Western Feedlots closure a sign of widespread industry trouble
The announced shutdown of Western Feedlots Ltd., one of the country’s largest cattle feeders, continued to reverberate throughout Alberta’s cattle country Thursday.
At feedlots big and small, operators were shaken by news that one of the most-respected players in the industry was calling it quits.
If this can happen to Western, some said — a company that’s been in business since 1958 and is credited with launching Alberta’s commercial feedlot industry — it’s an indication of just how much financial pain the sector is in.
“They ran just a top-notch operation … Western was very well-run,” said Ben Thorlakson of Thorlakson Feedyards near Airdrie.
“It speaks volumes that they have decided — with all the tools they have to work with and the management talent they have — to hit the pause button, if not the exit button.”
Western Feedlots — which has sites near Strathmore, High River and Mossleigh, with standing capacity for 100,000 head — said Wednesday it will idle its operations in early 2017 after it finishes marketing the cattle it currently owns.
The company blamed volatility in the cattle markets for creating a “high risk, low reward” environment.
Alberta cattle prices surged to record heights in 2014 and 2015, but have since plummeted — meaning feedlot owners bought animals at high prices and now have no choice but to sell them at a major loss.
“Last year, the profitability was — well, there wasn’t any,” Thorlakson said.
“And I believe this year is going to be a difficult year, and it’s going to reverberate all through the agricultural economy.”
The entire North American feedlot industry is experiencing losses as a result of current cattle prices.
But Dave Plett, Western president and CEO, also pinned some of the blame for his company’s woes on Alberta’s NDP government, saying a “poor political and economic environment” contributed to his company’s decision to wind down operations.
Ballco Feeders president Jeff Ball said that while he can’t speak for Western’s management, he has seen cost increases at his own feedlot near Brant, as a result of government policy. The NDP’s controversial farm safety legislation, which requires all agricultural employers to have WCB coverage for their workers, has meant Ball has to pay four times what he was paying previously for private insurance for his employees.
He said he is also “bracing” for the Jan. 1 implementation of the province’s new carbon tax, which the Alberta Cattle Feeders’ Association estimates will cost its members between $6 and $7 per head.
“These are increases in our overhead cost structure, and it’s hard to extract that out of a commodity market when we’re competing globally,” Ball said.
“And you also have to wonder, what else is coming down the pipeline? It’s a very unnerving feeling operating in a climate where it appears there are going to be rapid increases in costs.” Alberta Cattle Feeders’ Association CEO Bryan Walton said no government is responsible for the swings in commodity prices that are so badly affecting the feedlot industry.
But he said feedlots operate on slim margins at the best of times (according to one study, averaging just $18 a head in profit over a 10-year period), and governmentimposed taxes and fees can have a cumulative effect.
“We need to look at all the impacts that are being felt by the industry, and we need to make sure that governments — federally, provincially and municipally — are aware of that,” Walton said. “After all, if we’re talking about diversification of our economy, agriculture should be a priority.”
In an interview Thursday, Alberta Agriculture Minister Oneil Carlier said while he is aware that the current pricing environment is challenging, he has spoken to a number of cattle feeders over the last few months, and none of them feared Alberta would see feedlot closures.
“None of them expressed this kind of concern,” he said. “So it took me a bit by surprise that Western Feedlots had made this decision.”
Carlier added the provincial government doubled the provincial loan guarantee available to local feeder associations last week, to help small- and mid-sized feedlots weather current cattle prices. While there are no other assistance programs in the works currently, Carlier said his door is open.
“I am absolutely willing to talk to feeder associations as well as individual feedlots to see what more we can do to support the industry,” he said. He added he is confident Alberta’s feedlot industry will survive the current pricing environment.
“Beef does have its ups and downs,” said Carlier. “Ten years ago it was really tough times, and the beef industry has continued in Alberta. And I’m sure it still will.”