Economic disparity widens between grain, cattle

In my area of southwestern Saskatchewan, a recent bid put July barley at an amazing $6.90 a bushel with new crop at $5.50 to $5.70 a bu. depending upon delivery month. Can anyone remember barley being that profitable? Little wonder that barley acreage is up dramatically this year. | File photo

One of the few possible ways to lose money growing barley this year is to feed it to your own cattle.

Of course, the threat of not growing a decent crop always exists and there’s also the possibility of a dramatic drop in new crop barley prices if you don’t lock in any values in advance. But beyond those worries, the biggest threat to barley profitability comes if you’re feeding it.

This same principle used to apply to hog operations. A hog producer once told me that he had never lost money on his hogs, but he had penciled in some mighty cheap barley from the grain side of his operation.

These days, aside from Hutterite colonies, which still grow their own feed for hog barns, the big hog operations aren’t typically into growing their own grain. The situation is much different in the cattle sector. In addition to hay and pasture land, many producers grow annual crops such as barley, both for the grain and for green feed.

In my area of southwestern Saskatchewan, a recent bid put July barley at an amazing $6.90 a bushel with new crop at $5.50 to $5.70 a bu. depending upon delivery month.

Can anyone remember barley being that profitable? Little wonder that barley acreage is up dramatically this year.

Saskatchewan Agriculture in its Crop Planning Guide 2021 estimates the total cost of growing feed barley at $280 an acre in the brown soil zone when shooting for top yields. This includes all the variable costs such as fertilizer and plant protection along with machinery depreciation and land investment.

The target yield for the assumed inputs is 78 bu. an acre, while the provincial average yield for feed barley in the brown soil zone is a little over 61 bu. an acre.

Assuming a price of $5.50 a bu., which is readily available, the gross return from an average crop is $335 an acre for a net return of $55 an acre. With some moisture, a bit of luck and a 70 bu. per acre crop, the net return rises to $105 an acre. Reaching that target yield of 78 bushels an acre would generate $149 in net return.

If you can grow a decent crop, there’s good money to be made with barley. However, if you feed your barley to your cows, there’s no guarantee. What will the price of calves be this fall? The high price of feed barley will be factored into what feedlots can afford to pay for calves.

The current sky-high price for feed barley accentuates the divide in grain versus cattle returns that has lasted for a number of years. A single acre of feed barley might generate a net return greater than that of a 550 pound steer calf sold in the fall.

This isn’t a one-year event. Grain producers have often been able to realize good returns while it has been a tough grind for cow-calf producers.

If you have land that will grow annual crops and that land is being used for feed production, the economics are unfavourable. Hopefully, you’re making money, but a lot more money has been attainable by growing grain for sale. The current barley price just underlines the disparity.

It’s a good thing so many cattle producers love what they do and love their cattle. The work never ends and years with big profitability must seem few and far between.

Kevin Hursh is an agricultural journalist, consultant and farmer. He can be reached by e-mail at kevin@hursh.ca.

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