After too many tough years in the cow-calf business, there s finally a sunny mood in the auction mart bleachers as the fall calf run gets underway. Whether others along the market chain will be as happy this year remains to be seen.
If you look at the cow numbers, they re down between 20 and 25 per cent so I would think it s going to be tight on numbers at the auction markets, said Lyle Taylor, manager at Medicine Hat Feeding Company. I think the producer is going to receive quite a bit more money for his calves this year which is very positive, but whether more will actually come to market or not, I wish I knew.
Auction markets are facing a shrinking cattle herd, but the lure of high prices may move cow-calf producers away from private contracts as they seek higher prices from the ring.
Taylor said sellers have an opportunity to better capitalize on their calf crop by exposing their stock to more buyers.
Auctions present the cattle to the total marketplace rather than just a very limited exposure, Taylor said. Last fall when people were selling calves, lots of people sold in private deals and we know personally many people that left between $60 and $80 on the table because they were saving commission, but they could have paid the commission for four or five years and had their cattle exposed properly.
Bob Perlich, general manager and auctioneer at Lethbridge s Perlich Brothers, says it s too soon to tell how busy his auction market will be this year.
As far as numbers are concerned, we won t know until we get through it and as far as interest, we really won t know until we get into the bred cattle sales, which will come in November, Perlich said.
But I m thinking that the interest will be greater, not less. I think there s going to be more cattle come through the ring than usual, simply because where is the high in a rising market?
New market dynamics
Canada s cattle history is as old as the settled West itself, but this is new ground in a post-BSE world. High prices, low inventory and a par, or above-par loonie are keeping everyone guessing.
Absolutely prices are substantially better in 2011 than we ve seen well, you d have to go clear back to 2000 and 2001 to see prices comparable to the levels we ve been at so far this year, said Anne Dunford, marketing specialist with Gateway Livestock of Taber. Most certainly as we head into the fall calf run, it doesn t appear like there s any stumbles ahead from a price perspective. There s lots of demand and again one of the key reasons prices are moving higher is of course, smaller supply.
Bob Balog, co-owner and auctioneer at Balog Auction Services of Lethbridge, says it s about time the cow-calf producer is compensated.
Will the primary producer finally get paid? Yes, he s going to and that s already started. And that s necessary because soon there will be no one left in the business, so the primary producer needs to start seeing something of an optimistic future for him or there will be everybody selling out.
Many, including Balog, expect to see a lot of bred cows later in the run as producers choose to get out while the getting s good.
We have a lot of situations where ma and pa are both in their 70s now, the place is paid for, none of the kids are coming home and the neighbour boy that used to help them calve out, well he s gone to the oil patch, said Balog. So ma looks at pa and says, You said when the cows get high, we re going to sell.
Dunford agrees that there may be an increase in dispersals this fall, but believes that due to rising prices, there will be producers willing to invest in the industry again.
There s no question that there s been an interest in retaining some bred heifers and StatsCan numbers have been telling us that over the last year or so, especially the last 10 months. It does appear there is some interest as this industry for once again in a long time, is profitable, she said, adding that some producers may take the opportunity to expand.
The high prices have the rest of the chain feeders, processors and retailers wondering how much the market can bear. Higher prices mean more transaction risk.
The rule of thumb unfortunately in the margin business is high prices don t mean profits. And that s probably the number one concern once you get past the cow-calf level is the sustain-ability and profitability or the lack thereof going forward with higher-priced inputs.
Dunford said that at the end of the day, it depends on what consumers are willing to pay for beef. I don t know if we ve found that answer yet, but in the next short while, I think we will.
Ifyoulookatthe cownumbers,they re downbetween20and 25percent
Somalooksatpaand says, Yousaidwhen thecowsgethigh,we re goingtosell.