Feedlot growth overtakes herd size

Western Canada has become a net importer of feeder cattle as domestic production falls short of what feedlots need

Feedlot capacity continues to grow in Alberta and Saskatchewan at the same time as the domestic cattle herd continues to shrink.

Yet the markets have not been kind of late to feedlots. Many have been in a money-losing situation for nearly three years and suffered even further because of the pandemic, when they had to hold back cattle due to temporary slowdowns or closures at packing plants.

“It is rather interesting and a little bit head-scratching at times, especially this last year,” said Brian Perillat, Canfax manager and senior analyst at Canfax, about the increase in feedlot capacity.

“The biggest story really around all of this (is that) Western Canada is now a net importer of feeder cattle. Sometimes people maybe don’t like hearing that story, but realistically there simply is not enough feeder cattle in Western Canada to supply the feedlots or to allow growth of the feedlots.”

Alberta government data indicates live cattle imports from the United States to Canada were up in 2020 for the fourth consecutive year. Last year slightly more than 272,000 head were imported, an increase of 1.5 percent over 2019. Also in 2020, Canadian exports of live cattle to the U.S. were down nine percent compared to 2019 and 7.6 percent below the five-year average, according to figures provided by provincial livestock market analyst Jason Wood.

Conventional wisdom is that when the Canadian dollar is low against the U.S. greenback, more feeder cattle tend to head south. However, Perillat said the last time Canada saw an influx of U.S. feeder cattle in numbers similar to 2020 was in the early 2000s, when the Canadian dollar was low.

Canfax data indicates feeding capacity in finishing feedlots has grown for six consecutive years. Capacity is now at its highest point since 2011.

According to the marketing agency’s surveys, Alberta has 156 finishing feedlots and almost 38 percent of them have capacity of 20,000 head or more. Saskatchewan has 10, with 68 percent of them at 10,000 head or more.

Finishing feedlots in the two provinces have a combined one-time standing capacity of 1.63 million head.

Though capacity has increased, the number of feedlot owners, at 133, was the same as last year, reflecting consolidation in the industry. Ten years ago there were 175 feedlot owners, according to Canfax data.

The capacity figures do not include new or expanded operations that have occurred since January. As one example, a feedlot recently opened by Serfas Farms near Enchant, Alta., has a capacity of 40,000 head.

Ryan Kasko of Kasko Cattle Company operates several feedlots around southern Alberta. He said he is at a loss to explain why the feedlot sector continues to grow even though the Canadian cattle herd is at the lowest level in 30 years.

“It’s a mystery to me. I ask myself that all the time,” he said.

“The capital cost to build a feedlot is just off the charts, particularly people that are installing roller compacted concrete in the pens. It is a very expensive process. I guess if interest is cheap and you can get access to capital maybe it’s OK, but it’s hard to make the math work.”

In addition, cost of feed is currently high in Western Canada. Feed barley was selling for more than $6 per bushel in Lethbridge County, the heart of the Alberta and indeed the Canadian feedlot industry, at the end of March.

Perillat said that’s another head-scratcher when it comes to feedlot expansion.

“Realistically we’ve had a feed cost disadvantage. Barley has been higher than corn in the last few years.”

On the other hand, he said the packing sector is competitive and that has encouraged more finishing of cattle in Western Canada. Packing capacity has increased in recent years, said Perillat, primarily via major federal plants slaughtering animals five or six days a week instead of four.

Brad Dubeau, general manager of Alberta Beef Producers, said the domestic cattle herd is unlikely to increase until producers have access to better risk management programs. As well, cow-calf producers are faced with ever-increasing input costs that discourage major herd expansion.

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