Cattle ranchers trim herds as rising costs eat into profits
Despite what could be a brighter market for cattle producers in Saskatchewan, the damage may already be done as many ranchers have begun to downsize their herds or exit the business.
Saskatchewan Stock Growers Association (SSGA) president Garner Deobald said even though some producers have seen better prices for their cattle, high costs across the board have kept margins thin, eating away at any profits they might have.
“Cow numbers are declining and producers are exiting the industry because of the lack of profitability,” Deobald said in an interview on Monday.
The wariness comes after many producers experienced drought earlier this summer and in years past, which has harmed their supply of feed.
Now into the winter, many cattle producers have had to buy more feed at higher costs.
Fuel and fertilizer costs are also up, as is the cost to transport the animals by truck.
The carbon tax, which is slated to be increased, is also chewing on profits, Deobald said.
Will Lowe, president of the Saskatchewan Cattle Feeders Association, said many producers in the Swift Current area are feeling squeezed.
“There's a lot of cow-calf guys looking to exit and have exited,” he said. “Over time, I think we'll see some better prices, but there has been a lot of damage to some guys' equity over the last few years.”
Saskatchewan's ending cattle inventory has seen a year-over-year decrease of 4.3 per cent.
The inventory was 2.54 million by the end of June of this year, a decrease of 110,000 from 2.65 million reported by the end of June 2021.
Despite these challenges, meat prices across at grocery stores have skyrocketed.
Earlier this summer, the SSGA had asked the provincial and federal governments to conduct an investigation into the imbalance of pricing. The organization has questioned how meat packers are operating their businesses, alleging they have limited the amount of product on retail shelves, which they say keeps beef prices high. In return, they say this has allowed cattle supplies to build and therefore keep cattle prices low.
Since then, a federal agricultural committee was struck and has begun its study into food inflation. Canada's Competition Bureau has launched its own study into the grocery industry. When asked if he supports these studies on Monday, Saskatchewan Agriculture Minister David Marit said Ottawa “should just look in the mirror.”
“This study is probably going to only prove what they wanted to prove,” he said. “You can do a study if you know what kind of outcome you want. Like I said, look in the mirror and remove the carbon tax. Do that first and see how that impacts the cost of food.”
Marit has also rejected the provincial NDP'S ask for a special committee to look into surging food pricing. The NDP says ranchers are getting a raw deal while packers are raking in more cash.
NDP Leader Carla Beck told reporters on Monday the committee could also study the effect of the carbon tax on the cattle industry.
She argued the government is instead pointing fingers and “spinning a narrative” when it could be addressing some of these challenges.
“There are producers in this province today who are facing the possibility of selling off their herd,” she said.
Marit said ranchers, particularly in the southwest, have been experiencing drought and feed shortages. He noted costs have gone up, but again pointed to the carbon tax as the main driver. He added that packers are paying massive amounts of carbon tax.
Deobald said he would like the provincial government to support a federal investigation into meat pricing. He said it would be difficult for Saskatchewan to do its own because there are no packers in the province.
The SSGA has looked into the development of a new packing plant in the province, arguing it could help producers see better prices for their cattle and avoid supply chain constraints.
Marit didn't appear open to providing government incentives to build a plant in Saskatchewan. He said there would have to be a market for it.
“I think the challenge is how are you going to do it? We looked into it,” he said. “When you're competing with the two biggest processors in the country that do 90 per cent of the business, it's pretty tough to compete.”
Beck said the idea of government incentives supporting a plant could be discussed at the provincial committee.