Report Highlights:

The first year of a long awaited cattle expansion cycle will be marked by a continued decline in live exports and a modest rise in domestic slaughter, both trends reflective of a more competitive beef packing industry supported by the weak Canadian dollar. The hog sector stays steady on a path of moderate growth, with increased live exports and domestic slaughter, while pork exports are estimated to reach a record level.

CATTLE and BEEF

CANADAAnimal Numbers CATTLE ('000 head)

2014

2015

2016

USDA Official Data

NEW Post Data

USDA Official Data

NEW Post Estimates

USDA Official Data

NEW Post Forecast

Total Cattle Beg. Stks

12,220

12,220

11,920

11,920

11,930

12,100

Dairy Cows Beg. Stocks

959

959

953

953

950

950

Beef Cows Beg. Stocks

3,903

3,903

3,831

3,831

3,800

3,850

Production (Calf Crop)

4,606

4,606

4,400

4,400

4,375

4,410

Total Imports

45

45

35

36

40

40

Total Supply

16,871

16,871

16,355

16,356

16,345

16,550

Total Exports

1,245

1,245

1,025

832

925

650

Cow Slaughter

448

448

385

380

350

375

Calf Slaughter

248

248

215

223

200

200

Other Slaughter

2,471

2,471

2,300

2,297

2,200

2,425

Total Slaughter

3,167

3,167

2,900

2,900

2,750

3,000

Loss

539

539

500

524

535

540

Ending Inventories

11,920

11,920

11,930

12,100

12,135

12,360

Total Distribution

16,871

16,871

16,355

16,356

16,345

16,550

The trend projected in the previous report has not changed, and 2016 will mark the first year of a long awaited expansion cycle in the Canadian cattle sector. Inventories on January 1 are estimated to be 1.5 percent above the 2015 level on the same date, and an additional 2 percent growth is forecast to take place by the end of 2016.

Exports of live cattle are estimated to drop by another 22 percent in 2016, after an even more significant decline of 33 percent in 2015, with all cattle categories being impacted by this trend. The reason behind such a drastic development is the continued depreciation of the Canadian dollar, which intensified towards the end of 2015, and which translated into a more competitive beef packing industry. This allowed slaughter plants to offer higher prices for fed cattle, which, in turn, allowed feedlots to bid more aggressively on feeder cattle. The end result was that cattle, which would normally have been exported to the United States, remained in Canada to be fed and slaughtered.

From the beef packing industry perspective, the weaker Canadian dollar arrived at a fortunate time, as the slaughter plants in Western Canada were running at increasingly lower volumes below capacity, with the risk of threatening their longer term viability. The boost received from the depreciated dollar is expected to continue throughout 2016, thus allowing beef packers to keep cattle inventories in the country for feeding and slaughter.

Post now estimates that 2016 cattle slaughter will increase by 3.5 percent, after an 8.5 percent decline in 2015. Even with a higher slaughter volume, increased heifer retention is expected to continue in 2016, as it usually happens during a phase of expansion. Estimated at 375,000 head, cow slaughter will be higher than normally expected, as industry sources indicated that there were increased inventories of cows on feed at the end of 2015 which will all go to slaughter during 2016.

CANADA Meat BEEF and VEAL

2014

2015

2016

Data

USDA Official

NEW Post Data

USDA Official Data

NEW Post Estimates

USDA Official Data

NEW Post Forecast

Slaughter (Reference)

3,167

3,167

2,900

2,900

2,750

3,000

Beginning Stocks

27

27

33

33

30

30

Production

1,099

1,099

1,025

1,050

975

1,085

Total Imports

284

284

290

280

285

270

Total Supply

1,410

1,410

1,348

1,363

1,290

1,385

Total Exports

378

378

375

391

370

420

Total Dom. Consumption

999

999

943

942

890

935

Ending Stocks

33

33

30

30

30

30

Total Distribution

1,410

1,410

1,348

1,363

1,290

1,385

Post estimates beef production to reach 1.085 million metric tons in 2016, or 3 percent above the 2015 level, as carcass weights are expected to marginally decline. The 2015 beef production is now estimated higher than the original forecast, as animals got heavier throughout the year. According to Canfax data, the average steer carcass weight in 2015 was 3.6 percent higher than the average carcass weight one year earlier. However, from January to December 2015, carcass weights increased by 7.5 percent, offsetting to a large extent the decline in slaughter volumes.

At 420,000 metric tons (MT), beef exports in 2016 are now estimated 30,000 MT larger than in 2015, strongly supported by the depreciated Canadian dollar. The United States remains by far the number one export destination with 76 percent of the share, with China rising to a distant second market with 10 percent of market share. China and Hong Kong combined attracted more than 13 percent of Canadian beef exports in 2015, up from 10 percent during the previous two years.

Beef imports will decline in 2016 by an estimated 10,000 MT compared to 2015, and as will domestic consumption, which will likely reach one of the lowest levels in decades, both in total volume and on a per capita basis.

