Industry experts have expressed worry that drought escalation and other extreme weather events has beef farmers in the U.S. and Canada thinning their herds in near-record numbers, which could lead to supply problems in the beef industry over the longer term.
According to the experts, the Farmers will increasingly struggle with profitability amid the unpredictable seasons as climate change makes drought, flooding and wildfires more common.
Harping on the development, Desmond Sobool, principal economist with Farm Credit Canada, said for the past few years, dry conditions and droughts in both countries have prompted farmers to reduce their herd sizes by sending more cattle to slaughter, which has resulted in increased production of beef products.
In his words, while this would normally drive cattle prices down, inflation and high demand mean prices are remaining elevated — and if there’s less supply in the future, that will drive prices up further, which could affect consumer prices as well.
Sobool said first, there was a drought in Canada in 2021, which meant pastures were reduced and farmers had to buy more expensive feed from the U.S., sending costs higher.
On his part, Stuart Smyth, associate professor in the College of Agriculture and Bioresources at the University of Saskatchewan averred that in 2021 Canadian farmers sold thousands of extra cattle in the fall to make up for a shortage in feed due to the impacts of extreme weather.
He said “People just had to take a huge hit that year”.
Smyth averred that the spring of 2022 was dry, in some areas just as bad as 2021, and farmers kept selling.
Now, there’s a drought in the U.S., and farmers there are facing the same problems, Sobool said.
According to the U.S. Department of Agriculture and Farm Credit Canada, more than two-thirds of the U.S. cattle herd is in an area affected by drought, leading to the largest contraction of the North American cattle herd in a decade.
Sobool stated that U.S. farmers have contracted their herds three years in a row, for a variety of reasons including the drought, adding that this has resulted in the lowest cow herd on record.
He explained that while this means more beef is being produced in the short term in both Canada and the U.S., it means supply will eventually go down as herds get smaller, and farmers will send fewer cattle to slaughter while they try to rebuild their herds.
He, however, opined that while it’s normal for production to fluctuate from year to year, this time something is different.
Records have it that when farmers reduce their herds and beef production goes up, prices for cattle go down, which in turn can soften prices along the supply chain. But, Sobool said because of inflation and continued high demand for beef, farmers are still seeing elevated prices for their cattle, further incentivizing them to reduce their herds.
He said “It’s not pushing down those prices like you’d normally see”.
He expressed pessimism that, that’s likely to remain the case, and could affect prices along the supply chain all the way to retail.
Sobool said since farmers can only contract their herds so much, eventually they will need to sell fewer cattle and rebuild the herd, which means less production in the short term — and that normally pushes cattle prices higher.
According to him, if Canada and the U.S. face more droughts in the coming months and years, farmers may struggle further. He said “It would be tough for the sector, that’s for sure”.
Meanwhile, Smyth believes that technology will be key to help farmers adapt to the unpredictability of extreme weather, but that requires investment from the government.
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