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Cattle producers have the beef but aren’t getting the bucks

Producers are used to the cattle cycle but this one is extreme — and extremely painful

“In no way are we experiencing increases in our calf prices or the fat prices because of the increase at the grocery store.” – Melanie Wowk.

“In no way are we experiencing increases in our calf prices or the fat prices because of the increase at the grocery store.” – Melanie Wowk. Photo: Canada Beef

Reading Time: 4 minutesBeef prices are sky high, but that money is not trickling down into the hands of cattle producers. “I’ve been getting lots of calls from producers on why there’s such a difference on the price at the packer level and at the retail level,” said Melanie Wowk, chair of Alberta Beef Producers.

“Our prices at the cattle level, and I’ll include the feedlots here as well… pricing has been stagnant over the last few years.

“You see those prices at the store, but it’s not being percolated down the chain whatsoever. In no way are we experiencing increases in our calf prices or the fat prices because of the increase at the grocery store.”

The Beauvallon rancher wants consumers to know that it’s not cattle producers behind the “exorbitant prices” — nor are they sharing that bounty.

“Unfortunately, we’re price-takers. We don’t have much leverage as to what we get for animals. That’s where the discrepancy lies,” said Wowk, adding the reasons behind high prices are complicated.

Alberta Beef Producers chair Melanie Wowk is glad that demand for beef is still strong, but says consumers should understand high retail prices aren’t trickling down to cattle producers and feeders. photo: Miles Wowk

But for feedlot operator Ryan Kasko, the big factor is plain to see — a shortage of processing capacity in Canada

“One of the biggest challenges is that there are too many cattle in North America for the capacity that the packers have to process them,” said Kasko, CEO of Kasko Cattle Company in Coaldale.

Packers slowed processing when the pandemic hit as the threat of a recession loomed and then COVID-19 outbreaks in plants further constrained supply. Meanwhile, consumers were flocking to the meat counter.

“Beef demand is really, really strong, so prices (for beef) went up and they remain very strong,” said Kasko. “That’s really largely why prices are high for beef.”

“But the money hasn’t flowed back to producers because there’s an abundance of cattle that are ready in the near term.”

There are a lot of cows heading to slaughter because drought has led to a scarcity of feed supplies and/or very high costs.

With retail prices so strong, plants “would probably like to process more cattle,” Kasko said. But there’s another issue — like a lot of employers, packing plants are finding it hard to get the workers they need.

The pendulum shift

Cattle prices are the lowest in a decade, said Brian Perillat, manager and senior analyst with CANFAX.

“Throw in the drought and higher liquidation rates, and we have more cattle on feed and more cattle going to market than we have processing capacity at the packing plants,” he said. “In that kind of situation, prices are going to decline, no matter what. In the meantime, we’ve seen phenomenal beef demand.”

And Perillat can throw in another factor.

“Really, it’s the demand story, and the story of U.S. herd growth,” he said. “We’ve imported a lot, so Canada has become a net importer of feeder cattle.”

And part of that is likely due to increased feeder capacity here as the feedlot sector has grown. But like producers, these are not happy days for feeders.

“Packing margins are record strong and our feedlots are still losing money,” said Perillat. “Cow-calf guys, with the drought, they may be scraping by. There may be profit for some producers, for some maybe not.”

It’s an extreme version of the usual cattle cycle, he added.

“We had extreme highs five to six years ago, but the lows weren’t that low. We’ve seen the leverage shift. Packing plants have more of their share of the money.”

The balance will shift again when the herd shrinks or if packing capacity grows, said Perillat, adding he’s optimistic that cattle prices will strengthen.

Margin pressures mounting

But the financial pain is here right now

“For a feeder, the cost of grain has almost doubled since last year,” said Kasko, who is past chair of the Alberta Cattle Feeders Association. “It’s a very difficult cost to absorb. It’s hundreds of dollars extra (per animal).

“It’s not as much of a revenue problem as an expense problem that we have right now.”

“One of the biggest challenges is that there are too many cattle in North America for the capacity that the packers have to process them.” – Ryan Kasko. photo: Supplied

Feed prices “are going through the roof,” added Wowk.

“That’s one of the reasons that there’s been so much frustration on (the retail) price, because our margin is continuing to shrink and shrink and shrink,” she said.

Barring another year of bad weather, feed costs will come back down. But that alone is not a fix as meat isn’t the only item that has gone up in price and inflation is affecting both labour and input costs.

“The cost of labour has gone up and rightly so, because the people who work for us, they’re facing higher fuel costs to come to work, and the cost of food has gone up. The cost of housing has gone up,” said Kasko. “The inflationary pressure is making sure we have to pay them more to stay viable as an individual or a family.”

And prices for inputs — fuel, fertilizer and minerals — have also increased and so will be baked into a farm’s costs next year.

Shrinking margins will only exacerbate the long decline in herd numbers, said Wowk.

“More and more people are going to move out of cattle and it will shrink our herd even more,” she said.

So what can be done?

Wowk said she’s not looking for government to step in — nor does she think it should interfere with private companies.

“But what we’re hoping for is some help from the Alberta government in terms of increasing processing facilities in the province,” she said.

“Helping them out with grants or (lower) taxes to make it easier for a smaller processor to open. That gives us more of a chance to decide where our animals can go. Trying to get into a small processor in the province right now is impossible.”

And it would be a start in terms of dealing with the larger problem, she added.

“We need increased competition in the province (in terms of) processing facilities,” she said. “We have nowhere else to go.”



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.”