Sep 20, 2010 by Lee Hart

Beef producers headed for easy street

(To be honest, sometimes I throw out a tiny misleading headline like that,
just to catch people’s attention.)

The point is, I just read Jerry Klassen’s beef market column
which will be appearing in the early October issue of Grainews, (apparently I
have to read it, that is part of my job), but aside from being a generally more
positive outlook on the beef market ahead, I am always surprised by the various
factors that affect the price of beef (or any ag commodity, for that matter).

And I should know this stuff. Over the years I have sat
through (dozed through) dozens of market outlook presentations. Jerry sends his
column in by email, but if he was speaking to a crowd, like other market
analysts, he would probably have a nice power point presentation, with many graphs
and charts that would show how a particular influence on the market has trended
since Christ as a baby. And sometimes these analysts have charts with more
numbers on them than a Los Vegas bookie sheet, and it is all supposed to mean
something. (I always get a kick out of it too, when the presenter throws up one
of these bzillion number slides and says ‘you probably can’t see this in the
back’ – no kidding, you can’t read it if your anywhere past the third row – but
that is another comment for another day).

Back to my point about Klassen’s column – yes the world
recession had a big impact on the beef industry in Canada, but often I don’t
think about the details. The news is all about world banks and multinational
corporations folding and billions and trillions spent on bailouts – all this
big scale stuff.

But fact is, the price that Bob Rancher gets for a fall calf
at the auction mart in Assiniboia, Sask., for example, so much depends on
whether Joe Blow in the US has a job or doesn’t. If he doesn’t have a job, he
and the family likely stay home and open a can of tuna for dinner. If he keeps or
finds a lower income job they may eat once in a while at McDonalds, and if it
is a little better job they might go to The Keg. It is all those individual
buying or eating habits that ultimately affect the price of beef here. And I
don’t often stop to think about that.

Klassen describes a bit of the increasing beef consumption
due to reduced unemployment rates. There is a five per cent increase in the
spending on away-from-home food – more eating out – and restaurant receipts are
up too just because summer holidays are over and more business people are
traveling again. A bunch of little things that burger by burger, or steak by
steak make a difference to this North American market.

I’ve read too, for the mustard growers in Canada (and maybe the beef
producers too), if the economy is in a slump, fewer people go to
baseball and football games, so they eat fewer hotdogs with mustard.

With higher unemployment, fewer people buy new cars,
and that impacts the amount and value of beef hides needed to make leather
seats. If the packer is getting less money for hides, that’s less money paid
back through the system to the producer.

North American beef production continues to contract with no
sign of expansion, and there are all these little signals about increasing beef
consumption, so overall that bodes well for prices. One reference Jerry made,
which was a bit surprising, concerned expected increases in feed grain prices.
I thought with all this late, wet fall there might be all kinds of cheaper feed
grains, but maybe not, and maybe Canada isn’t a big enough producer to make a
difference. Of course, I often figure, too, if it is raining on my street it is
raining everywhere in the world, and that isn’t always the case. I will have to
keep reading Jerry’s column to see how this plays out. It is just like a soap
opera.

In the meantime I think the message for all true Canadians
is keep your job, eat more at The Keg, go to sports events and have a hot dog,
and buy a car with leather seats. It is the least I/we can do for Bob Rancher
at Assiniboia.

-30-

Lee Hart

Lee Hart


Lee Hart is a long-time farm writer, and honorary member of the Alberta Institute of Agrologists, with many observations on the agriculture industry, who never hesitates to admit he is wrong (should that ever happen.)


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