exports are forecast to increase in 2011 by 0.9 percent, to 1.175 MMT compared to the 1.165 MMT estimated for 2010. 2 | P a g e Canada Livestock Annual ? September 2010 Outlook In 2010 the Canadian economy has been showing a growth rate among the best in the developed world, largely fueled by government spending. However, as the fiscal stimulus is drying up, and with a domestic consumption that is slowly picking up, the Bank of Canada is forecasting lower growth for 2011, paralleling a trend that is expected in most countries for the next year. Overall, Canadian analysts are forecasting that global consumption is slowly picking up, and will continue to do so in 2011. Consumers are forecast to maintain and even increase their demand for meat, and probably more so in the higher end Asian markets than in the North American ones. This trend will positively affect Canadian exports of both beef and pork. Production of red meat in Canada, however, is likely to decline in 2011, given the continued decrease in breeding inventories and the required response time of the livestock sector to market signals. Opportunities for poultry production may be stronger in 2011, as the sector is quicker in adjusting to market conditions. In 2011, as the Canadian economic activity continues to grow, inflation is expected to rise as well which will likely prompt the Bank of Canada to further increase interest rates. In the United States, if interest rates remain at current levels, or increase less than in Canada, pressure will be on the Canadian dollar to appreciate. Coupled with stable or increasing prices for natural resources, and with an expected good economic performance in 2011, the Canadian dollar, which has already been strong in 2010, is likely to become even stronger in 2011 and possibly reach parity with the U.S. dollar for an extended period of time. A strong Canadian dollar will negatively impact Canadian exports in general and exports of cattle and hogs in particular. The impact of the exchange rate on exports of beef and pork is less significant than in the case of live animals. At this time, grain prices are expected to remain relatively high for 2011, and so are feed prices. Canadian cattle and hog producers cannot count on cheap feed to start rebuilding their herds, and production costs are expected to remain high, leaving operations with very tight profit margins, although somewhat improved from the last couple of years. After a number of years of continued decline in both cattle and hog inventories, animal production remains at low levels. This, in turn, translates into a lower meat production and as demand picks up, the market will remain tight going into 2011. Both live animals and meat prices are expected to remain strong in 2011 and to increase above 2010 levels. Taking advantage of these improving conditions, producers may finally decide to stop the decline of the animal sector, and start rebuilding herds. As such, 2011 is poised to represent the year when the downtrend bottoms out and the livestock sector starts growing beginning with 2012. 3 | P a g e Canada Livestock Annual ? September 2010 Commodities: Animal Numbers, Cattle Meat, Beef and Veal Production: Cattle Production The Statistics Canada mid-year report showed another significant decline in cattle inventories. The Canadian herd on July 1, 2010 was slightly above 14 million head, down 4.9 percent from the same date in 2009, and down 17.1 percent from its peak in 2005 when it totaled 16.9 million. Reflecting decisions made by producers in 2009 when future prospects looked quite grim, the number of calves born during the first six months of 2010 was down 10.2 percent compared with the same period in 2009. Similarly, the number of beef cows declined further during the first half of 2010 by 5.1 percent compared with the first half of 2009, and farmers reported that the number of replacement heifers also declined by 2.3 percent. The herd of dairy cows remained almost flat throughout the period at 0.98 million head. Source: Statistics Canada / 2011 Post forecast Given the recent trend, Post estimates that the year-end cattle inventories for 2010 will be lower by 725 thousand head compared to the year-end inventories of 2009 for a total of 12.29 million head. Going into 2011, with fewer beef cows and lower heifer retention, and with expected high feed prices Post 4 | P a g e Canada Livestock Annual ? September 2010 forecasts a further decline in cattle inventories: an annual decline of 2 percent in the calf crop, and an overall annual decline in the cattle herd by an additional 810 thousand head with the result that the 2011 year-end inventory is forecast at 11.48 million head. Cattle Prices Because of the low supply and a steady or increasing demand, cattle prices are expected to remain strong in 2011. The impact of higher prices, however, will only be seen in 2012 