CANADA: Total Beef Exports (Quantity in metric tons, CWE*)

1995

2000

2005

2010

2013

2014

2015

World

263,682

563,090

596,307

523,073

332,491

378,315

391,199

United States

248,232

469,043

515,797

414,678

255,740

286,213

298,462

China

47

85

0

2

7,869

9,137

39,319

Mexico

197

43,712

57,125

49,437

16,030

22,259

18,241

Japan

8,871

22,155

7

17,932

14,950

20,831

13,341

Hong Kong

116

919

13,035

21,128

26,234

27,428

11,759

Saudi Arabia

0

87

25

7

1,908

1,175

3,173

All other countries

6,219

27,089

10,318

19,889

9,760

11,272

6,904

Export Market Shares

United States

94.1%

83.3%

86.5%

79.3%

76.9%

75.7%

76.3%

China

0.0%

0.0%

0.0%

0.0%

2.4%

2.4%

10.1%

Mexico

0.1%

7.8%

9.6%

9.5%

4.8%

5.9%

4.7%

Japan

3.4%

3.9%

0.0%

3.4%

4.5%

5.5%

3.4%

Hong Kong

0.0%

0.2%

2.2%

4.0%

7.9%

7.3%

3.0%

CANADA: Total Beef Imports (Quantity in metric tons, CWE*)

1995

2000

2005

2010

2013

2014

2015

World

268,309

290,280

151,000

243,444

295,278

283,922

280,017

United States

146,221

128,553

60,360

175,237

226,568

179,407

162,585

Australia

56,038

55,268

11,395

11,794

24,301

48,238

56,577

New Zealand

60,192

29,602

42,265

31,576

21,543

23,138

35,911

Uruguay

157

34,493

27,144

15,734

17,466

26,015

19,066

Brazil

2,085

4,125

7,383

7,415

4,114

5,657

2,416

Argentina

3,439

38,168

2,315

1,625

899

220

0

All other countries

177

71

138

63

387

1,247

3,462

Import Market Shares

United States

54.5%

44.3%

40.0%

72.0%

76.7%

63.2%

58.1%

Australia

20.9%

19.0%

7.5%

4.8%

8.2%

17.0%

20.2%

New Zealand

22.4%

10.2%

28.0%

13.0%

7.3%

8.1%

12.8%

Uruguay

0.1%

11.9%

18.0%

6.5%

5.9%

9.2%

6.8%

Brazil

0.8%

1.4%

4.9%

3.0%

1.4%

2.0%

0.9%

HOGS and PORK

CANADAAnimal Numbers SWINE ('000 head)

2014

2015

2016

USDA Official Data

NEW Post Data

USDA Official Data

NEW Post Estimates

USDA Official Data

NEW Post Forecast

Total Beginning Stocks

12,940

12,940

13,165

13,165

13,300

13,250

Sow Beginning Stocks

1,191

1,188

1,195

1,195

1,200

1,215

Production (Pig Crop)

27,078

27,078

27,850

28,500

28,000

29,000

Total Imports

3

3

5

6

5

5

Total Supply

40,021

40,021

41,020

41,671

41,305

42,255

Total Exports

4,960

4,960

5,550

5,773

5,050

6,225

Total Slaughter

20,498

20,498

20,750

21,250

21,200

21,300

Loss

1,398

1,398

1,420

1,398

1,455

1,400

Ending Inventories

13,165

13,165

13,300

13,250

13,600

13,330

Total Distribution

40,021

40,021

41,020

41,671

41,305

42,255

The general outlook for the hog sector remains unchanged from the previous report, as the industry continues on its path of moderate growth. However, the depreciation of the Canadian dollar has helped both producers and packers, making exports of live hogs and of pork more competitive. Therefore, Post now expects that the magnitude of growth in exports of hogs and pork to be slightly larger than originally estimated.

Post forecasts sow inventories for January 1, 2016 at 1,215,000 head, or nearly 1.7 percent larger than on the same date in 2015. This growth is primarily supported by expansions in Quebec and Saskatchewan, because, despite increased opportunities for growth fueled by the weaker dollar, lending conditions and the environmental regulations in Manitoba remain a major constraint to a more robust expansion in the hog sector.

Post now estimates exports of live hogs at 6,225,000 head in 2016, up nearly 8 percent from the level reached in 2015. It must be noted that the 2015 hog volume now stands at 5,773,210 head, more than 16 percent larger than in 2014, as trade was driven by the continuing depreciation of the Canadian dollar.

Most of the growth in live hog exports will come from feeder hogs, as western provinces, especially Manitoba, but also to a lesser degree Ontario in the east, are expected to increase their shipments. Increased exports of slaughter hogs will be primarily fueled by Ontario, as the provincial sector continues to struggle with a reduced slaughter capacity.

