China’s seemingly insatiable demand for feed has kept livestock production costs high throughout the rest of the world. Feed costs have most recently fallen somewhat but they’ll continue to take a chunk of revenues from both cattle and hog producers over the next three months. However, profitability in the two red meat sectors is showing different outcomes. Margins are expected to be mixed for Canada’s cattle and hog sectors as finishers and feedlots struggle with rising feed costs in the short term.
In February, we identified African Swine Fever, feed costs and growing global demand for red meats as the three dominant forces impacting profitability of the Canadian red meat sectors. They are still exerting dominance, with the added uncertainty of weather-related impacts on global feed crops in 2021.
Hog sector to benefit from elevated hog prices
Prices should continue to improve over the outlook period from our February outlook forecasts. The average annual prices for each class of cattle and hogs through 2021 remain higher than 2020 prices. While most of this year’s prices are expected to also be higher than the five-year average, Alberta fed and feeder cattle will remain lower as backgrounders and feedlots find themselves sandwiched between high feed costs pushing up slaughter rates and packers buying cheaper cattle now for fall delivery.
Farrow-to-finish operators will continue to benefit from the strong rebound that started last fall. They have much to look forward to in the next three months including the upcoming barbecue season and the enhanced likelihood of reduced restrictions. One possible caution: lingering slowdowns in pork production can impact margins in eastern Canada.
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