Cattle feeder, beef producer group release new industry competitiveness study

The Alberta Cattle Feeders’ Association (ACFA) and the Alberta Beef Producers (ABP) recently conducted an industry competitiveness study to evaluate the industry’s ability to profitably maintain or enhance the market share of the Alberta beef industry in relation to its American counterparts.

Key highlights from the report include:

  • Beef cattle sales in Alberta amount to approximately $5.7 billion at the packing level and $5 billion at the farm level;
  • Based on sales and Statistics Canada industry multipliers, the Alberta beef industry generates approximately $18 billion in total economic activity;
  • The industry creates more than 57,000 jobs indirectly on farms and suppliers across Canada; and,
  • Production and trade data shows Alberta’s industry was generally competitive over the past decade.

The report looks closely at Alberta’s competitiveness against three states including Nebraska, Kansas, and Texas, and there were overall more similarities than differences when comparing all four regions, as part of a North American cattle and beef industry structure. Of note, there are few significant differences when looking at just the three states in most aspects including cattle type, production, regulatory and business environment, supply chain structure and presence of the same large packing companies.

“Broadly speaking, these comparisons hold true when adding Alberta into the comparison,” the report states. All four areas are located in the Great Plains and have comparable open-air cow-calf and feedlot operation styles as a result of location.

When looking specifically at competitiveness — defined as the ability to profitably maintain or enhance market share — the report found Alberta is competitive with its only real setback being feedlot capacity erosion since BSE hit the province back in 2003.

Due to industry changes and new cost factors playing a role in the market, the report indicates some trends that could potentially cause decreasing competitiveness for Alberta’s beef should said trends continue. Some of those trends include:

  • Area of greatest loss and concern is the relative size of cow herd.
    • In 2008, Alberta accounted for 23 per cent of the total herd of Alberta, Nebraska, Kansas, and Texas combined. other major cattle. In 2018,  that number dropped, with Alberta accounting for 19.2 per cent of the herd (1.5 million head).
  • When looking at the year, the return on most beef items for packers is less in Canada than the U.S. — on average, the return by Alberta packing industry will be $20-25/head behind the U.S.
  • Most stakeholders acknowledged the reality that winter climate in the province will always have an unavoidable impact on feed and fuel costs; however, relative feed costs are also one of the most variable factors from a competitiveness standpoint.
  • The competitive disadvantage from negative spreads between U.S. corn and Canadian barley is recent, starting in 2017
    • Decreasing availability of feed barley is largely due to the declining acreage share of barley and several years of lower yields.

“The big question for the cow-calf producer is why is the herd not growing in Alberta? Opportunities for higher returns in other sectors, farmland prices, and the cost of equipment and labour make entering the industry more difficult,” says Rich Smith, executive director of ABP. “ABP and ACFA are continually working with governments on producers’ behalf to reduce regulatory burden to keep them profitable and the industry not only viable, but growing.”

Other key areas the report points out have to do with regulatory burdens Alberta producers face when it comes to some of the smaller cost components that reduce competitiveness. Some of those burdens include:

  • Labour issues
    • There is great concern surrounding this, especially for feed lots, when it comes to Occupational Health and Safety requirements, the temporary foreign worker program, and holiday pay
  • Carbon tax
    • An issue for most of those interviewed, as Alberta fuel costs are already significantly higher before the new tax regimen was implemented
  • Transport capacity and cost

“For the fed cattle industry, the most significant operating cost is feed. Alberta has had a historical advantage due to barley, but with recent weather impacts, will that advantage remain in our favour?” says Janice Tranberg, CEO of ACFA. “Then, after stripping away feed costs, the long-term margins in the industry are near break-even. If pending taxes and regulatory policies are put into place in the next year, they translate into losses and potential downsizing of the whole industry.”

The report, prepared by Serecon Inc. with Kevin Grier Consulting, can be found by clicking here.

Listen to RealAgriculture’s Shaun Haney and ACFA’s Janice Tranberg discuss the report below:

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