This year has probably gone better than most cattle producers in Alberta expected.
“We started out dry and in a drought, and conditions were a concern early in the year,” said Brian Perillat, manager and senior analyst with CanFax. “But we worked through it and we’ve come full circle.
“We’ve got really ample feed supplies and we’re probably in a better standpoint than we’ve been in for three years.”
A large amount of feed barley has lowered costs for both producers and feedlots, but culling has still been high, and the herd has still been shrinking.
“We’re close to the smallest cow herd in 30 years,” said Perillat. “That’s been a continuing challenge. We continue losing beef cows.”
That trend is expected to continue but the province’s herd may shrink less than initially anticipated.
“Maybe with these feedstocks, guys will cull less and we can keep a few more heifers around,” he said.
Many producers have already revised their feeding programs, he added.
“Last year, you were basically forced to because of the price of hay and the lack of it. You were forced to move to a grain- and straw-based diet,” said Perillat. “More guys put up silage. Silage crops were really good this year.”
Another plus has been that calf prices have continued to be relatively strong. There were concerns that high feed costs earlier in the year would send more calves to market and push down prices. But that didn’t happen.
“They’ve held on relatively strong, similar to where they were a year ago,” said Perillat. “For a lot of producers, given reasonable herd management, there’s a little bit of profit in the cow-calf sector this year. It’s not going to be huge, but not big losses by any means.”
But if grain prices are low, does that mean mixed farmers suffer?
Perillat isn’t sure, but has some ideas.
“What we’ve seen across the last few years is that we don’t have as many mixed farms,” he said. “The cattle operations have got bigger, or the grain guys have got bigger and some of the grain guys ditched their cattle operations years ago.
“We still see some of the smaller mixed guys leaving one or both of those operations.”
And while most are profitable, it’s a far cry from the 2014-15 period, when producers were selling calves for $3 a pound, and feed costs were a lot more manageable.
“They got some pretty big profits — several hundred dollars per cow,” said Perillat. “Now when we’re talking profits, it’s $100 a cow or less.
“It just takes some of the enthusiasm out of it a little in terms of the labour and risk involved in the cow-calf sector.”
Calf prices have held up fairly well from the spring, and calves are still selling at about $2 a pound.
“Guys who use tools like price insurance or other things like that were able to capitalize on marketing earlier this year,” he said.
Producers have been able to restock their feed supplies because of lower prices, so most should be well stocked going into 2020.
Feedlots, however, have struggled a bit.
“There has not been a lot of profitability in the feeder sector this year,” he said. “Starting last year, calf prices were quite strong. Early in the year, we saw our basis levels weaken off. The last few years, Alberta cattle prices have been relatively strong compared to the U.S.
“This spring, we saw some major weaknesses in the local markets. Feedlots started losing money through the first quarter of the year.”
Losses increased during the summer, and feedlot owners are now losing a couple hundred bucks a head, he said.
Lower feed costs have helped a bit, but the fed cattle markets are disappointing.
“We’ve produced more cattle in Western Canada despite our cow herd shrinking, from the feedlot’s perspective,” he said.
Capacity has increased, with some new feedlots being built while others have expanded. That’s one of the reasons why the sector is currently keeping more feeder calves in Canada, or importing calves from the United States.
The feedlot sector has slowed a little in terms of what it is paying for calves.
“Last year, it was paying pretty lofty prices relative to market expectations; it kind of lost money,” he said. “This year, it’s dialed it in a little bit, and although prices are similar to a year ago, feed costs are lower so hopefully they are set up for a better chance of making money next year.”
Beef demand is still up globally, and Canada is finishing and processing more cattle, which are all positives for the sector, he added.