Outbreak rattling livestock chain
The closures and slowdowns at local meatpacking plants in the past few weeks due to COVID-19 outbreaks have already begun having a downward impact on prices of fat cattle, feeder cattle and cow cull cattle for local ranchers, feedlots and at cattle auction marts.
“The main impact we are facing in the auction market world is the slowdown of cull cow numbers coming through the ring,” explains Ryan Konynenbelt, an auctioneer and sales representative at Southern Alberta Livestock Exchange based in Fort Macleod. “With Cargill being shut down and JBS cutting their kill back, they are only taking fat cattle or finished cattle through the feedlots. So they are not taking any cull cows right now, and we have seen a slowdown on those numbers coming through the ring and a definite impact on the price. But not as aggressive as we thought we would see.”
Cull cows and bulls just aren’t moving very well at all right now, but Konynenbelt says the high U.S. dollar and a relatively strong cattle export market to the United States has taken some of the price pressure off here in southwest Alberta.
“The American market and the way the American dollar has definitely saved us in that aspect,” he confirms. “We’re seeing the fat cattle are going to start getting backlogged pretty quickly here with the meatpackers only taking X amount, and with Cargill not reopening until (this) week. These fat cattle are going to start backlogging because them cattle keep growing. So we are seeing a backlog, and these feedlots are going to start getting full pens here.”
In contrast, grassfed cattle and the light cattle markets have definitely been holding their own because those cattle won’t be ready for slaughter until the end of the year anyway, says Konynenbelt.
“The further out you can go, the better off you can do,” says Konynenbelt. “Those cattle are bringing the same money as the cattle that are closer up (to finishing). It’s a strange situation, and nobody ever thought we’d be facing it. But it is what it is.”
Darcy Wills, a rancher near Writingon-Stone Provincial Park, is concerned with what he is seeing in this current backlog situation at meatpacking plants. Feedlots are pulling back on their bids for feeder cattle at auction marts, which inevitably means less money in ranchers’ pockets.
“What a lot of people don’t realize is the cattle feeders are moving cattle on a daily basis; so it is kind of like one long cycle for these guys,” he explains. “In my situation, when I take my cattle to town, my whole year’s income depends on about 10 minutes when my cattle go through the auction mart. So for my situation, it is really critical the market forces be at their best when my cattle are being marketed in that 10-minute period. They (feedlots) will always take your cattle, but (right now) the concern is it will be at a significant discount.”
The chain from the farm gate to the packing plant usually goes from primary producer who raises the animal from birth and brings them in to sell at the cattle auction marts as feeder cattle which may weigh as much as 900 pounds. Those feeder cattle are then bought by feedlots who add a couple hundred extra pounds of weight to finish those cattle off for slaughter, profiting on the weight differential paid out to local farmers versus what is eventually paid out to them by meatpacking plants for the finished animals. The meatpacking plants slaughter the animals and act as the wholesale seller to the national grocery store chains.
Wills says any farm assistance program which is brought forward by government to help with this situation should be paid out directly to producers at the primary level.
“I have seen some situations with these aid programs in the past where the money goes in and they hope there is going to be a trickle-down effect,” Wills states. “That, a lot of times, doesn’t work. If you give it to the packers and they say, ‘We’ll pay more for the animals.’ Unless they are directed to pay more, a lot of money never comes down to the grassroots guys like me. And it’s the same with the feeders. If they get money in their hands, they might share it a little bit. But there is also a lot of things they could also spend it on, and it never seems to bring it back to the farm gate and the absolute, primary producer.”
Wills suggests an aid program where government calculates what the price of cattle would likely be under normal market circumstances, looks at what the cattle feeders are currently paying producers at a discounted price, and pays ranchers the difference.
“My personal opinion is if the (governments) are going to throw money around or put money into a program, you always hope that it is going to be done in the most effective way possible,” he says. “My situation, being a rancher, I always think it is most important to put the money in at the grassroots. Then the guy that actually produces that animal, and grows it from conception to the time of first sale, they are the people who are the most significant in the production of that animal. The rest of the (cattle marketing) system is done on margins. We ranchers start with nothing and make it into something.”
In addition to the $77 million in federal aid offered to meat processors this week to help clear the backlog of animals and provide safety equipment at plants, the Alberta government announced on Thursday additional provincial supports for the livestock industry. Premier Kenney announced $17 million will be paid out through the AgriStability program to cattle feedlot operators to help ensure price stability for up to nine weeks for finished cattle as the meat processing plants work to catch up on their backlogs.