While the backlog of cattle from packing plant closures and slowdowns last spring has dwindled, feedlot owners are still being hit hard.
In the spring, there was a backlog of 130,000 cattle that needed to be processed. That number is now down to 30,000, thanks to no more further shutdowns at packing plants, which have also added a Saturday shift to increase production.
But that hasn’t ended the financial hurt for feeders, who have been losing $200 to $300 a head since June.
“The plant shutdown caused beef prices to go up and cattle prices in feed yards to go straight down,” said Leighton Kolk of Kolk Farms near Iron Springs. “We’ve never fixed that ratio since. We’re well under water. We had bigger losses May through June and then the market crept back up to where it is now.
“We’ve created a big bulge of market-ready cattle when the plants shut down, and we haven’t dug our way out of them.”
And until the oversupply of market-ready cattle is gone, the tough times will continue, say market analysts.
“We’ve been slaughtering a lot more cattle on the fed side,” said Brian Perillat, CanFax manager and senior analyst. “It’s been decent, but the backlog is starting to affect the market in other ways.
“We’ve got a lot of big, big cattle and it’s starting to keep the markets depressed. It’s a lot more urgent to get them processed and through the system now.”
The steer carcass weights have hit records, and are hitting the markets at a huge size.
It’s a problem across Western Canada, said Kolk.
“If you look at slaughter data, everyone has cattle 46 pounds heavier than the five-year average,” he said. “Everyone has cattle that are too big. We know how to manage the best through the bad times. We take the biggest cattle and keep moving them first.”
‘A hope and a prayer’
In normal times, groups of cattle would be sold together. But at this point, feedlot owners are trying to unload their heaviest cattle, and keep feeding the smaller ones.
“Part of this strategy is a hope and a prayer that the market will recover, and so you drag your feet a little, you drag your feet as much as you can, hoping that the market gets better at some point,” said Kolk.
Feedlots have continued to lose big dollars while holding on to bigger cattle, said Perillat. The market has been depressed all summer, depressed below a year ago and depressed below the five-year average, he said.
Usually, the fed market improves around this time of year, but not this year.
It was a rough summer, said Jacob Bueckert of Driland Feeders near Warner.
“All summer long at our feedlot, we kept cattle about a month longer than the projected out date was,” he said. “Personally, we’re caught up because there was a period of time when we didn’t have any cash cattle. I’m still hearing of people who are falling behind. Anyone who is selling cash cattle is falling behind because the packers are committed to their contracts first, because they had the contracts first, and they had to honour them.
“I know some of our contracts get pushed around towards the end of the month, and some of them are spread out.”
But there’s nothing that packers can do about that.
“When you have market-ready cattle and your buyer isn’t ready to own them, they have the upper hand. That’s where we sit at the moment,” said Bueckert.
The paring down of the backlog happened in summer, during optimum conditions, with no holidays or weather disruptions, said Kolk.
When everything is running flat out in optimum conditions, western Canadian packing plants can usually slaughter about 45,000 to 47,000 cattle a week.
“In order to get those 30,000 (in the backlog), they’re picking away running Saturdays, so between all the plants, they get about 4,000,” said Kolk. “If you take 3,000 or 4,000 per Saturday, you’re still two months away to eat all that,” he said.
And this doesn’t account for Christmas closures, winter weather shutdowns and other potential delays.
Bueckert said in his 20 years of running a feedlot, 2020 has been the worst for mental health.
“We’re scared every day that one of our employees might contract COVID-19 and what that’s going to look like,” he said.
Pen riders and feed truck drivers are uniquely trained, and can’t be easily replaced.
“We’re doing our best to segregate everybody, but it’s hard not to be close to people in our working environment.”
Bueckert said he also worries about COVID-19 getting into the plants again.
“It’s scary times,” he said.
On top of that feed prices have shot through the roof and the Canadian dollar is rallying, so sales to U.S. buyers don’t bring in as much money.
“It’s kind of a double whammy on the calf market,” said Perillat. “Calf prices are not down nearly as much as the fats (but) they are lower than they were a year ago. They are at some of the lowest prices in the last three or four years.”
The pandemic also means there’s uncertainty in terms of demand. With rising COVID-19 numbers, the battered restaurant sector may buy less beef, either because more restaurants have to close or because diners may stay away.
But so far, the cow-calf sector is not doing too badly.
“Our prices compared to last year are very similar,” said Bueckert, who has a cow-calf operation in addition to his feedlot. “It’s a little bit less than last year. The cow-calf sector seems to have adequate feed, and they’re not bringing as many calves to town because the prices were starting to dip with the grain rising up.”
And since fewer feeder cattle came to market this fall, buyers have been chasing them and prices have been good.
However, since packers are focused on killing fats, they haven’t taken as many older cull cows, so those prices have decreased.