production numbers, which would reflect the possible decision of farmers to start rebuilding their herds. The second half of 2010 has started to show consistently higher fed steer prices compared to the same period in 2009. Preliminary reports indicate that some of the August contracts showed prices to be in the low $90s. The expected tight market is likely to maintain an upward pressure on prices going into 2011. Source: Statistics Canada 5 | P a g e Canada Livestock Annual ? September 2010 Source: Statistics Canada Consumption: Meat Production and Consumption The July 1, 2010 Statistics Canada data showed that during the first six months of 2010 the number of cattle sent to slaughter was 6.5 percent higher than during the same period in 2009. With exports of live cattle expected to remain within a range similar to the one observed in 2009, Post estimates the 2010 annual slaughter to be 3.82 million head, or 3.1 percent higher than in 2009. Increased cattle prices, especially cull cow prices, increased demand for meat and stronger export opportunities for beef and veal contributed to increased cattle slaughter. These trends are expected to continue in 2011, maintaining pressure to send animals to slaughter. However, the 2011 herd size will be lower yet than in 2010. Therefore Post forecasts 2011 slaughter volumes to actually decline by only 0.8 percent compared to 2010, to 3.79 million head. Paralleling the evolution of slaughter statistics, Post estimates the annual beef and veal production to increase in 2010 to 1.285 million metric tons (MMT) or by 2.4 percent compared to 2009 and to decline in 2011 by 0.8 percent compared to 2010, to 1.785 MMT. Beef and veal consumption in Canada, albeit lower again in 2010, appears to be stabilizing after a more pronounced decline due largely to reduced demand during the recession. Post estimates a per capita beef and veal consumption of 29.5 kilograms carcass weight equivalent for 2010. Despite an expected increase in domestic demand for 2011, tight supplies will basically translate into increased competition for meat between the domestic and the export markets. Post forecasts that domestic beef and veal consumption will actually decline slightly in 2011, down to 29.2 kilograms on a per capita basis, 6 | P a g e Canada Livestock Annual ? September 2010 meaning less meat available for Canadian consumers who will likely have to pay a little bit more for their beef cuts. Canadian Per Capita Consumption Beef & Veal kg/person, CWT Year kg/person 2004 31.98 2005 31.35 2006 30.92 2007 31.70 2008 30.36 2009 29.65 2010* 29.50 2011** 29.20 Source: Statistics Canada, Post *estimate **forecast Trade: Cattle Trade After a significant decline in 2009, cattle exports have stabilized in 2010 and even shown signs of recovery. Post estimates 2010 cattle exports at 1.1 million head, which is 3.1 percent higher than 2009 numbers. Reduced inventories in Unites States and the need to place feeder cattle in feedlots have largely contributed to this trend, which is likely to continue into 2011, and to outweigh the negative impact of a stronger Canadian dollar. As such, Post forecasts an upwards trend in Canadian cattle export, up by 4.5 percent in 2011 compared to 2010, to a total of 1.15 million head. Canadian cattle imports are estimated to be 50,000 head for 2010 and forecasted at 55,000 for 2011. CANADA: Cattle Exports to United States Quantity in 1,000 head January-June %change 2007 2008 2009 2009 2010 - 10/09 - Feeders 123 186 75 57 35 -37.6% Slaughter 849 896 763 381 469 23.3% Other 455 214 152 157 111 -29.1% Total of above 1,428 1,295 990 595 616 3.6% Source: Global Trade Atlas / Dairy and breeding cattle excluded. 7 | P a g e Canada Livestock Annual ? September 2010 Beef and Veal Imports Recent statistics show a decline in beef and veal imports of 11.2 percent during the first six months of 2010 compared to the same period in 2009. Post estimates this downward trend to continue for the remainder of the year, placing the total volume of annual imports at 235 thousand metric tons (TMT), or 4.9 percent less than in 2009. Increased slaughter in Canada which translated into a larger than previously expected meat production and therefore more meat available domestically was the main cause for these reduced import volumes. With production numbers expected to decline in 2011 and a strong Canadian dollar, Post forecasts increased beef and veal imports for the next year, up 4.3 percent compared to 2010, at 245 TMT. CANADA: Total Beef Imports Quantity in metric tons, CWE* January-June %change 2007 2008 2009 2009 2010 - 10/09 - World 240,919 230,194 247,031 135,563 120,445 -11.2% United States 147,042 171,411 163,798 78,225 75,249 -3.8% New Zealand 35,788 30,866 42,146 30,121 18,966 -37.0% Uruguay 31,935 6,832 16,803 15,866 15,549 -2.0% Australia 16,349 13,173 16,955 8,726 6,308 -27.7% Brazil 7,964 5,764 5,659 