Livestock and Products Annual 2012

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

Posted on: 21 Sep 2012

Excellent pastures and abundant forage will support stabilization in the cattle sector. Inventories will modestly increase in 2013, while exports of cattle will fall.

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: 09/01/2012 GAIN Report Number: CA12036 Canada Livestock and Products Annual 2012 Approved By: Robin Gray Prepared By: Mihai Lupescu Report Highlights: Excellent pastures and abundant forage will support stabilization in the cattle sector. Inventories will modestly increase in 2013, while exports of cattle will fall. Heavier carcasses will compensate reduced slaughter resulting in a stable beef production, with trade staying flat. High feed costs will trigger further concentration in the hog sector. Pig production and exports will decline, while reduced slaughter will result in a lower supply of pork. Imports and exports of pork will fall. Canada Livestock – Annual – September 2012 Executive Summary: Cattle & Beef With the years of decline left behind, the Canadian cattle sector has now stabilized and is looking for opportunities to grow. Excellent pasture conditions and an abundance of forage are currently the basis for such potential and will help the sector weather the following period of expected high feed prices. Barley and wheat, both substitutes for corn in Canada, will be plentifully available, though at elevated costs. For 2013, Post forecasts a very modest increase in inventories and calf production. More cattle are expected to stay in feedlots and be finished locally, rather than be shipped to the United States. Exports in 2013 will thus see a decline, in stark contrast with the first half of 2012. Given a limited supply of slaughter cattle and a stable demand for beef, packers have become interested in heavier animals. The trend observed in 2012 will continue into 2013, with heavier carcasses exiting slaughterhouses. Beef production is expected to remain flat into 2013, for a third consecutive year, although slaughter will see a mild drop of 0.5 percent in 2013 after a more significant 4 percent decline in 2012. With beef supplies tight, the market will rely on imports to fill the gap, which are forecast to increase by a meager 1 percent in 2013. A limited production and the continued strength of the Canadian dollar will remain the reasons why beef exports will continue to stay flat, below recent average levels. In 2012, Canada is expected to import the same amount of beef as in 2011, while exports are estimated to decline by almost 4 percent. Hogs & Pork The prospect of high feed costs and a reduced demand for feeder hogs in the United States have the potential to jeopardize the recovery in the hog sector, which began during the first part of 2012 with increased pig production and exports. Facing higher costs and struggling financially, some smaller producers started to liquidate their inventories in the second half of the year, a trend expected to continue into 2013. Post forecasts a 2.5 percent decline in the sow herd and a 3 percent decline in pig production. After a modest increase up until mid-2012, exports of live hogs are declining, and will continue to do so in 2013. Hog slaughter remains relatively flat, forecasted only slightly down for 2013, after another small decline in 2012. Based on relatively similar weights, pork production will show a modest drop in 2013 as well. Both exports and imports of pork are estimated to come down in 2013, after higher than expected volumes in 2012. Shipments of pork to Russia are the driving force behind an estimated 4.5 percent increase in exports in 2012. Limited supplies on the domestic market triggered a surge in pork imports, estimated now to exceed by 18 percent the previous year’s level. Page | 2 Canada Livestock – Annual – September 2012 In 2011 Canada conducted an Agricultural Census. Data from this census is now incorporated into official livestock statistics, and the new Post estimates presented in the Production, Supply and Distribution tables included in the present