CANADA Meat SWINE

2014

2015

2016

USDA Official Data

NEW Post Data

USDA Official Data

NEW Post Estimates

USDA Official Data

NEW Post Forecast

Slaughter (Reference)

20,498

20,498

20,750

21,250

21,200

21,300

Beginning Stocks

65

65

76

76

80

70

Production

1,805

1,805

1,840

1,890

1,880

1,900

Total Imports

214

214

220

216

210

210

Total Supply

2,084

2,084

2,136

2,182

2,170

2,180

Total Exports

1,218

1,218

1,210

1,234

1,210

1,250

Total Dom. Consumption

790

790

846

878

880

890

Ending Stocks

76

76

80

70

80

40

Total Distribution

2,084

2,084

2,136

2,182

2,170

2,180

Post estimates hog slaughter to remain nearly flat in 2016, after a 3.7 percent increase in 2015. In 2013, the Ontario slaughter capacity fell nearly 37,000 hogs per week with the closure of two plants. Some of the lost capacity was recovered, as one provincial packer increased its own capacity, and currently Ontario's slaughter capacity is estimated as 71,500 hogs per week, as opposed to 95,000 hogs per week three years ago. This situation has presented major challenges for the provincial hog producers as new markets had to be found for their finished hogs.

As indicated in our previous reports, the volume of Ontario hogs that cannot be slaughtered in the province is now shipped to three destinations: Quebec, Manitoba and exported to the United States. This arrangement is very likely to continue in 2016, although Post estimates that volumes of hogs moving to Quebec will decrease as that province increases its own hog production, while exports to the United Sates will increase, being supported by the weaker Canadian dollar.

Pork production in 2016 is now estimated at 1.9 million metric tons (MT), nearly unchanged from the 2015 volume of 1.89 million MT, as hog carcass weights are expected to remain flat. The 2015 pork production is almost 5 percent larger than the 2014 level, as both the number of hogs and the carcass weights increased in 2015.

While domestic pork consumption is expected to continue to increase in 2016 by a modest amount, after a significant surge of 11 percent in 2015, the bulk of Canada's pork production will continue to be exported. The depreciation of the dollar will keep fueling exports which are now estimated to reach 1.25 million MT in 2016, which would be the largest volume on record. The United States remains by far the top destination for Canadian pork, while the other major export markets like Japan, China, Mexico, South Korea, Taiwan and Hong Kong are expected to slightly increase their share in total Canadian pork exports.

At 210,000 MT, pork imports in 2016 are estimated to remain nearly flat compared to 2015, inhibited by the weak Canadian dollar, with the United States continuing to supply over 90 percent of this volume.

CANADA: Total Pork Exports (Quantity in metric tons, CWE*)

1995

2000

2005

2010

2013

2014

2015

World

366,189

659,814

1,083,686

1,159,196

1,246,000

1,218,131

1,233,916

United States

257,416

420,854

477,899

395,559

404,305

445,981

491,468

Japan

51,434

125,661

304,063

259,966

219,367

227,922

252,556

China

299

1,929

18,045

38,998

131,126

100,882

114,183

Mexico

1,894

17,049

45,565

61,858

66,151

80,114

101,674

Korea South

5,211

14,181

57,708

56,065

49,131

46,067

48,062

Taiwan

996

6,254

12,262

27,120

30,984

32,331

45,463

Philippines

311

4,714

10,105

48,634

46,495

27,787

32,175

Australia

3,973

13,496

44,304

50,595

36,847

30,906

31,810

Hong Kong

4,717

5,947

4,015

31,439

13,355

15,583

20,167

Chile

824

1,053

873

7,752

14,326

15,873

14,205

New Zealand

2,813

10,836

8,688

10,861

11,517

9,418

13,658

South Africa

2,524

334

4,096

7,539

8,914

1,863

9,267

Colombia

296

545

1,540

3,222

12,907

11,091

7,895

Russia

8,819

8,110

25,499

99,563

114,532

113,661

34

All other countries

24,662

28,851

69,024

60,025

86,043

58,652

51,299

Export Market Shares

United States

70.3%

63.8%

44.1%

34.1%

32.4%

36.6%

39.8%

Japan

14.0%

19.0%

28.1%

22.4%

17.6%

18.7%

20.5%

China

0.1%

0.3%

1.7%

3.4%

10.5%

8.3%

9.3%

Mexico

0.5%

2.6%

4.2%

5.3%

5.3%

6.6%

8.2%

Korea South

1.4%

2.1%

5.3%

4.8%

3.9%

3.8%

3.9%

Taiwan

0.3%

0.9%

1.1%

2.3%

2.5%

2.7%

3.7%

CANADA: Total Pork Imports (Quantity in metric tons, CWE*)

1995

2000

2005

2010

2013

2014

2015

World

31,119

67,759

139,445

183,377

220,392

213,666

215,830

United States

26,320

61,883

129,818

177,495

207,556

195,952

194,541

Germany

134

0

0

0

4,485

5,253

4,903

Poland

0

0

81

81

97

1,714

3,088

Denmark

4,443

4,809

6,814

1,332

1,696

3,181

3,001

All other countries

222

1,067

2,732

4,469

6,558

7,566

10,297

Import Market Shares

United States

85%

91%

93%

97%

94%

92%

90%

Germany

0%

0%

0%

0%

2%

2%

2%

Poland

0%

0%

0%

0%

0%

1%

1%

Denmark

14%

7%

5%

1%

1%

1%

1%