Winnipeg Free Press - PRINT EDITION

Fortunes for cattle farmers are finally turning around

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It's no secret the cash-flow situation for grain farmers is looking a little hellish this winter.

Their bins are stuffed with last year's record harvest and the grain trains have been sluggish, to put it mildly. Farm leaders are asking creditors to go easy on their grain-rich, cash-poor customers and the industry's best and brightest -- led by Agriculture Minister Gerry Ritz -- are putting their heads together in search of a solution.

But with about half of this province's grain producers also in the cattle business, there's an opportunity for some, at least, to turn those frowns upside down.

Cattle prices have been soaring to new heights in recent weeks in a nearly complete reversal of the perfect storm that decimated the industry barely two years ago.

Feed prices that went through the roof in the wake of the 2012 U.S. drought have sunk to levels where it is profitable to be feeding livestock again.

The Canadian dollar was weakened against the U.S. currency. And there just aren't that many cattle around.

The annual USDA cattle inventory released in January recorded the smallest U.S. herd in 63 years.While there are signs producers there have started to hold back young animals for herd expansion, it takes about two years for that to increase beef supplies, a time lag some analysts predict could close between one and three U.S. packing plants.

So these prices aren't going away any time soon.

"There is nothing in the report to cause us to doubt we're going to have a lot of record prices for both cattle and beef in 2014 and 2015," University of Missouri livestock economist Ron Plain said in a Reuters report.

He added it might be 2016 before the downward trend in overall cattle numbers is reversed.

To make life even sweeter, Canadian governments have finally come through with insurance schemes for livestock that mimic the kind of backstop crop producers have had for decades.

"The combination of the new livestock-price insurance and the revisions to forage insurance that were announced this past fall will give beef producers a strong and bankable risk-management package," Manitoba Beef Producers president Trevor Atchison said in a release. "This could fundamentally change beef production in this province."

The only thing that would make a Canadian cattle farmer's rosy world complete would be a decision by U.S. politicians to abide by World Trade Organization rulings and reverse their position on mandatory country-of-origin labelling (COOL).

Canada is even threatening to impose duties on U.S. imported goods -- everything from meats, cereal products and ketchup to wine and office furniture -- effectively making Canadian consumers pay for U.S. transgressions. But to no avail.

Legislators down south just signed off on a new five-year farm bill and COOL is staying put, which means the discount on Canadian cattle moving into the U.S. will, too.

Still, industry observers such as Allan Munroe, who runs the Killarney Auction Mart, are witnessing a renewed enthusiasm for beef production.

Who wouldn't be excited? Critters that were selling for 93 cents a pound a couple of years ago have been fetching bids as high as $1.60 a pound.

But it does present producers with a dilemma. Do they hold cattle back and feed some of that low-priced grain they can't sell anyway? That might seem like a no-brainer, and it's traditionally how diversified livestock and grain farms on the Prairies have managed the see-saw between grain and livestock markets.

But recent history is full of examples where producers did just that, only to have livestock prices tank right about the time they are ready to go to market.

The new insurance plans mitigate some of that market risk, but there is still the extra labour and time to consider.

Or do they take advantage of the high cattle prices to sell livestock and bring in some much-needed cash flow?

These high prices are an opportunity for producers nearing the end of their farming careers to cash out of the beef business altogether.

Tough choices, to be sure. But it sure is nice to have options.

 

Laura Rance is editor of the Manitoba Co-operator. She can be reached at 204-792-4382 or by email: laura@fbcpublishing.com.

Republished from the Winnipeg Free Press print edition February 8, 2014 B10

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