2,090 3,631 73.7% All other 1,841 2,148 1,670 535 742 38.7% Import Market Shares United States 61% 74% 66% 58% 62% New Zealand 15% 13% 17% 22% 16% Uruguay 13% 3% 7% 12% 13% Australia 7% 6% 7% 6% 5% Brazil 3% 3% 2% 2% 3% Source: Global Trade Atlas / *Conversion to carcass weight equivalent at 1.4 for fresh, chilled and frozen meat, and at 1.79 for salted and processed meat. 8 | P a g e Canada Livestock Annual ? September 2010 Source: Global Trade Atlas / 2010: Post estimate Beef and Veal Exports Tight supplies in Unites States coupled with a recovery and strong demand on the Asian markets are the main factors indicating that Canadian beef and veal exports are going to be up in 2010 compared to 2009, outweighing the negative impact of a strong Canadian dollar. Statistics for the first six months of the year show exports up 18.3 percent compared to the same period in 2009 and Post estimates that the annual total will be up 9.1 percent, at 525 TMT. These trends are likely to continue into 2011 and, in addition, the Canadian Government is working hard to effectively open the Chinese market for beef exporters, with a veterinary agreement in negotiation. However, 2011 will see lower meat production volumes in Canada and possibly an even stronger dollar compared to 2010. Despite these negative factors, Post expects that improved market conditions in terms of demand and prices will pull exports volumes up and therefore forecasts an increase in beef and veal exports by 1 percent in 2011 compared to 2010, for a total of 530 TMT. 9 | P a g e Canada Livestock Annual ? September 2010 CANADA: Total Beef Exports Quantity in metric tons, CWE* January-June %change 2007 2008 2009 2009 2010 - 10/09 - World 458,624 494,899 481,266 231,823 274,222 18.3% United States 381,694 403,042 390,068 192,988 220,384 14.2% Mexico 47,361 48,489 48,063 21,239 29,541 39.1% Hong Kong 10,975 10,049 12,665 5,444 10,767 97.8% Japan 4,609 6,905 11,314 2,527 5,225 106.8% Taiwan 569 1,907 3,926 1,763 2,266 28.5% Vietnam 285 770 2,383 1,496 1,164 -22.2% Philippines 367 8,364 2,251 1,518 478 -68.5% Macau 8,208 7,372 2,108 2,002 35 -98.3% Indonesia 210 399 2,080 172 310 80.2% Suriname 1,109 1,472 1,225 629 725 15.3% Cuba 117 1,494 558 284 990 248.6% All other 3,120 4,636 4,625 1,761 2,337 32.7% Export Market Shares United States 83% 81% 81% 83% 80% Mexico 10% 10% 10% 9% 11% Hong Kong 2% 2% 3% 2% 4% Japan 1% 1% 2% 1% 2% Taiwan 0% 0% 1% 1% 1% Source: Global Trade Atlas / *Conversion to carcass weight equivalent at 1.4. Policy: Recent Support Program Announcements Under AgriFlexibility (a 5-year, C$500 million fund): An investment of up to C$3 million to support the beef industry by developing new marketing opportunities to help farmers and food processors boost their bottom line. This investment is in addition to the Government of British Columbia?s (BC) C$2 million investment that will fund projects recommended by BC?s Ranching Task Force. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100824) Canadian slaughterhouses can now apply to the Abattoir Competitiveness Program and the Slaughter Waste Innovation Program. The Abattoir Competitiveness Program will make C$25 million available to help Canadian cattle slaughterhouses maintain critical slaughter capacity in Canada for over-thirty- month-old (OTM) cattle while the industry undertakes efforts to become more innovative and competitive when dealing with specified risk materials (SRM). The Slaughter Waste Innovation Program will make C$40 million available to help drive research, development, and adoption of innovative technologies or processes to reduce handling costs or return profits from the use or disposal of SRM. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100705a) Under the Slaughter Improvement Program (a C$60 million fund): 10 | P a g e Canada Livestock Annual ? September 2010 An investment of up to C$2.09 million to help Ryding-Regency Meat Packers to improve its operations and capture new markets for Canadian farmers. Ryding-Regency is the second largest federally- inspected abattoir in Ontario and processes beef, veal and lamb. The company exports high-quality products to communities across Canada and the northeastern United States. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100813) A C$1.5 million investment in Holly Park Meat Packers, which will help increase their slaughter capacity, cut costs and improve operations making the industry more profitable and competitive. Holly Park Meat Packers is one of Ontario?s largest provincially inspected meat processing facilities and employs 100 people in its Cookstown and Caledon locations. