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Cow-calf future in question

Rancher says tweet was his way to “poke the bear” and spark a productive debate.
The problem of inadequate cattle prices in Canada has prompted some in the industry to suggest that producers should ask some fundamental questions about how they could potentially reinvent their business.

VERMILION, Alta. — A rancher who sent a tweet underlining the increasingly unsustainable financial situation facing many of his fellow cow-calf producers wants to spark a conversation he said some people are trying to avoid.

“They’ve got cattle and they know that maybe the writing’s on the wall,” said Sean McGrath of Round Rock Ranching southeast of Vermilion, Alta. “And it’s just, I mean, it’s an emotional thing, right?”

McGrath’s children mark the sixth generation his ranch has been in the family. He understands the deep attachment many cow-calf producers have to their operations.

“There are people that have — every cow they own is named — and a lot of them aren’t necessarily doing it for the money. But if the money situation gets to a point where you can’t continue to do it, it’s extremely emotional, and how do you? They would just rather not talk about it, which is something that I totally respect.”

McGrath’s Twitter post Oct. 17 said the average net income for a 200-head herd is estimated at less than $18,000, or just under $90 per cow.

“I don’t think that is sustainable,” he wrote. “We will see a lot more cows go at that rate, at least from medium-sized herds.”

A subsequent tweet by McGrath said a young person working at Tim Hortons after school “with no investment will do better than that. When you consider the assets tied up to produce that, I think our sustainability argument goes out the window on the simple pillar of profitability.”

Cow-calf producers are crucial to Canada’s beef industry, said Melanie Wowk, chair of Alberta Beef Producers. However, calf prices haven’t kept up with rising costs of fuel, grain and land when the sector has faced labour shortages, drought and lack of trucking capacity, she said.

“Without cow-calf, you don’t have calves, so we’re super important,” said Wowk, who has a cow-calf operation near Beauvallon, east of Edmonton. “I think that’s one part that’s forgotten about this.”

Things must significantly improve so producers can make a living without working off the farm, “or figuring other ways to make money other than just through our cattle,” she said.

“We’re not seeing replacement from the younger generation. We’re losing producers at a rate that we’re absolutely not replacing them, and our mother cow herd has been shrinking since I believe 2010. And the question is, ‘is it going to come back?’ I don’t think so.”

McGrath wondered how herd reduction will affect the infrastructure of the feeding and processing sectors of the beef industry.

“Those are big questions that tip the scale pretty quick, and I have no foresight into what that looks like.”

However, he said the aim of his tweets was to “poke the bear” and spark a productive debate.

There are many traditional mindsets about the right way to manage cows, said McGrath.

“A lot of us have the mindset we have to own all the land we run cows on. I don’t know if we do. A lot of us have the mindset we have to own all of our own machinery and make all our own feed. I don’t know if we do. A lot of us have the mindset we have to feed cows all winter. I don’t know if that’s true.”

Producers should ask some fundamental questions about how they could potentially reinvent their business, he said.

The other part of the debate is that decisions cow-calf producers make as individual operations must occur in the context of the overall industry, said McGrath.

“There’s some structural and other types of issues in this industry that aren’t going away, and I think we’re just going to have to have some hard discussions and deal with it.”

A beef industry competitiveness study conducted by the provincial government is expected to be unveiled by the end of November, said Wowk. It was launched last year by what is now the Ministry of Agriculture and Irrigation.

The study will partly address concerns about price discovery and transparency “by identifying which data should be reported at each stage of production, and highlighting potential interventions when margins become excessive,” said an annual report by ABP.

Wowk expected much of the study will deal with beef processing capacity.

“There’s two large packers in southern Alberta that are responsible for 80 percent of the slaughter of Canada’s beef market,” she said during an interview in 2021. “And so the question is, exactly why is there such a discrepancy between what we’re getting and what the packers and retailers are making?”

Cow-calf producers are at the bottom of the pile in the beef industry, said Brodie Haugan, finance chair for ABP.

“We can’t set our prices, and yet we’re the ones that have to pay for all the inputs and everything that goes into these calves … so it’s sort of a perfect storm that’s happened to us.”

As a 32-year-old and the fifth generation at Haugan Land and Cattle Co. near Orion, south of Medicine Hat, he enjoys working outside, doing something he loves that is connected to a family history dating back to 1909. Haugen said the true indicator of whether the beef industry is turning the corner is whether more young people start investing in it.

Part of the solution is being able to better manage risk through government programs to help stabilize the industry, he said, “but I think cash is king at the end of the day, and we’re going to need to see prices stay strong and steady for several years.”

Wowk recalled how different things were when she married her husband about 30 years ago.

“Looking back at the way my husband’s father did it for years and years, you could survive on 50 cows and a couple of quarters of land, and you just can’t anymore,” she said.

“You need bigger numbers, you need bigger calves finishing in the fall, you need to manage your land differently. Land is probably our more expensive commodity right now … If you’re still buying land, it’s very difficult to have enough cows run on that land to make your payments.”

Wowk said many producers have changed their practices in the past decade, whether it’s adopting rotational grazing or improving herd genetics.

“I think as cow-calf producers, we continually are not making enough money for what we are doing,” she said.

“I think this became glaringly obvious during the drought and the number of cows that ended up being sold … We’re definitely having an issue bringing young producers in, and I don’t think the question is — I mean, we are always trying to get better at what we do for sure, whether it’s reducing our costs or whether it’s responding to the environmental sustainability pressures that we have on us.”

The cow-calf sector is always striving to move ahead, said Wowk, “but at the end of the day, something has got to happen with these prices. We need to make more money on our calves.”

She looks at her children and the difficulties they face managing risk and debt.

“It’s very difficult to pencil out cows making sense right now … so, I don’t know. It’s very difficult to say where the industry is going to go.”