report are based on the census data. Therefore, the set of data entitled “New Post Estimates” is statistically different from the set of data titled “USDA Official Data.” Readers are urged to use caution when comparing the two sets of data. Similarly, data in this report entitled "New Post Estimates" is statistically different from the same type of data in previous reports and therefore not directly comparable. In 2011, Canada also conducted a general Population Census. Results from this census will only be incorporated into official population statistics in 2013. In estimating per capita consumption of red meat, Post continues to use population data from official statistics and not census data. Readers should be aware that over the next year, as census data is reflected in official statistics, per capita consumption will change and will no longer be comparable with older data. Page | 3 Canada Livestock – Annual – September 2012 CATTLE: NOTE: "NEW Post" data reflect author's assessments and are NOT official USDA data Methodological note: “NEW Post” data take into account the 2011 Agriculture Census and therefore are not directly comparable with the “USDA Official” data CANADA 2011 2012 2013 Animal Numbers USDA NEW Post USDA NEW Post USDA NEW Post CATTLE ('000 head) Official Data Data Official Data Estimates Official Data Estimates Total Cattle Beg. Stks 12,457 12,155 12,515 12,215 0 12,280 Dairy Cows Beg. Stocks 983 966 985 959 0 955 Beef Cows Beg. Stocks 4,273 4,046 4,228 3,998 0 4,020 Production (Calf Crop) 4,662 4,599 4,710 4,509 0 4,530 Total Imports 73 73 60 65 0 65 Total Supply 17,192 16,827 17,285 16,789 0 16,875 Total Exports 696 696 700 740 0 700 Cow Slaughter 535 535 500 500 0 475 Calf Slaughter 290 293 300 290 0 290 Other Slaughter 2,640 2,563 2,705 2,475 0 2,485 Total Slaughter 3,465 3,391 3,505 3,265 0 3,250 Loss 516 525 525 504 0 505 Ending Inventories 12,515 12,215 12,555 12,280 0 12,420 Total Distribution 17,192 16,827 17,285 16,789 0 16,875 Stabilization in the Cattle Sector Continues Excellent pasture conditions and an abundance of forage are currently the premises for continued consolidation in the cattle sector and will help weather the following period of expected high feed prices. Barley and wheat, both substitutes for corn in Canada, will be plentifully available, though at elevated costs. For 2013, Post forecasts a modest increase in total cattle inventories and calf production. Source: Statistics Canada Page | 4 Canada Livestock – Annual – September 2012 Data released by Statistics Canada on July 1st showed for the first time in seven years an increase in the number of beef cows. Albeit tiny, this expansion coupled with a continued increase of 3.5 percent in the number of heifers retained for beef cow replacement, suggests the cattle sector may soon move towards a new rebuilding stage. The total cattle inventories on July 1, 2012 are virtually unchanged from the 2011 level, confirming that after many years of decline the sector has now stabilized. Cattle prices have remained at high levels throughout 2012, well above the average levels of previous years. Source: Canfax Cattle Exports to Remain Steady Although Below Historical Levels The Canadian relative cost advantage in feed, vis-à-vis the United States, supported primarily by excellent pastures and abundant forage, is likely to continue into 2013. Therefore, Post forecasts that live cattle exports will remain around the 700,000 head mark, comparable to the levels recorded in the previous two years. Page | 5 Canada Livestock – Annual – September 2012 Source: Global Trade Atlas / *Post estimate The current year was one of two different stories. During the first half of 2012, exports of feeder cattle picked up significantly, up almost 46 percent compared to the similar period in 2011. This trend was curbed over the summer, when the prospect of a shortage of grains and of high feed prices settled in the United States, lowering the demand for feeder cattle, which remained in feedlots in Canada. Post estimates that the number of non-feeder cattle will increase during the second half of 2012, putting