Good times don’t last forever, so use them wisely.
That, in a nutshell, is the advice of four Alberta cattle producers who were asked for their thoughts on the current state of the sector and what lies ahead.
A decade of misery following the BSE crisis in 2003 has been followed by record-high prices, and some mixed signals — good and bad — about what might be next.
The four producers who spoke to Alberta Farmer were generally optimistic on the price side — at least in the short term.
“I think we’ll probably be in for three years of good prices because our cattle (herd) numbers are so low,” said Brian Chomlak, who farms at Beauvallon, and is chair of Alberta Farm Animal Care and an Alberta Beef Producers delegate.
“Depending on how the TPP (Trans-Pacific Partnership trade deal) comes out, it may benefit us again. Those countries take a lot of cuts that we don’t use in Canada, like tongue and offal, so it can add value to our carcass, which would be a good thing.”
Although cattle prices have softened a bit, “it’s still very good money,” said Jake Meyer, who ranches near Welling in southern Alberta.
However, the flip side of that is pricey steaks and roasts that have consumers wincing at the meat counter, said the president of the Young Cattleman’s Council.
“Just about every consumer I talk to right now is very concerned about the high price on the shelf,” he said.
As a feedlot operator, Bryan Thiessen is troubled by price volatility.
The fed cattle market is seeing big swings in weekly prices — $10 per cwt is common — and that makes it hard to run a business, said owner of Namaka Farms in Strathmore.
“Right now, the instability in our markets is probably a bigger concern — more so than the dollar figure for the day,” said Thiessen, who sits on the Cattle Feeder Council for Alberta Beef Producers and is a Canadian Cattlemen’s Association director.
“The way the market is bouncing up and down is probably a bigger concern, at least for the feedlot side. The volatility we’ve seen these last few years is unprecedented in our marketplace.”
Gord Graves has seen a lot of ups and downs in his four-decade-plus career as a cattleman, and while prices have probably peaked, he figures the current good times have some legs.
“The cattle industry should be OK for a while,” said the producer from Iron River. “Three to five years would be my guess. I don’t see it going beyond five years because in five years, the American herd will be built up somewhat.”
And there’s the rub. If your crystal ball can tell you the size of the U.S. herd in five years — along with beef consumption, how the TPP trade deal will play out, and the value of the loonie over that period — you’ll have a good handle on the state of Alberta’s cattle business in 2020.
Of course, as Meyer pointed out, “nobody can predict the future and anything’s possible.”
But there are things to watch closely.
For Graves, that includes the American herd, which had shrunk to its smallest size since 1951 because of a multi-year drought across much of U.S. cattle country before starting to expand this year.
“They’re going to be retaining heifers so the probability is that there will be fewer calves going to market in the U.S.,” he noted. “Theoretically that, combined with environmental disasters elsewhere in the world and fewer cattle out there, should — and I’ll emphasize the word should — keep the market relatively buoyant for a bit.”
But for many, it’s the size of the Alberta herd that is most troubling.
After peaking at 2.2 million head in 2005, it’s now down to 1.5 million.
“We are at the lowest numbers that we’ve been at for years,” said Thiessen. “For us personally, it could potentially cause us tougher times in our business, which would reflect back on our personal lives as well.
“What also could happen is that we’re going to start losing ground to the Americans because they’re growing their herd and we haven’t seen our herd grow yet, partially because of the drought.”
Building for the future
“I’m sort of concerned about the age of the cattle producer,” added Chomlak.
Seeing more young farmers at ABP’s fall meetings was very encouraging, but that also underscores the need for action, he said.
“It shows me there is optimism in the cattle industry,” he said. “I think the new governments will have to come up with some programs to keep those people in the industry. But in the next three years (while prices are good), we’ve got to get some young farmers because the old farmers are just getting older and we’re going to lose more producers again.”
That was another theme of the producer panel — use good times to make investments in the future.
Helping young producers is one example. Taking advantage of the TPP trade deal is another. If ratified, that deal will lower tariffs in expanding markets in Asia — but there’s a but.
Alberta Beef Producers wants the $1 national checkoff boosted to $2.50 (and make the $2 provincial levy non-refundable). Graves calls that “a no-brainer — it has to go up.”
“Even though we will have lower tariffs, we will be competing with our competitors in the U.S., Australia and New Zealand, who pay a significantly larger amount in their checkoff to promote their product,” he said.
“If we don’t have the money to go out and court those markets, the trade deal might mean nothing… We need to have dollars there, for marketing and research. Our competitors, through their checkoffs, have the funding to do more research to keep their producers more competitive.”
Investing in your own business was another recommendation.
“Right now, a producer can actually make a profit and start investing some of that money back into their place,” said Meyer, who has been growing his herd, now at 120 cows, quite aggressively this year.
But ensuring the business is sustainable is also a priority, so he is also saving “for when the times are bad.”
That view was echoed by Thiessen.
“I hope the industry keeps growing, being that we are at the lowest numbers that we’ve been at for years,” he said.
But, he added, “Don’t bet more than you can lose — don’t extend yourself more than you can handle.”