From Reuters Updates
* Cattle herd slips 1.3 percent
* High feed costs, smaller livestock exports hurt (Adds biofuels industry comment, paragraphs 12,13)
By Rod Nickel
WINNIPEG, Manitoba, Feb 16 (Reuters) - Canada's hog and cattle herds shrunk to their smallest levels in more than a decade as the livestock industry reels from rising costs and export barriers, Statistics Canada said on Tuesday.
The country's hog herd fell 4.5 percent year over year to 11.63 million head on Jan. 1, the smallest it has been in 12 years. The cattle herd slipped 1.3 percent to a 15-year low of 13.015 million head.
The reduction in cattle is due to beef cattle ranchers downsizing their herds, while the supply-managed dairy cattle herd changed little year over year.
Ranchers and hog farmers have suffered from a surge in feed grain prices since 2007 due to increased ethanol demand, Statscan said. The appreciation of the Canadian dollar and implementation of the U.S. country-of-origin meat labeling law last year have also cut sharply into livestock exports.
Given the circumstances, it's surprising hog farmers aren't cutting back more quickly, said Andrew Dickson, general manager of the Manitoba Pork Council. Farmers are earning C$127 ($122) per finished pig, well below the break-even level of C$140, Dickson said.
Farmers actually need about C$160 per slaughter pig to account for their average debt load, Dickson said.
Despite the downsizing, farmers continue to keep hog packer Maple Leaf Foods (MFI.TO) in Brandon, Manitoba, well enough supplied to run two production shifts as the U.S. labeling law discourages U.S. packers from buying foreign livestock.
Feed companies, however, have suffered from farmers slashing herd sizes, Dickson said.
Downsizing of the beef herd will likely continue into 2011 or 2012, said Scott McKinnon, market analyst for Canfax in Calgary, Alberta.
"Obviously, we have an over-capacity in the feedlots and packing plants and that's going to play a part," he said. "Nothing is going to change until we can stimulate demand."
The industry needs to see a global economic recovery that would revive demand for beef, McKinnon said.
The problems facing the livestock industry are many, but rising biofuels production is not one of them, said Gordon Quaiattini, president of the Canadian Renewable Fuels Association. Some biofuels production uses corn and wheat, the same grains farmers feed to livestock.
"The report is factually wrong," he said. Grain prices spiked after 2007 with crude oil, not because of additional demand from the biofuels sector, he said, adding that prices have since retreated despite record biofuels production.
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