the total cattle exports estimate for the entire year at 6 percent above the total level in 2011. BEEF: NOTE: "NEW Post" data reflect author's assessments and are NOT official USDA data Methodological note: “NEW Post” data take into account the 2011 Agriculture Census and therefore are not directly comparable with the “USDA Official” data CANADA 2011 2012 2013 Meat USDA NEW Post USDA NEW Post USDA NEW Post BEEF and VEAL Official Data Data Official Data Estimates Official Data Estimates Slaughter (Reference) 3,465 3,391 3,505 3,265 0 3,250 Beginning Stocks 30 30 35 31 0 35 Production 1,170 1,154 1,200 1,160 0 1,155 Total Imports 282 282 280 285 0 290 Total Supply 1,482 1,466 1,515 1,476 0 1,480 Total Exports 426 426 450 410 0 415 Total Dom. Consumption 1,021 1,009 1,030 1,031 0 1,035 Ending Stocks 35 31 35 35 0 30 Total Distribution 1,482 1,466 1,515 1,476 0 1,480 Page | 6 Canada Livestock – Annual – September 2012 Beef Supplies Stable despite Diminished Slaughter Given a limited supply of slaughter cattle and a stable demand for beef, packers have become interested in heavier animals, allowing them to put on as much as between 4 to 6 percent more weight. The trend observed in 2012 is expected to continue into 2013, with heavier carcasses exiting slaughterhouses. Beef production is forecast to remain flat into 2013, for a third consecutive year, although slaughter will see a mild drop of 0.5 percent in 2013, after a more significant 4 percent decline in 2012. Beef production is now forecast at 1.155 million metric tons (MT) for 2013, after an estimated level of 1.16 in 2012. Per capita domestic consumption is not likely to change much from the levels experienced in recent years. Following a period of steady decline, it seems to be stabilizing around 28.5 kilograms per capita of carcass weight equivalent. Source: Statistics Canada / Post *estimate **forecast Trade Remains Flat With beef supplies tight, the market will rely on imports to fill the gap, which are forecast to increase by a meager 1 percent in 2013. A limited production and the continued strength of the Canadian dollar will remain the reasons why beef exports will continue to stay flat, below recent average levels. In 2012, Canada is expected to import the same amount of beef as in 2011, while exports are estimated to decline by almost 4 percent. Page | 7 Canada Livestock – Annual – September 2012 Source: Global Trade Atlas / Post *estimate **forecast The United States continues to be the main export market in 2012 for Canadian beef, although at a lower level than in 2011. Exports to Mexico continued their declining trend started in 2010, as a result of their resumption of beef imports from the United Sates following the resolution of the trucking dispute. Imports, by contrast, are likely to see a tiny increase in 2012 as demand remains steady, with the United States as major supplier. Canada: Beef Exports, January - June (metirc tons, CWE*) Quantity % Market Share % Change 2010 2011 2012 2010 2011 2012 2012/2011 World 273,626 207,752 197,193 100.00 100.00 100.00 - 5.08 United States 220,104 161,233 157,613 80.44 77.61 79.93 - 2.25 Mexico 29,533 17,609 14,885 10.79 8.48 7.55 - 15.47 Hong Kong 10,766 13,797 13,232 3.93 6.64 6.71 - 4.09 Japan 5,154 4,661 3,805 1.88 2.24 1.93 - 18.37 Egypt 121 2,055 1,448 0.04 0.99 0.73 - 29.57 Russia 611 2,813 1,160 0.22 1.35 0.59 - 58.76 Korea South 1 6 1,130 0.00 0.00 0.57 ∞ All other countries 7,336 5,578 3,920 2.68 2.68 1.99 -29.72 Source: Global Trade Atlas / *Conversion to carcass weight equivalent at 1.4 Page | 8 Canada Livestock – Annual – September 2012 Canada: Beef Imports, January - June (metirc tons, CWE*) Quantity % Market Share % Change 2010 2011 2012 2010 2011 2012 2012/2011 World 120,487 134,835 137,986 100.00 100.00 100.00 2.34 United States 75,292 99,545 100,146 62.49 73.83 72.58 0.60 New Zealand 18,966 21,355 17,988 15.74 15.84 13.04 - 15.76 Australia 6,308 5,152 8,868 5.24 3.82 6.43 72.13 Uruguay 15,549 5,578 8,536 12.90 4.14 6.19 53.02 Brazil 3,631 3,018 2,027 3.01 2.24 1.47 - 32.83 All other countries 741 187 421 0.62 0.14 0.31 125.13 Source: Global