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100408) Under the Advanced Payments Program: Some cattle and hog producers facing hard financial times now have extra time to repay cash advances under the Advance Payment Program (APP) due to an announced stay on the repayment of livestock advances. Producers who took an advance in 2008-09 face the prospect of repaying large cash advances this fall, creating significant cash-flow pressures. A Stay of Default allows livestock producers to spread their repayments out over a longer period of time and avoid default. Cattle producers will have until March 31, 2012 to repay amounts owed, with regular repayments to begin eight months from the start of the Stay. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100806) Under AgriMarketing: Investments totaling up to C$3.3 million in support of helping farmers and agri-food exporters create new trade opportunities by showcasing livestock and Canadian premium products at international trade fairs and on trade missions. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100804) Under AgriRecovery: Livestock producers in Alberta and Saskatchewan facing two years of drought will receive funding from federal and provincial governments to buy feed while damaged pastures recover. Under the 2010 Pasture Recovery Initiative, livestock producers living in the eligible counties and municipal districts in Central and Northern Alberta and West Central and Northwest Saskatchewan will receive pasture assistance for breeding cattle, as well as assistance for other types of breeding livestock, totaling up to C$114 million subject to size of the eligible livestock. It is estimated that there are more than 2.2 million breeding animals in the affected areas. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100531a) 11 | P a g e Canada Livestock Annual ? September 2010 Under AgriInnovations (a 5-year, C$158 million fund): The Canadian Cattlemen?s Association (CCA) will receive more than C$6 million to lead a research cluster of industry experts, scientists and universities. The Beef Cluster will pull together the scientific expertise for research that will help Canada?s beef and cattle industry address challenges the sector has faced in recent years. Research will focus on key priorities the sector has identified: reducing production costs, increasing feed efficiency and decreasing the impact of animal health issues. CCA?s contribution is nearly C$1.2 million. Provincial government partners will also contribute nearly C$464,000. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100323) Other program announcements: The governments of Canada and Alberta are providing more than C$2 million to the Canadian Cattle Identification Agency (CCIA) to help Alberta's beef producers with age-verification and traceability initiatives. This funding will ensure the CCIA's Mobile Field Representatives are available to support producers across the province for the next two years. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100804a) Additional Markets Open To Canadian Cattle and Beef Colombia: With the implementation of the free trade agreement with Columbia, the government highlighted that Canadian cattle can be exported to Colombia after almost 10 years of trade restrictions. This announcement followed Colombia?s recent decision to reopen its market to Canadian beef. Canadian exporters are now eligible to export to Colombia all cattle born after August 1, 2007. Colombia is the first country in South America to reopen its market to Canadian cattle since 2003. According to the industry, the Colombian market for Canadian cattle is estimated to be worth more than C$2 million a year, while beef exports are estimated to be worth about C$6 million. China: In June 2010 Canada announced a breakthrough agreement with China which provides the foundation for a staged approach to full market access for Canadian beef and beef products. When implemented, Canada stands to become the first country to resume trade in beef with China following a case of Bovine Spongiform Encephalopathy (BSE) back in 2003. Following this initial agreement, China agreed to take the regulatory step to formally lift the ban on Canadian boneless beef under thirty months (UTM) and tallow for industrial use, effective July 3, 2010. According to industry estimates, the Chinese market for Canadian beef and tallow is expected to be worth C$110 million once full market access is achieved. At present the two governments are working towards finalizing the necessary veterinary and food safety procedures to be put in place to actually allow products from Canada into the Chinese market. Panama: Also in June 2010 the Canadian government announced the re-opening of Panama's market to Canadian breeding cattle and expanding market access to bovine genetics. Canada and Panama signed a free trade agreement in May 2009. Once implemented, the agreement is expected to open doors to 12 | P a g e Canada Livestock Annual ? September 2010 Canadian farmers and exporters with improved market access, bringing benefits to a wide range of sectors, including livestock. Production, Supply