EDMONTON – There’s money to be made in the bison business as long as the price for heifers doesn’t drop, economists told bison producers earlier this year.
“Barring a total collapse in heifer prices, profitability can be achieved,” said Dean Dyck, Alberta Agriculture’s farm management specialist in Red Deer.
“It’s profitable, quite profitable,” Dyck said during the International Bison Conference held in Edmonton this summer.
“If prices go below $1,000, then you have a problem.”
With the help of producers, Dyck developed two scenarios on bison profitability. They showed how 24-cow and 100-cow bison herds can make money.
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In Dyck’s scenario, new producers peg heifer prices at $2,000, not an unreasonable price in an expanding bison market where heifers are in demand. But there are signs bison prices are starting to soften as supply outstrips demand.
Price threshold
When heifer prices drop below $1,000, the producer will still cover his expenses, but he can no longer pay himself, cover depreciation or interest, said Dyck.
Jill Hobbs, with the University of Saskatchewan’s agriculture economics department, said investors receive a clear signal that the heifer market has turned into a feeder market when heifers begin to show up in feedlots.
“Then you will know the heifer market has stabilized.”
Another way to get started in the business is to buy 24 cows and keep them with a custom operator, said Dyck. This allows the owner to become familiar with the animals and slowly build the herd to about 100 cows.
“One hundred seems to be the economics of scale for North America.”
Steve Metzger, farm business management program co-ordinator with the Carrington Research Extension Centre in North Dakota, agreed profitability hinges on heifer calf prices.
Keep weaning rates high
But there are ways to make money even when heifer calf prices drop, he said. One of them is to keep the weaning rate above 80 percent.
“It’s difficult to make profits and cash flow under 80 percent calf crop.”
While many people worry about a rise in interest rates, Metzger said it’s more important to increase weaning percentages.
“Too many people worry about the wrong item.
“The interest rate is important, but keep it in perspective.”
