Packers regain pace after slowdown

Plans are in place in Alberta for a fed cattle set-aside program, but there are concerns other sectors will need assistance

Alberta’s two major packing plants are approaching full capacity, which is welcome news for the cattle industry facing a fed cattle backlog of about 130,000 head.

Kelly Smith-Fraser, chair of Alberta Beef Producers, said the JBS plant in Brooks, Alta., and the Harmony Beef plant in Balzac, Alta., were operating near full capacity and the Cargill plant in High River, Alta., was nearing 90 percent of its full capacity last week.

All three plants saw reduced activity in April and May due to widespread worker illnesses with COVID-19. That caused a build-up of fed cattle that couldn’t be processed when ready.

Plans and government funding are now in place to support a set-aside program to help match plant capacity with available cattle but Smith-Fraser expressed concern about future support for backgrounders and the cow-calf sector.

“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 cow-calf or background sectors at this time and to be honest, it doesn’t appear likely that there will be the announcement of funding in the near future,” she said.

“There is no certainty that funding will be available for these sectors if there are major market drops in the fall. We are strongly encouraging producers to take the steps available to mitigate risks themselves.”

With combined federal and provincial funding announced last month, Alberta has $43 million earmarked for programs specific to fed cattle, said Alberta Cattle Feeders Association chair Greg Schmidt.

Of that total, he said up to $16 million is being allocated for the fed cattle industry to offset feed costs incurred by keeping fat cattle on a maintenance ration until they can go to slaughter.

It will cover feed costs of up to $2 per head per day on eligible cattle fed from May 1 to June 30. The initiative began June 12.

Schmidt said the feed cost offset wasn’t among the requests for provincial government help because it might use money that would be better directed elsewhere.

“We do feel that that takes away from money that may be needed later,” he said. “We think that this major backlog is still yet to come and some of our problems may be coming later.

“In conjunction with beef industry partners, our original ask from the government was … for a program to cover both fed and feeder cattle sectors as well as a review of the price insurance premiums and changes to the business risk management suite of programs. We will continue to lobby for these options.”

The fed cattle set-aside program is being administered by Agriculture Financial Services Corp. Producers can register for the bid process starting June 22 and then be eligible to participate in weekly bidding starting June 29. They can tender a bid to set aside slaughter-ready cattle for up to nine weeks and once accepted will be required to provide tracking and RFID tag numbers for all eligible animals being held back. Cows, bulls and cull animals are not eligible.

Dennis Laycraft, executive vice-president of the Canadian Cattlemen’s Association, said the industry welcomed the set-aside program but shared Smith-Fraser’s concerns about the need for assistance to backgrounders and bred heifers should a second wave of COVID-19 affect the workforce at the major packing plants and cause ripple effects down the supply chain.

“With the limited funds that are available, where can we get the strongest response that will help the market function? Our intention was really to not just focus on fed cattle, for one thing, but also to look at other classes of cattle that we may need to look at and managing depending how things unfold with the second wave of COVID.”

Among the risk management options is the Western Livestock Price Insurance Program (WLPIP), which is available to producers in the four western provinces.

The CCA, ABP and Saskatchewan Cattlemen’s Association all asked federal and provincial governments for help to offset the high premiums seen earlier this spring that prevented producers from signing up.

Saskatchewan agriculture minister David Marit last month announced $5 million for that purpose, which has been augmented by up to $1 million by the SCA itself.

“Producers are facing uncertainty like never before. That uncertainty is part of why WLPIP premiums skyrocketed,” said SCA chair Arnold Balicki.

“SCA is glad to partner with the government of Saskatchewan in reducing the COVID-19 impact on livestock price insurance premiums. Producers that need to manage their risk by putting a floor under their expected prices are well served by WLPIP.”

The Alberta government has not provided funds to offset WLPIP premium costs. Deadline to apply for the program is June 18.

Premium costs have come down from earlier highs. ABP finance chair Brad Osadczuk said the WLPIP deserves consideration given that current government funding isn’t designed for backgrounders and cow-calf producers.

“Please have a plan A and a plan B coming into fall,” said Osadczuk, just in case “things aren’t as rosy as we’d hope.”

Schmidt, as a cattle feeder, acknowledged concerns about the other sectors.

“It’s a fed cattle set-aside but I think we need to take an industry view of this, and we all know that keeping one part of the industry healthy affects all of the other ones and that’s why we worked so hard as cattle feeders to keep the packing plants healthy.

“We know we depend heavily on them and we know the cow-calf guys depend heavily on us for pricing and we depend heavily on them for calves that we need in our feedlot.”

Laycraft said he expects more details to be available soon about the $77.5 million in government money designated for pandemic response in packing plants and food processors. Plants implemented numerous safety measures to reduce risks to workers.

Those have enabled affected beef packing plants to ramp up capacity.

“I’m a bit more optimistic now that we’re going to trend towards more normal numbers than I would have thought a month ago,” Laycraft said. “I think we’ve all been pleasantly relieved to see the capacity come back quicker in Western Canada.”

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