and Demand Data Statistics: 2009 2010 2011 CANADA Market Year Begin: et Year Begin: Jan Market Year 2010 Jan Mark2009 Begin: Jan 2011 Animal Numbers, Cattle USDA New Post USDA Old Post New Post New Post Official Data Data Official Data Data Data Data Total Cattle Beg. Stocks 13,180 13,180 13,015 13,015 13,013 12,288 Dairy Cows Beg. Stocks 979 979 981 981 981 980 Beef Cows Beg. Stocks 4,650 4,650 4,471 4,471 4,471 4,325 Production (Calf Crop) 5,110 5,081 4,980 4,980 4,645 4,550 Total Imports 54 54 50 50 50 55 Total Supply 18,344 18,315 18,045 18,045 17,708 16,893 Total Exports 1,067 1,067 1,150 1,150 1,100 1,150 Cow Slaughter 620 643 570 570 620 510 Calf Slaughter 285 299 300 300 250 200 Other Slaughter 2,800 2,763 2,775 2,750 2,950 3,080 Total Slaughter 3,705 3,705 3,645 3,620 3,820 3,790 Loss 557 530 550 550 500 475 Ending Inventories 13,015 13,013 12,700 12,725 12,288 11,478 Total Distribution 18,344 18,315 18,045 18,045 17,708 16,893 All data in 1,000 head CANADA 2009 2010 2011 Market Year Begin: Market Year Meat Market Year Begin: Jan 2010 , Jan 2009 Begin: Jan 2011 Bee USDA New Post USDA Old Post New Post New Post f and Veal Official Data Data Official Data Data Data Data Slaughter (Reference) 3,705 3,705 3,645 3,620 3,820 3,790 Beginning Stocks 34 34 36 36 37 35 Production 1,245 1,255 1,225 1,215 1,285 1,275 Total Imports 247 247 265 290 235 245 Total Supply 1,526 1,536 1,526 1,541 1,557 1,555 Total Exports 480 481 490 490 525 530 Human Dom. Consumption 1,010 1,018 1,000 1,015 997 995 Other Use, Losses 0 0 0 0 0 0 Total Dom. Consumption 1,010 1,018 1,000 1,015 997 995 Ending Stocks 36 37 36 36 35 30 Total Distribution 1,526 1,536 1,526 1,541 1,557 1,555 All data in 1,000 metric tons, carcass weight equivalent, except slaughter in 1,000 head 13 | P a g e Canada Livestock Annual ? September 2010 Commodities: Animal Numbers, Swine Meat, Swine Production: Hog Production Canada's hog herd continues to shrink, but at a slower pace. The July 1, 2010 data released by Statistics Canada reveal that hog inventories dropped to 11.78 million head or by 2.4 percent compared to the same date in 2009. However, the rate of decrease is much lower compared to the 7 percent and 11.6 percent decreases recorded in the previous two years. The declining trend has also continued with respect to the sow herd, practically eliminating any chance of recovery for 2010 or 2011. The July 1 data show sows at 1.285 million head, 4.8 percent lower than on the same date in 2009. This decline, however, is slowing down in the second half of the year. The Canadian Pork Council has recently indicated that a number of farmers who had previously placed successful bids in the federal Hog Farm Transition Program have eventually decided to retain their hogs and not accept the buyouts. There may be more producers who do the same, given that the final deadline for taking or rejecting the buyouts is March 31, 2011. To date, over 800,000 hogs have been removed due to this program, including 121,000 sows. Despite this development, the hog sector continues to remain in difficulty, with no comeback in sight for 2011. Sources have confirmed that financial institutions continue to refuse financing expansions of the sector. 14 | P a g e Canada Livestock Annual ? September 2010 Source: Statistics Canada / 2011 Post forecast Post continues to estimate an annual pig production for 2010 at 28 million head, down 4.4 percent compared to 2009. Going into 2011, Post forecasts total hog inventories on January 1 at 11.36 million head, down 4 percent compared to 2010, and a sow herd of 1.28 million head, down only 2.3 percent compared to 2010. Production for 2011 is forecast at 27.4 million head, down 2.1 percent compared to 2010. Hog Prices In 2010 there has seen a comeback in terms of hog prices, with some reports placing average slaughter hog prices in some of the August weeks close to 50 percent higher than similar periods in 2009. Manitoba Pork Council has recently indicated that these returns are above the break-even point for most producers, however much higher returns would be required if farmers were to be able to pay down the accumulated debt and consider any expansion. Future contracts for the winter months place prices below the levels recorded during the summer, but tight market supplies are likely to maintain prices at relatively higher levels throughout most of 2011. Source: Statistics Canada 15 | P a g e Canada Livestock Annual ? September 2010 Source: Statistics Canada Consumption: Meat Production and Consumption A lower pig crop in 2010 has resulted in lower slaughter numbers, with recent data from Agriculture and Agri-Food Canada (AAFC) indicating a drop of 2.4 percent as of the end of August 2010 compared with the same period in 2009. However, continued lower hog exports have translated into proportionally more hogs being slaughtered domestically. Typically