The BSE crisis showed no signs of abating last week, forcing the cattle industry to further scramble for control of its destiny.
The Alberta Cattle Feeders Association proposed last week a much-expanded packing and processing industry to help the cattle business in the face of export market losses.
The feeders association was expected to meet with Alberta minister of agriculture Shirley McClellan Feb. 12 to suggest a loan guarantee program that will allow the sale and refilling of 700,000 spots in the province’s feedlots. The meeting was held after Western Producer press deadlines.
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Because the U.S. market remains closed to Canadian cattle, the Canadian beef industry finds itself over-extended with its lenders.
Feeders lost as much as $700 per head after the Canadian BSE case was discovered, according to cattle analysis agency Canfax. Feedlot owners hoped to recover somewhat by filling their pens in the fall of 2003. But with the U.S. border still closed, many now face a financial crisis.
Feedlot owners like Rick Paskal of Picture Butte, Alta., and Glen Thomson of Iron Springs, Alta., say banks are keeping close tabs on cattle producers’ debt to equity ratios.
As a result, cattle producers and feeders are being forced to sell animals and land to improve cash flows and finance borrowing.
Bob Lane of Saskatchewan-based Lane Realty said his company is reselling land purchased by Alberta feeders and backgrounders in the last five years to insulate themselves from future droughts.
“They bought land in Saskatchewan and Manitoba hoping it would protect (Alberta cattle producers) from the worst thing that they could imagine. It turns out drought wasn’t the worst thing,” said Lane.
The ACFA also planned to suggest changes to the Canadian Agricultural Income Stabilization program that would modify the required single annual valuation of cattle as an inventory item.
In the long-term, the cattle feeders plan to ask the provincial government’s assistance in developing a “five year or more” plan to create a larger meat packing and value-added processing industry within Canada.
“We can’t keep on relying on a single market that can hold us hostage or discount our animals,” said Ron Axelson, general manager of the ACFA.
Jack Daines of the Innisfail Auction Market in Innisfail, Alta., said cattle producers in central Alberta are beginning to liquidate land “even if they aren’t in trouble yet” in anticipation of tighter lender requirements.
“The pressure will be on the hardest in feedlot alley. There are a lot of smaller feedlots that will need to sell land and if everybody does it at once, the land price could drop fast down there,” said Daines.
Axelson says if feeders can’t find a way to continue financing their operations, the ripple effect in rural Alberta will be tremendous.
“Stores, equipment dealers, banks. If it works with agriculture, it is going to hurt.”
Lane said on the brighter side, the depressed cattle prices and land reaching the market is making Western Canada an easier sell to farmers in Europe looking to make a move to North America.
