RED DEER, Alta. – The last two years have been the worst on record for the Canadian feeding industry and if feed grains prices remain high, feedlots will continue to bleed red ink.
That’s part of the stark reality Canfax’s Anne Dunford laid out to the Alberta Cattle Commission’s semi-annual meeting in Red Deer recently.
“We’ve come through an era of some pretty significant losses,” said Dunford.
Going back to 1994, most months have shown a loss in the feeding sector. Canfax has tracked profits and losses since 1979. Their figures reveal for this period that feeders made an average profit of $17 per head.
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U.S. hogs averaged $106.69 on a carcass basis July 11, down from $110.21 July 4.
As for 1994 and 1995, “they will go down as two of the worst cattle feeding years in history,” she said.
“If you look at cattle cycles in history, it would suggest as these feeder cattle prices come down, we should be going into a time frame (where) cattle feeding is more profitable. But we’ve been hit with this double whammy of higher feed costs coming at the same time,” she said.
The repercussion is that grain prices will directly affect what cattle buyers are able to pay for calves this fall.
A barley price increase affects the cost of gain proportionately.
Barley at $3 a bushel results in a 68 cent a pound cost of gain and $4 barley translates into a 91 cent cost. This does not take into account specific rations or interest rates.
For example, if barley hits $4.25 a bushel, that results in a cost of gain of 96 cents a pound. With a break-even number of 75 cents, buyers will only be able to afford to spend 56 cents a pound on feeder calves.
“This illustrates the type of response that we’re going to see as we go into the fall run, depending on what happens with this year’s corn crop and barley crop,” she said.
For Alberta this could be a tough fall since the province has experienced a phenomenal rate of growth in its feeding sector.
Alberta fed 1.8 million head in 1995 and forecasts are for that number to reach two million, which along with the non-fed sector will add seven to eight percent more beef into the system over last year.