about 67-68 percent of an annual pig crop would be slaughtered in Canada, but this share has gone up to 76 percent since 2009. Based on the data through August, Post estimates that producers would have sent to slaughter 21.25 million hogs by the end of 2010, down 2.6 percent compared to 2009, and forecasts a slaughter of 20.8 million hogs in 2011, down 2.1 percent compared to 2010. Mirroring reduced slaughter in Canada, pork production is estimated at 1.75 million metric tons (MMT) for 2010, down 2.2 percent from the 2009 level, and forecast at 1.725 MMT for 2011, or a further decline of 1.4 percent. Per capita pork consumption in Canada seems to be stable at a level above 23 kilograms carcass weight equivalent. After a slight decline in 2009, Post estimates per capita consumption for 2010 at 23.6 kilograms, similar to the level registered in 2008. A lower meat supply in 2011 coupled with the competition from the export market will leave the domestic market with less meat available, resulting in a forecasted per capita consumption of 23.2 kilograms, just below the 2010 level. 16 | P a g e Canada Livestock Annual ? September 2010 Canadian Per Capita Pork Consumption kg/person, CWT Year kg/person 2004 26.84 2005 23.03 2006 23.44 2007 25.08 2008 23.68 2009 23.36 2010* 23.60 2011** 23.20 Source: Statistics Canada, Post *estimate **forecast Trade: Hog Exports The decline in hog exports that began in 2009 continued into 2010. Based on data from the first six months of the year Post estimates exports will total 5.8 million head by the end of the year, down 9 percent from 2009. The strong Canadian dollar and some uncertainty surrounding requirements under the Country of Origin Labeling (COOL) regulations in United States are the reported factors associated with the decline. However, looking into 2011, the market is likely to remain very tight, with prices staying at high levels, given lower inventories in United States and strong demand for both feeder hogs and pork. As such, Post forecasts an increase in 2011 Canadian hog exports by 2.6 percent compared to 2010, up to 5.95 million head. CANADA: Hog Exports to United States Quantity in 1,000 head January-June %change 2007 2008 2009 2009 2010 - 10/09 - Feeders 6,721 7,036 5,221 2,797 2,337 -16.5% Slaughter 3,282 2,306 1,141 576 516 -10.4% Total of above 10,002 9,342 6,363 3,374 2,853 -15.4% Source: Global Trade Atlas / Breeding hogs excluded Pork Imports 17 | P a g e Canada Livestock Annual ? September 2010 A lower domestic pork production in 2010 coupled with a resumed consumer demand after the recession period is translating into increased pork import requirements. Statistics for the first six month of 2010 have pork imports up by 10 percent compared to the same period in 2009. Post estimates that imports of pork will total 200 TMT by the end of the year, up 11.1 percent from 2009. Reduced meat production and increased demand from export markets is expected to require Canada to increase its imports further in 2011. Post forecasts pork imports at 230 TMT, up 15 percent from the 2010 level. CANADA: Total Pork Imports Quantity in metric tons, CWE* January-June %change 2007 2008 2009 2009 2010 - 10/09 - World 170,984 193,876 180,264 81,821 90,020 10.0% United States 164,483 186,279 173,900 79,586 88,473 11.2% Chile 2,197 2,510 3,039 1,817 1,070 -41.1% Denmark 1,272 3,008 1,347 1 22 2100.0% All other 3,032 2,079 1,978 417 455 9.1% Import Market Shares United States 96% 96% 96% 97% 98% Chile 1% 1% 2% 2% 1% Denmark 1% 2% 1% 0% 0% Source: Global Trade Atlas / *Conversion to carcass weight equivalent at 1.3 Pork Exports Statistics for the first six month of 2010 show pork exports up by 7.3 percent to 576 TMT compared with the same period in 2009. Tight supplies and improved demand in export markets, particularly in some of the Asian markets and Russia, have outweighed the negative impact of a stronger Canadian dollar. Post estimates 2010 pork exports will be 1.165 million metric tons (MMT), up 3.7 percent compared to 2009. As these trends are likely to continue into 2011 and further increase the demand for Canadian pork, this will translate into increased exports despite lower meat production volumes. As such, Post forecasts exports in 2011 will increase by an additional 0.9 percent, to 1.175 MMT. CANADA: Total Pork Exports Quantity in metric tons, CWE* January-June %change 2007 2008 2009 2009 2010 - 10/09 - World 1,032,787 1,128,621 1,123,043 537,367 576,469 7.3% United States 432,879 362,890 382,969 180,866 184,857 2.2% Japan 250,968 262,298 259,273 129,142 146,639 13.5% Korea South 66,724 64,887 67,937 37,051 28,825 -22.2% Russia 86,211 142,790 63,281 33,798 57,147 69.1% Australia 52,434 45,959 61,651 32,935 27,201 -17.4% Hong Kong 8,799 58,837 46,636 18,923 21,918 15.8% Philippines 11,316 32,358 45,312 19,119 23,343 22.1% Taiwan 6,307 17,138 34,639 10,956 10,335 -5.7% Mexico 