EDMONTON – Last week Todd McKinnon put 250 head of cattle up for bid to the packers.
When the bid came back at 50 cents a pound, with an additional 15 cent discount if any were overweight, he couldn’t believe it.
The price was 72 cents a lb. the day before, and the Airdrie, Alta., feedlot operator had rejected the bid. He couldn’t understand how cattle prices could drop 22 cents a lb. overnight.
An hour later he heard about the $460 million provincial and federal aid package to help feedlot owners recoup some of their losses.
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“I said ‘Oh, crap.’ I turned down that 50-cent bid and now I’m kind of wondering if I made a mistake,” said McKinnon of Three Cross Cattle Ltd., who has the same cattle up for bid again this week.
“I might sell these cattle because now I’m concerned about just getting a place to kill them,” said McKinnon.
The aid program was the reason Airdrie feedlot operator Gary Olsen sold 14 cattle last week.
“I just wish all my cattle were ready because I want to get rid of them before the aid money runs out,” said Olson, who accepted the low price just to get rid of his animals.
“You just close your eyes and send them.”
He blames the dramatic one-day price drop on packing plants.
“I really strongly believe the packers are taking advantage of the situation. When they put out a bid for 45 cents, that’s a joke,” said Olsen.
The combination of five weeks of abnormal markets, the government aid program, no cash flow and a buildup of cattle combined to force the price of cattle down, said Anne Dunford, Canfax market analyst.
“We always said after week three we’d get a crunch. Last week was a crunch week. In the end, an oversupply crushed the market,” said Dunford.
She noted there is a sense of frustration from producers and feeders about packers who are still operating their plants at 40 percent kill capacity.
“The entire industry is really in a very, very difficult time and it’s just making it very difficult to understand what’s going on in the next segment,” she said.
Gary Mickelson of Tyson Meats, which owns Lakeside Packers in Brooks, Alta., said packers are taking a big hit from the BSE scare too.
“We understand the frustration of Canadian cattle producers. We’re also a major cattle feeder in Canada and our inventory values have also been declining.
“In addition, our Brooks beef plant has been significantly affected, running at rates far less than normal while our operating costs remain high.”
Mickelson said it is difficult for Lakeside to return to full production and offer producers higher prices because they are unable to export finished product and because some cuts are not in high demand in Canada.
Cargill’s plant south of Calgary and Lakeside, account for almost 75 percent of the slaughter capacity in Canada.
