A new report from the Alberta Livestock and Meat Agency (ALMA) says the cattle and hog sectors face challenges, but their economic prospects over the next decade ARE positive.
The report predicts there will be a modest increase in the provincial cattle herd, partly because producers are “cautious” about additional investments.
“The rapid improvement in the equity position is a double-edged sword, with some producers choosing to exit the industry while others are investing — although the extent and pace of exit are likely tempered by tax considerations,” states the report prepared by Informa Economics.
The beef sector has been challenged by country-of-origin labelling laws, higher feed costs and BSE in the past decade, said Clint Dobson, ALMA’s senior manager of research and policy.
But the market is sending positive signals, he added.
“Global production of beef has slowed and export opportunities continue with strong demands in markets such as China which will remain important factors.”
World hog production is growing slower than it has historically while demand remains strong. “In Alberta, the sector is still rebuilding from lost equity despite positive margins in 2014,” said Dobson.
The report estimates that producers have recovered just 30 to 40 per cent of the losses they suffered in the previous decade and forecasts only very modest growth in herd numbers.
“Producers are being cautious,” the report states. “They are very aware of increasing U.S. herds. No one expects growth over the next five years, as farmers do not have the equity to put into their operations, and there is little, if any, interest from the banking sector in extending credit. If margins remain positive, it will likely be five to seven years before organic growth occurs.”
The study also looked at the economic impact the sectors have on the provincial economy.
“What is obvious is how important the cattle and hog sectors are to the provincial economy measured by direct and indirect impacts including sales, service, and purchasing trends,” said Dobson.
“The results show that the two industries combined contributed over $7 billion in GDP to Alberta’s economy and employs over 96,000 workers. The report projects that those totals will change to $11.5 billion in GDP and employ approximately 155,000 by 2025.”
However, labour availability was identified as a key challenge to expanding both sectors, Dobson said.
The full report and executive summary of Medium-Term Economic Outlook for Alberta’s Cattle and Hog Sectors can be found at alma.alberta.ca.