37,226 29,549 29,097 11,074 21,334 92.6% China 22,849 23,142 22,687 12,426 9,188 -26.1% 18 | P a g e Canada Livestock Annual ? September 2010 South Africa 10,732 6,376 17,045 10,944 4,124 -62.3% New Zealand 11,286 9,979 12,832 7,022 4,719 -32.8% Ukraine 0 5,708 11,138 2,057 2,452 19.2% All other 35,056 66,710 68,546 31,054 34,387 10.7% Export Market Shares United States 42% 32% 34% 34% 32% Japan 24% 23% 23% 24% 25% Korea South 6% 6% 6% 7% 5% Russia 8% 13% 6% 6% 10% Australia 5% 4% 5% 6% 5% Hong Kong 1% 5% 4% 4% 4% Philippines 1% 3% 4% 4% 4% Source: Global Trade Atlas / *Conversion to carcass weight equivalent at 1.3. Policy: The Canadian Hog Buyout Program Held Its Last Tender The Hog Farm Transition Program (HFTP) was a $75 million initiative of the federal government designed to help eligible producers by providing payments to those who agreed to set aside all hog production in their enterprise for a minimum of three years. The program was opened to all hog producers that were in the business of hog production as of April 1, 2009. The HFTP provided funding through a process of four tenders, the last of which took place on March 10, 2010. The aim of the program is to reduce the herd by the equivalent of 250,000 sows. As indicated earlier in this report, according to the Canadian Pork Council some of the successful bidders had in the meantime decided not to accept the buyouts. As per the program's regulations, the funds that thus became available are to be used to honor bids next in line from the results of the fourth tender. The table below summarizes the results of the program up until mid-July. Canada: Hog Farm Transition Program Final Cumulative Successful Bid Summary (July 12, 2010) Total Bid Province Bids V Over alue Sow Up to s C$ mil. 30 kgs Total 30 kgs British Columbia 13 $4.8 7,945 24,284 30,397 62,626 Alberta 60 $9.9 11,828 29,676 94,967 136,471 Saskatchewan 15 $7.8 16,748 28,002 24,970 69,720 Manitoba 72 $15.3 35,870 44,732 56,234 136,836 19 | P a g e Canada Livestock Annual ? September 2010 Ontario 202 $26.3 38,324 98,579 166,318 303,221 Quebec 68 $6.2 8,567 21,238 50,500 80,305 Atlantic Region 16 $1.5 1,714 7,111 15,425 24,250 TOTAL 446 $71.8 120,996 253,622 438,811 813,429 All swine numbers in head. Source: Agriculture and Agri-Food Canada. WTO Dispute on Certain Country of Origin Labeling (COOL) Requirements At its meeting on November 19, 2009, the Dispute Settlement Body (DSB) established a single panel in this World Trade Organization (WTO) dispute, pursuant to the requests of Canada and Mexico. The two had previously filed challenges at the WTO regarding certain aspects of the U.S. COOL legislation. On April 30, 2010, the same two countries requested the WTO Director-General to determine the composition of the panel, which he did through a decision issued on May 10. The three-member panel is composed of the following: Mr. Christian Häberli (president), Mr. Manzoor Ahmad and Mr. João Magalhães. As per the regular WTO dispute process, Canada?s first written submission in this case was circulated on June 23, followed by United States' first written submission on August 4. The first substantive meeting among the parties involved is taking place in Geneva during the month of September 2010. Later in the year a second round of written submissions will occur, followed by a second substantive meeting, scheduled at present for December 2010. Provided that all deadlines are met and the process pursues its regular course, the WTO panel will issue its final Report on this case around the middle of 2011. Recent Support Program Announcements Under the Advanced Payments Program: Some cattle and hog producers facing hard financial times now have extra time to repay cash advances under the Advance Payment Program (APP) due to an announced stay on the repayment of livestock advances. Producers who took an advance in 2008-09 face the prospect of repaying large cash advances this fall, creating significant cash-flow pressures. A Stay of Default allows livestock producers to spread their repayments out over a longer period of time and avoid default. Hog producers will have until March 31, 2013 to repay amounts owed, with regular repayments to begin eighteen months from the start of the stay. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100806) Under Canada's Economic Action Plan: - An investment of C$9.5 million for the Swine Cluster to bring together industry, government and scientists to address the research and development priorities of pork producers, including food safety, meat quality and feed input issues. 