Canadian cattle producers are receiving strong price signals to begin expanding their herds — but will that be enough to reverse the decline in the national herd?
Canfax’s research manager Brenna Grant thinks so, but not until next year.
“We are anticipating these prices that we’re currently seeing to stabilize, but the price signal for expansion will be there very strong this fall,” she said. “We’re expecting expansion to really kick into gear in 2015.”
The current focus for most producers is on rebuilding “equity that was lost over the last decade,” said Grant.
“Producers have been really cautious over the last five years,” she said. “There’s been a lot of better news, but it’s not necessarily good news.”
Grant saw some heifer retention in 2012 when calf prices were around $1.80 per pound. Prices are now north of $2 and “that’s a really strong signal to retain some heifers.”
“If we’re at the point where these high prices are here to stay, you want to be the one retaining heifers this year,” she said.
That’s what Clay Williams plans to do.
“Last year, we ran 20 head, and this year, we’re ramping up to 80 head,” said the Hanna-area producer, who farms with his parents and his wife Jesse.
The young couple has been buying heifers in the spring and selling them as bred heifers since starting their operation two years ago.
“We’re doing that again this year, but we’re planning to keep back enough for one or two bulls.”
As a new farmer, Williams has found strong cattle prices to be both a blessing and a curse.
“It’s a lot tougher to grow mostly because the price to either keep (bred heifers) back or buy them is high, and the price of land is high,” he said. “(But) you’re going to get good money for your calves in the fall.”
He’s optimistic, though.
“As long as the markets hold and our profit margins are good, it’s going to make it not too difficult to get into the business.”
New entrants have been as rare as decent profits for most of the post-BSE period. Alberta’s cow herd peaked at 2.2 million head in 2005, but the 2011 agricultural census found the herd had shrunk to fewer than 1.6 million cows — a 23 per cent decline in just a decade.
The number of producers fell even faster. In 2001, nearly 29,000 farms had cows on them. A decade later, that number had plunged by nearly 10,000. A few counties lost only 10 or 20 per cent of their cattle producers, but drops of 30 to 40 per cent were not uncommon. In Kneehill County (west of Olds) 254 farms reported having cattle in 2011 versus 756 a decade earlier.
Williams’ county (Special Area No. 2) lost a quarter of its producers.
“We saw a lot of good ranching land getting ripped up into farmland,” he said.
Williams said that “has as much to do with labour as it does money.”
“The reason people are leaving ranching for farming is the amount of work required,” he said. “The effort required to calve cows and continuously monitor your cattle is greater than it is to farm comparable acres.”
As people move away from the work required in ranching, herds will continue to decline, and pasture lands will continue to go to crops, he said.
“Most who break land have a complete herd dispersal.”
That makes it harder for newcomers like Williams to break into the business — but he’s in it for the long haul.
From the Canadian Cattlemen website:
A year of change
“Although the workload is higher, my wife and I enjoy raising cattle,” said Williams. “It’s as much a lifestyle as it is anything.”
While there may be an upward “blip” in cattle numbers in the July inventory report, Grant said she expects rebuilding the herd here and in the rest of Canada will be “a slow and steady climb.”
“The question is how quickly will producers respond to that change in circumstances?” she said.
“I really think that producers are going to be cautious, not just in Canada but in North America as a whole. This isn’t going to be something that’s super dramatic.”
No fast track
Even Williams, who says he “got in at the right time,” agrees it will be slow going.
“A lot of guys — us included — are having a really hard time balancing whether you keep (bred heifers) back or you sell them,” he said.
“If you don’t keep them, your herd is slowly decreasing in size, and you’re not growing the way you’d like to. To not sell them, you’re walking away from a significant amount of revenue.”
Their off-farm jobs — Clay is a drilling engineer with Husky Energy and Jesse is a botanist with Dow — “feed that investment that’s required to grow the farm.”
“It’s too tough to grow from zero to big in any amount of time, so with the second revenue, we can grow our farm a lot more significantly,” said Williams.
He said he and his wife hope to move away from the bred heifer market and into the cow-calf market with the goal of eventually making a living from the ranch.
“That’s the ultimate dream — to be able to farm 100 per cent,” he said. “But it takes a lot to grow a farm from nothing to that point.”