Trade Atlas / *Conversion to carcass weight equivalent (CWE) at 1.4 for fresh, chilled and frozen meat, and at 1.79 for salted and processed meat HOGS: NOTE: "NEW Post" data reflect author's assessments and are NOT official USDA data Methodological note: “NEW Post” data take into account the 2011 Agriculture Census and therefore are not directly comparable with the “USDA Official” data CANADA 2011 2012 2013 Animal Numbers USDA NEW Post USDA NEW Post USDA NEW Post SWINE ('000 head) Official Data Data Official Data Estimates Official Data Estimates Total Beginning Stocks 11,895 12,690 12,020 12,785 0 12,988 Sow Beginning Stocks 1,294 1,193 1,293 1,195 0 1,165 Production (Pig Crop) 28,638 28,593 28,800 28,400 0 27,500 Total Imports 3 3 3 3 0 3 Total Supply 40,536 41,286 40,823 41,188 0 40,491 Total Exports 5,821 5,821 5,820 5,500 0 5,100 Total Slaughter 21,269 21,269 21,300 21,200 0 21,100 Loss 1,426 1,411 1,400 1,500 0 1,500 Ending Inventories 12,020 12,785 12,303 12,988 0 12,791 Total Distribution 40,536 41,286 40,823 41,188 0 40,491 Difficult Times Again for the Hog Sector The prospect of high feed costs and a reduced demand for feeder hogs in the United States have the potential to jeopardize the recovery in the hog sector, which began during the first part of 2012 with increased pig production and exports. Facing higher costs and struggling financially, some smaller producers have started to liquidate their inventories in the second half of the year, a trend expected to continue into 2013. Post forecasts a 2.5 percent decline in the sow herd and a 3 percent decline in pig production for the next year. Page | 9 Canada Livestock – Annual – September 2012 Source: Statistics Canada Data released by Statistics Canada on July 1st show larger overall hog inventories and an increased sow herd which presented for the first time in seven years a positive growth of 1 percent. These trends are more reflective of developments taking place during the first half of 2012, when recovery seemed to be well underway in the sector. Post estimates that this trend will change in the latter part of 2012. Post expects the sow herd will see another drop to 1.165 million head into 2013, which in turn will translate into a reduced pig production. The diminished demand in the United States for Canadian feeder hogs is going to impact primarily the feeder hog export provinces of Manitoba and Ontario, whereas Quebec, which is Canada's primary pork producing province, will be minimally impacted since their exports of live hogs are virtually negligible. Live Hogs Exports to Decline Similar to the situation in the cattle sector, 2012 is a year of two stories for hog producers. During the first half of the year, exports of live hogs picked up marginally, confirming a stabilizing trend started in 2011. The picture changed in the second part of 2012, with the prospects of high feed prices and reduced demand for feeder hogs. Post estimates that overall hog exports in 2012 will be 5.5 percent lower than in 2011, and forecasts an additional drop of 7 percent for 2013. Only an abundance of feed wheat and barley, which are the substitutes for corn in Canada, could break this trend. If poor weather is experience during the fall harvest and an otherwise good crop is downgraded, there may be a break in the trend. Page | 10 Canada Livestock – Annual – September 2012 Source: Global Trade Atlas / *Post estimate PORK: NOTE: "NEW Post" data reflect author's assessments and are NOT official USDA data Methodological note: “NEW Post” data take into account the 2011 Agriculture Census and therefore are not directly comparable with the “USDA Official” data CANADA 2011 2012 2013 Meat USDA NEW Post USDA NEW Post USDA NEW Post SWINE Official Data Data Official Data Estimates Official Data Estimates Slaughter (Reference) 21,269 21,269 21,300 21,200 0 21,100 Beginning Stocks 45 44 40 63 0 43 Production 1,770 1,797 1,775 1,790 0 1,775 Total Imports 204 204 215 240 0 225 Total Supply 2,019 2,045 2,030 2,093 0 2,043 Total Exports 1,197 1,197 1,175 1,250 0 1,195 Total Dom. Consumption 782 785 815 800 0 810 Ending Stocks 40 63 40 