20 | P a g e Canada Livestock Annual ? September 2010 - An investment of C$3.3 million for the Canadian Pork Council to strengthen the national swine traceability system, which is designed to track the movement of hogs across the country. An investment of C$1.4 million for the Canadian Swine Exporters Association to promote pork in international markets through market development, brand building and industry-to-industry trade promotion. - An investment of C$839,480 for the Canadian Centre for Swine Improvement to develop methods to predict marbling in hogs through better technology, genetics and feed, and to promote marbling as a major quality trait for domestic and international markets. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100514a) Under the Slaughter Improvement Program (a C$60 million fund): An investment of nearly C$4.5 million to help Great Lakes Specialty Meats of Canada Inc. in Ontario improve and expand its facility allowing the company to pursue new niche markets. This funding will be used by Great Lakes Specialty Meats of Canada Inc. to improve plant capabilities to produce high quality value added products using modern and efficient equipment and technology such as the leading traceability systems for improved food safety. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100501a) A C$310,000 investment for Winkler Meats Ltd. in Manitoba. This federal investment will be used to improve its operations through equipment upgrades and the expansion of its plant facilities. The installation of two new smokehouses and the upgrade of its production line equipment will allow Winkler Meats to continue to focus on opening up new markets for their high-quality products. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100430b) An investment of C$1.6 million to help Cambridge Meat Packers in Ontario. This loan will allow the company to construct a water-treatment facility and finance the purchase and installation of new equipment to make sure that pork producers can get their high-quality product to consumers. Cambridge Meat Packers? 35,000-square-foot plant was recently renovated into a state-of-the-art facility, meeting federal inspection requirements. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100423) An investment of C$70,000 which will help Antigonish Abattoir in Nova Scotia upgrade their plant equipment and data tracking software and improve their traceability system. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100416b) An investment of C$567,500 in Country Meat and Sausage in Manitoba. This investment will help the family-run business reduce costs, purchase equipment and upgrade its facilities to meet federal requirements. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100416a) Under the Canadian Agricultural Adaptation Program: The Ontario Pork Industry Council (OPIC) will receive an investment of C$175,000 to improve and address any potential gaps in the Ontario pork industry?s emergency response system. Working with 21 | P a g e Canada Livestock Annual ? September 2010 Ontario Pork and the sector, OPIC will develop the disease emergency response plan for the Ontario pork industry. Project activities include clarifying roles and responsibilities, developing communications networks, and assessing the role of traceability in emergency preparedness. (http://www.agr.gc.ca/cb/index_e.php?s1=n&s2=2010&page=n100413) Production, Supply and Demand Data Statistics: 2009 2010 2011 CANADA Market Year Begin: t Year arket Year Begin Marke: Jan 2010 Jan M2009 Begin: Jan 2011 Animal Numbers, Swine USDA New Post USDA Old Post New Post New Post Official Data Data Official Data Data Data Data Total Beginning Stocks 12,180 12,180 11,630 11,630 11,835 11,357 Sow Beginning Stocks 1,371 1,371 1,313 1,313 1,310 1,280 Production (Pig Crop) 29,151 29,301 27,900 28,000 28,000 27,400 Total Imports 3 3 2 2 2 2 Total Supply 41,334 41,484 39,532 39,632 39,837 38,759 Total Exports 6,376 6,376 6,000 6,000 5,800 5,950 Total Slaughter 21,848 21,810 21,100 21,200 21,250 20,800 Loss 1,480 1,463 1,500 1,500 1,430 1,325 Ending Inventories 11,630 11,835 10,932 10,932 11,357 10,684 Total Distribution 41,334 41,484 39,532 39,632 39,837 38,759 All data in 1,000 head CANADA 2009 2010 2011 Market Year Begin: Meat Market Y ear Begin: Jan Market Year2010 , Jan 2009 Begin: Jan 2011 Swine USDA New Post USDA Old Post New Post New Post Official Data Data Official Data Data Data Data Slaughter (Reference) 21,848 21,810 21,100 21,200 21,250 20,800 Beginning Stocks 60 60 67 67 52 40 Production 1,790 1,789 1,740 1,740 1,750 1,725 Total Imports 180 180 210 210 200 230 Total Supply 2,030 2,029 2,017 2,017 2,002 1,995 Total Exports 1,123 1,123 1,130 1,130 1,165 1,175 Human Dom. Consumption 840 854 845 845 797 790 22 | P a g e Canada Livestock Annual ? September 2010 Other Use, Losses 0 0 0 0 0 0 Total Dom. Consumption 840 854 845 845 797 790 Ending Stocks 67 52 42 42 40 30 Total Distribution 2,030 2,029 2,017 2,017 2,002 1,995 All data in 1,000 metric tons, carcass weight equivalent, except slaughter in 1,000 head 23 | P a g e
Posted: 30 November 2010, last updated 19 February 2011

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