It isn’t a secret in the agriculture industry that cattle prices have been at historic highs over the past couple of years.
One of the driving factors for the high prices has simply been a shortage of beef.
The North American cow herd has been squeezed ever smaller by previously softer prices and then drought across a large area of the southern United States.
The high prices for feeder cattle has kept pressure on the cow herd as many producers have found better profits in selling replacement heifers to feedlots rather than retaining them to grow their herds.
When you analyze the current situation it comes down to a market where weather has been the main determining factor. We may not immediately think about weather affecting livestock markets as directly as it does grains, but the availability of feed for stock very much impacts the profitability of any stock sector.
And the weather pendulum swings dramatically and quickly.
It was only a year ago across large areas of Saskatchewan, and Manitoba that a rain hit in the last days of June which caused significant flooding. Roads, bridges, culverts were washed away in torrents of water.
Areas of communities such as Yorkton and Melville saw significant flooding of basements, such damage coming all too close on the heels of flooding in 2010 from torrential rains then too.
From the perspective of 12 months ago, the last thought on anyone’s mind was drought.
Crops were flooded out in places, and cattleman were working hard at keeping cattle on the move enough to keep ahead of generally lush pastures (at least where it was not drowned out in the low spots).
From the perspective of cattle producers, good prices and at least descent feed reserves made it a very good year.
There is a drought across most of the Prairies. There are reports coming out of Alberta of some producers already looking to sell off cattle early as grass pastures are suffering without rain. There is of course some added incentive to sell off at this point as cattle prices are still pretty good, so a forced sell will not hit the pocketbook as much as it could.
Granted there was some rain on July 4, but it will take a lot more than showers to kick start pasture growth, and to ensure a hay crop which can sustain cow herds through the winter ahead.
If the drought that trimmed the southern U.S. cow herd has indeed moved north, what it will do is sustain the higher prices of the current cattle cycle for longer than may have been anticipated.
But the downside will be the fact that Canadian producers may not be able to enjoy the high prices as much if they are forced into a sell off because of a drought.
The situation may not yet be dire, but each day without significant rain draws the cattle sector closer to a very difficult cult year in terms of cattle feed. A year ago we lamented the rains, but now they are most certainly needed, just not to extremes.