Packing plants back on track, but future uncertain

With a huge backlog of animals to work through, cattle groups are fearful of what comes next

Alberta’s beef-packing plants are working at or near full capacity but the crisis is not over yet, say cattle leaders.

“Our processing capacity has continued to increase over the past few weeks and cattle prices have been relatively strong, but markets are still vulnerable to a disruption in the processing plants,” Alberta Beef Producers chair Kelly Smith-Fraser said in a virtual town hall in mid-June.

The most recent fed cattle numbers indicate a backlog of around 130,000 head of cattle ready to be slaughtered. The Cargill plant at High River is now at 90 per cent of capacity and the JBS plant at Brooks and Harmony Beef at Balzac are close to capacity. Eastern Canada is now operating at 110 per cent capacity, while U.S. processing capacity is at about 95 per cent. Labour continues to be the biggest constraint.

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The federal and provincial government have created a $43-million ‘set-aside’ program in Alberta to cover the costs of feeding cattle waiting to be processed, but Alberta Beef Producers and other cattle groups say the sector needs additional support. ABP has asked the provincial government to expand support to the cow-calf and backgrounding sectors. Cattle groups also want government to provide funding to reduce the cost of the Western Livestock Price Insurance premium for calf and feeder cattle insurance, and eliminate the reference margin limit on AgriStability, to make it more effective for cow-calf producers.

“Despite the assurances from the (provincial agriculture) minister that he is working to improve risk management programs and will monitor prices going into the fall, we have not received any commitment of funding for the cow-calf and backgrounding sectors at this time,” said Smith-Fraser, who ranches at Pine Lake.

“To be honest, it doesn’t appear likely that there will be any announcement of funding in the near future. There is no certainty that funding will be available for these sectors if there are major market drops in the fall.

“The existence of the Western Livestock Price Insurance Program makes it difficult for governments to implement the AgriRecovery fund to cover market losses. Any AgriRecovery support for the sectors in the fall would likely be restricted to cover feeding costs for cattle that can’t be sold.”

She encouraged producers to take steps to mitigate risk, and consider purchasing the Western Livestock Price Insurance, which was open until June 18. With COVID-19, premiums soared, but had since stabilized at about $42 a head, said Brad Osadczuk, finance chair with ABP.

Smith-Fraser said producers need to be prepared for the fall, and the uncertainty it will bring.

The set-aside program

Greg Schmidt, chair of the Alberta Cattle Feeders Association, explained the set-aside program, which launched June 29.

Along with dealing with the current backlog, there’s the issue of feeding cattle that will soon be ready for processing, said Schmidt, a cattle feeder from Barrhead. The industry has been pushing for the set-aside to start in the summer, he said.

“The other key point we’ve been making is that while the program covers extraordinary feed costs, the bigger issue is market and price stabilization,” he said.

Alberta Agriculture and Forestry began Part 1 of its two-pronged approach on June 12, with a feed cost offset initiative, followed by a bid set-aside program that started June 29. Both programs are administered through the Agricultural Financial Services Corporation Connect, and producers can download the application on the website.

“The immediate feed cost offset initiative will use up to $12 million out of the total $43 million allocated to the fed cattle industry to compensate for the cost of keeping animals on a maintenance ration,” said Schmidt.

The feed cost offset initiative is available to Canadian residents who report farm income for tax purposes in Alberta, and who are actively feeding eligible cattle in Alberta. The initial payment will work to address feed costs up to $2 per head on eligible cattle.

“It is intended to compensate for cattle held back from May 1 to June 30,” said Schmidt, adding more details will be available soon.

Lot location, premise identification numbers, numbers in each lot, type of animal, average per head, weight in pounds, original marketing date and actual estimated marketing date will all be required for applications.

Eligible animals must be designated Grade A, and the average weight at the lot be a minimum of 1,300 pounds per heifer and 1,400 pounds for steers.

On June 29, the bidding setaside system was to become operational, and includes a weekly bid that producers can enter each week through an online system. More information is available on AFSC’s website.

Although the program is a good one, said Schmidt, the test will come as more cattle become ready for slaughter and the effect that has on prices.

“Our biggest hope is that we can stabilize these prices,” he said.

About the author

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Alexis Kienlen

Alexis Kienlen lives in Edmonton and has been writing for Alberta Farmer since 2008. Originally from Saskatoon, Alexis is also the author of two collections of poetry, a biography, and a novel called "Mad Cow."

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