The Western Canadian farm sector has long dreamed of a period of high grain and oilseed prices.
And we are certainly in the middle of such a cycle at present.
The prices have been at record levels across most crops at some point in the past two, or three years, and they appear to be staying high through 2013.
In fact as the snow continues to blanket the fields, and more is falling as I write this, the likelihood of a late spring looms over the Prairies.
At a time when the market is already signaling strong prices, a late spring in a major grain export region such as the Canadian Prairies only helps support those prices staying strong.
That is of course great news for the grain sector.
But there is an opposite side to most stories, even the good ones, and that is the case here.
When grain prices are high it is bad news for the livestock sector.
The impact has already been seen in the hog sector where high feed costs were certainly a contributing factor to major production units falling into baths of red ink and receivership.
The hog sector is one which went from being a shining light of rural economic development to one where its very existence seems to hang under a very dark cloud.
Long gone already is the only major pork processor in Saskatchewan.
Existing production units might manage to survive based on reduced investment as second and third owners pay lower than new build costs, but the recent vision of expansion of the sector are well-faded.
So high feed costs, labour, and similar economic factors hit the pork sector hard.
The same elements also impact the beef sector, in particular the feedlot sector.
A feedlot has two major costs, the calves to feed and the grain to feed them.
While feed cattle prices are at record high levels the sector is still seeing massive losses, of $100-plus per head.
The reason for the losses go back to the two major inputs; high priced calves and the high feed, which of course influences calf prices we well.
When losses hit $100-plus a head, the bottom line at a big feedlot gets to looking ugly in a hurry.
That said large units often hang in longer based on investment factors, while smaller feedlots, like the one which was located near Rhein, SK. have already closed. The closure is one which really exemplifies the pressure the sector feels. It was only a few years ago the feedlot was the Yorkton Chamber of Commerce Business of Year recipient, and now it is mothballed in the face of cost/return pressures.
It is interesting countries such as China, Korea and India are seeing strengthening economies enabling people there to add more protein through meat to their diets and we see the livestock sector shocked and shrinking here. It might seem we are facing such a decline at a very inopportune time.