43 0 38 Total Distribution 2,019 2,045 2,030 2,093 0 2,043 Foreign Demand Continues to Support Pork Production With two thirds of the Canadian pork production being exported, the industry relies on demand from foreign markets, which seems to have been exceptionally good during the current year. Given the existing slaughter capacity, pork production is only a function of the availability of slaughter hogs. A lower pig crop in both 2012 and 2013 will result in a proportionally lower pork production, as the Page | 11 Canada Livestock – Annual – September 2012 prospect of high feed prices will not encourage increased hog weights to compensate for the reduced slaughter. Source: Statistics Canada / Post *estimate **forecast Per capita consumption of pork in Canada seems to have stabilized. For 2013, Post forecasts a consumption level of almost 21 kilograms carcass weight equivalent, similar with the levels in recent years. Per capita consumption is not likely to increase, as each year the population grows and pork has not managed to climb in popularity among proteins, despite sustained promotion by the industry. Pork Exports to Come Down after Peak Year The current year has been exceptionally good for Canadian pork exports. Despite the continued strength of the Canadian dollar, Post estimates total annual exports at 1.25 million metric tons (MT), a level never reached before and which is likely to remain hard to match in the near future. Based on lower pork production, Post forecasts a 4 percent decline in exports for 2013. Page | 12 Canada Livestock – Annual – September 2012 Source: Global Trade Atlas / *Post estimate **forecast In 2012, Russia was the driving market behind increased exports, with a 77 percent boost in volume during the first half of the year compared to the similar period in 2011. Other Asian markets, like China and Hong Kong, also contributed to the export trend. Interesting to note is that sales to the South Korean market have dropped by one third, returning now to their pre- FDM (foot and mouth disease) levels as the country is recovering from the outbreak. Canada: Pork Exports, January - June (metirc tons, CWE*) Quantity % Market Share % Change 2010 2011 2012 2010 2011 2012 2012/2011 World 577,140 577,209 612,925 100.00 100.00 100.00 6.19 United States 184,830 175,492 177,797 32.03 30.40 29.01 1.31 Russia 57,214 70,695 125,116 9.91 12.25 20.41 76.98 Japan 146,857 127,461 118,893 25.45 22.08 19.40 - 6.72 China 9,251 31,232 38,269 1.60 5.41 6.24 22.53 Korea South 28,825 55,532 37,716 4.99 9.62 6.15 - 32.08 Australia 27,201 20,291 21,619 4.71 3.52 3.53 6.55 Mexico 21,431 20,084 18,834 3.71 3.48 3.07 - 6.23 Philippines 23,473 17,673 17,396 4.07 3.06 2.84 - 1.57 Taiwan 10,335 12,981 10,654 1.79 2.25 1.74 - 17.93 South Africa 4,158 5,708 7,453 0.72 0.99 1.22 30.58 Hong Kong 22,004 5,651 6,932 3.81 0.98 1.13 22.67 New Zealand 4,719 5,724 3,989 0.82 0.99 0.65 - 30.30 All other countries 36,842 28,685 28,257 6.38 4.97 4.61 -1.49 Source: Global Trade Atlas / *Conversion to carcass weight equivalent at 1.3 Page | 13 Canada Livestock – Annual – September 2012 With additional pork supplies going into the export markets and a stable domestic demand, imports have had to make up the difference. For 2012, Post estimates pork imports at 240,000 MT, up almost 18 percent compared to the previous year, with the United States as major supplier. For 2013, Post forecasts a 6 percent decline in imports to 225,000 MT, a volume closer to historical levels. Canada: Pork Imports, January - June (metirc tons, CWE*) Quantity % Market Share % Change 2010 2011 2012 2010 2011 2012 2012/2011 World 89,949 95,773 114,509 100.00 100.00 100.00 19.56 United States 88,411 92,879 108,766 98.29 96.98 94.98 17.10 Chile 1,070 1,333 1,628 1.19 1.39 1.42 22.11 Netherlands 0 62 1,116 0.00 0.06 0.97 1706.73 Denmark 22 546 1,070 0.02 0.57 0.93 96.04 Germany 0 0 646 0.00 0.00 0.56 ∞ All other countries 446 953 1,283 0.50 1.00 1.12 34.63 Source: Global Trade Atlas / *Conversion to carcass weight equivalent at 1.3 Page | 14
Posted: 21 September 2012

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