Farm Credit Canada has released its 2023 outlook for beef and pork, with both being heavily affected by the current conditions.
Senior Economist Leigh Anderson points out that a rise in both cattle and hog prices is an outcome of recent weather events.
"We're basically saying that feed costs and demand strength lead to profit uncertainty. So right now we have very strong cattle prices, which is good news for the cattle sector, but the biggest uncertainty is a lot of producers, especially in Western Canada are going through a significant drought, which is weighing on their decisions to actually invest in their herds or replenish them. High feed costs and lack of pasture conditions have led to them actually, in many instances, culling or significantly reducing their herd sizes or reaching out to find feed availability for them."
"Same thing in the hog sector. The hog sector in North America is going through a very significant downturn right now. So they continue to face pressured margins right now. That's some bad news for the hog sector. Weather, of course, is a big factor going forward for what the actual feed sources will be available for coming into the winter months for feeding, especially for feed lots in the cattle sector. "
The reaction to the bad weather is similar to what was felt in 2021 during that drought, though some feedlots are more prepared this time around.
"The North American cattle herd is going through the same thing," said Anderson, "Kind of the reason why you're seeing such strong cattle prices is US herd sizes have also been shrinking as well, just given the drought conditions there. The good news for feedlots, they have been proactively sourcing feed relative to what they had during the 2021 drought, so they are gearing up for bringing in a lot of corn imports starting in September as our chart in our online blog post is showing for current sales."
Prices will also be determined by demand, which is still strong for beef while pork seems to be falling.
"Our data is showing that the demand for beef exceeds consumption levels right now, while pork kind of can struggle to get back to increasing consumer consumption," said Anderson, "Especially when you consider where retail pork prices have been, you would actually expect them maybe to consume a bit more relative to the prices of beef."
Future costs will be key to determining where beef and pork prices end up in the future.
"The future will really depend on where actual feed grain prices and feed production actually end up and how any economic downturn weighs on consumer's choices for red meat and for chicken consumption in Canada," said Anderson, "What their behavior will illustrate at retail."