Cattle producers and retail markets are bracing for impact as meat processing plants go idle or slow production.
The High River Cargill plant announced its temporary closure on April 20, and days later on April 23 the Tyson Foods plant in Tyson, Washington – which processes large numbers of Canadian cattle – also announced a shutdown due to COVID-19. The JBS Canada plant in Brooks remains open, but has limited its production line to about 25 per cent of its regular capacity and only one shift.
It’s taking its toll on cow-calf ranchers and local feedlots as they handle the backlog of cattle not being processed. Between Cargill High River and JBS, around 10,000 head of cattle were being processed per day.
“Without them processing, the industry just backs up with cattle,” said Doug Price, owner of Rimrock Feeders, west of High River.
A two-week shutdown would mean between 100,000 to 140,000 head would be stuck on feedlots or ranches, unable to be processed. It will mean a lot of work to be done down the road in order to catch up, he said.
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In the meantime, feedlots like Rimrock are incurring extra costs of $3 per cow per day in feed.
The market is also beginning to feel the crunch as less cattle is running through processing plants.
“As soon as you have a big supply hanging over you then everybody’s trying to get them processed, the bigger the supply, the prices go down,” said Price. “Then the producer, whether it’s us or anybody else, is really motivated to get them processed and what’s the price? It’s whatever they’ll give you for it, because they cost you money every day you got them.”
If it’s short-term, producers like Rimrock can handle it because although the additional cost per head hurts the bottom line, the cattle are still gaining weight and staying healthy for sale at some point, he said.
But they will take a major hit on the sale price, he said.
“We’ve moved from $1.40 a pound to $1.20 or $1.15 since Cargill went down. We’ve probably lost $300 a head in the market,” said Price.
While it’s frustrating to see the value of cattle drop, he said it’s worse for the end consumer, who will see a hike in prices at the meat counter as supply drops.
“Consumers are having to pay too much for beef, and we’re not getting enough for it,” said Price. “It has a massive impact on the whole industry.”
It’s going to take a while to turn around, he said. Getting production back up at places like Cargill or Tyson – and even ramping up the line at JBS – won’t happen overnight.
Between COVID-19 outbreaks among workers and healthy employees citing fear of going into the plants, he said it will take time for processing plants to return to even 50 per cent capacity.
“I think we’re looking at pretty tough times for quite a while,” said Price.
That’s what the Canadian Cattlemen’s Association (CCA) has been preparing for.
The organization began discussing the potential for shutdowns before they happened, and continues to analyze the situation daily.
Dennis Laycraft, executive vice-president of the CCA, said cattle prices have been falling consistently since the beginning of April due to COVID-19, and further dips in value as plants slowed down or closed. He said the association estimates a loss of about $500 per head.
“That’s a huge impact in an industry that normally has pretty small margins,” said Laycraft. “You’d be happy to have margin a tenth that size. These are huge losses.”
While the ultimate solution is to get processing back up and running, he said the timeline there is unknown and in the meantime the CCA is recommending transition measures to the government to help Canadian producers manage their inventory and financial hits.
For inventory management, the organization recommends reviving the set-aside program it implemented 17 years ago during the BSE outbreak.
“Essentially we would take a certain number of animals that are in the feeding system and you put those on a maintenance ration to slow them down, you sort of set them aside,” said Laycraft.
The program would also look at slowing down feeder cattle that would normally be transported to pens and holding them back further in the system, down to keeping them on ranches and farms until capacity returns.
Some heifers would also be returned to cow-calf producers to ensure they’re not coming into the feeding system right away, he said.
“With our cow herd at a 30-year low there’s certainly some room to retain some more heifers,” said Laycraft.
In addition to managing inventory, he said the CCA is suggesting a livestock price insurance program to offset premiums that have risen 300 to 400 per cent with volatility in the market, making insurance programs least affordable when they’re needed most.
“We’re recommending the government help offset the increase in the premiums so we have an affordable insurance program, similar to what crop insurance is for crop production,” said Laycraft.
Lastly, he said the CCA has asked for a program to help financially, similar to how the government helped out canola companies when they were locked out of China a year ago. The interest-free portion of the advanced payments program was increased up to $500,000 and the cap was raised to help those producers with cash flow during the crisis.
The same should be done now for beef producers, he said, adding fast action could have huge impact on the industry.
“There’s quite a comprehensive list of things, many of which if we move quickly can help producers early to manage the program, then the more you can get through with less severe losses,” said Laycraft.
Foothills MP John Barlow said the government is keeping a close eye on the industry, which has already seen the impact of Cargill’s closure one week later. Ranchers and farmers are going to start feeling the hurt soon, he said.
“There’s a real ripple effect throughout the industry as the cost of feed, the impact on the sale, there are some real issues these guys are having to deal with,” said Barlow. “If you can’t keep them at home on pasture and you have to buy feed it’s costly.”
Krista Conrad, OkotoksToday.ca
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