Closure of the border to Canadian cattle imports continues to hurt packers financially. The absence of Canadian fed cattle and cull cows coincides with tighter than expected supplies of both categories in the U.S. The result is more reduced operating hours at slaughter plants and worker layoffs. Third largest beef processor Swift & Company last Monday laid off 84 people, 15% of the workforce at its Nampa, Idaho, plant. It cannot obtain enough animals to support full production, it says. The plant can kill 1100 head per day.

Shapiro Packing, Augusta, Ga., has laid off half its 600-person work force and reduced its daily kill to 450 per day. It can kill 1500 head per day. Other cow slaughterers are running well below capacity as well. There’s a possibility the border may reopen to live cattle imports by late May. It’s not likely to reopen any earlier than that, say observers. So packers face at least two more months of reduced fed and non-fed cattle supplies.

Swift’s Nampa plant kills a mix of fed and non-fed cattle. So it is doubly impacted by the closure. It has been taking every step possible to preserve jobs and has been operating on a reduced schedule for weeks, say general manager Doug Pageler. The whole industry has been operating at approximately a 12% lower level than the same period last year. A key factor is the inability of U.S. processors to access Canadian cattle, which have been priced at between $275 and $400 less per head than domestic cattle, he says.

Cow killers in most parts of the U.S. are operating at sharply reduced levels. Some are at only 50% of normal production while others are running only 3 or 4 days per week. Numbers appear tightest in the Southeast, hence Shapiro’s cutback. Kill data bear this out. Cow slaughter in the nine weeks to March 6 totaled 922,400 head, down 13% or 141,300 head from the 1,063,700 head for the same nine weeks last year. That’s 15,700 fewer cows slaughtered per week. It’s also an average of 102,488 cows per week, compared to an average of 114,811 cows per week for all of 2003.

One reason for the reduced kills is that cow slaughter in 2003 was unexpectedly higher than the year before. It totaled 6.085M head, compared to 5.758M head in 2002 and 5.775M head in 2001. 2003 had 53 weeks. But the total still indicates that processors handled a lot more U.S. cows after Canadian cow imports halted on May 20. The U.S. imported 1M slaughter cattle from Canada in 2002, 756,000 fed cattle and 319,000 cows and bulls. It imported 389,915 slaughter cattle Jan 1 to May 20 last year. This included 91,922 cows and 16,326 bulls.

Another reason is that overall cow numbers are down after another year of liquidation. Beef cow numbers on Jan 1 totaled 32.86M, down 0.4% from year earlier. Dairy cow numbers totaled 8.99M, down 2%. Herd rebuilding is still to begin in the U.S. So producers have not retained sufficient numbers of heifers to release older cull cows. In addition, the prospect of better grass conditions this spring has further held back cows.

Canada is likely to export about 500,000 feeder cattle in the 12 months after the border opens. That’s what Canadian market watchers believe will be the number. It’s half the number that some U.S. analysts forecast (as reported in CBW, March 15, 2004). There will be two major factors to constrain feeder exports, say the Canadian sources. First, feed costs in western Canada are much cheaper than in the U.S. Alberta cattle feeders currently pay C$130-140 per tonne for barley. U.S. corn prices are more like C$170 per tonne, they say. Putting it another way, costs of gain in Canada are C$60-100 per head cheaper than in the U.S.

Not everyone in Canada is broke, says one source. Feeding will take place where feeding is cheap. There will be many more fed cattle than feeders going south, he says. He predicts a record number over the first 12 months the border is open, with the most occurring from August through February 2005. Numbers will likely average 15,000 head per week (780,000 over 12 months), with less until August and more after that, he says.

The second factor is lack of trucking capacity. It has been seriously reduced since May 20 last year, says Dennis Laycraft, executive vp of the Canadian Cattlemen’s Assn. This will limit the number of cattle overall going south until capacity is rebuilt, he says.

As for when the border might reopen, the comment period on USDA’s rule ends April 7. USDA might take a minimum two weeks to complete a final rule. It will take another 2-4 weeks for inter-agency approval. So the border might reopen on May 20, say some observers. That would be exactly one year since USDA closed the border after Canada announced its first home grown BSE case.

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