030725 Desperate Times for Canada's Beef Industry

Winnipeg, Manitoba - Desperate times in the Canadian cattle industry are spurring desperate measures.

Devastated by export bans on their cattle and beef in the wake of the discovery of a single case of mad cow disease, Canadian feedlot owners are going as far as organizing ultra-low-price sales of hamburger in supermarket car parks to try to get rid of their products.

"That's a very untraditional, desperate way of marketing, but it worked," said Rick Paskal, who raises cattle near Picture Butte, in Alberta's "feedlot alley."

During the past few weeks, Paskal and his counterparts have hired tractor trailers to haul loads of 10-lb (4.5-kg) frozen logs of ground beef to car parks in several western cities, selling them as quickly as the trucks can be unloaded at one Canadian dollar (75 U.S. cents) a pound, or about a third of the usual store price.

The Canadian beef industry ground to a halt on May 20, when one case of mad cow disease was reported in Alberta. Foreign markets, which buy 60% of the country's cattle and beef, slammed their doors to imports from Canada.

The industry estimates it lost C$550 million ($410 million) in the first month after the import bans were set up.

A government investigation has failed to turn up any other cases of bovine spongiform encephalopathy, or mad cow disease, but it has also failed to definitively find out how the lone animal got the brain-wasting disease. There are few signs the bans will end soon, and with a population of fewer than 32 million people, Canada can't eat its way through its beef stocks, given recent weekly production levels of 31 million pounds.

Paskal says there is a "tidal wave" of held-back animals waiting in feedlots, gaining weight.

Cattle prices have crashed to a mere 30% of what they were before the bans, said analyst Kevin Grier of the George Morris Center, an agricultural think tank.

"I believe that it's moved from being a crisis to being a catastrophe in terms of its impact on the industry."

PRICES LOW ENOUGH "TO MAKE ANYBODY CRY"

Feedlots -- units where cattle are kept indoors and made to put on weight rapidly -- cannot wait any longer to sell their cattle, Grier added, even though prices have sagged to 35 Canadian cents a pound from more than C$1 before the mad cow case.

"It's enough to make anybody really cry, literally," he said.

Paskal sold some cattle this month at 45 Canadian cents a pound -- a loss of C$200 per animal, even with help from a new government aid package worth some C$460 million.

"You've got to look at these things like a box of ripe apples: they're ready now," Paskal said. "And the longer that you keep them, they're going to start going bad on you."

Canadians mainly eat the prime cuts of beef, leaving processors with freezers full of the lower-cost cuts and reluctant to add to their stocks.

Slaughter numbers have perked up recently, with 46,000 head processed during the week of June 28, up 47% from the average rate since the bans went up. That's still only a third of typical levels for this time of year.

Strong consumer demand domestically has kept retail prices from plunging, Grier said. And stores are reluctant to drop prices, fearing a consumer backlash to the eventual increases once beef exports resume.

"Retailers know what it's like once you start selling low, low, low. They know what chaos it creates in the meat case."

Paskal said he holds little hope that borders will reopen soon, adding it was inevitable that some feedlots would fold.

Feedlots are not giving up, however, and want to target more domestic stores with their cheap hamburger campaign.

"We just have such a hard time sitting back and doing nothing," Paskal said.

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