Western Feedlots closure seen hurting prices

Winnipeg | Reuters — The closure of one of Canada’s biggest cattle feedlots is likely to depress prices of young cattle and the grains used to fatten them, and may increase sales to the U.S., industry officials say.

Alberta-based Western Feedlots said Wednesday it will shut feeding operations early in 2017, citing poor market conditions and unfavourable economic factors in the province.

“The market we’re in now can’t get much more depressed,” said Martin Zuidhof, chairman of Alberta Cattle Feeders’ Association, a rancher who also runs a feedlot.

The price of young cattle is likely to face pressure, and if it leads to fewer cattle raised in the province, could jeopardize profits in the packing industry, he said.

The price of slaughter-weight cattle has dropped 30 per cent from a year ago.

Alberta’s two biggest beef packers, Cargill and JBS USA, declined to comment.

Barley and wheat are fed to cattle to fatten them for slaughter, and Western’s closure may also weigh on prices of those grains if feeder cattle numbers dip, Zuidhof said.

Canada is the world’s sixth-largest beef exporter, and Alberta raises more cattle than any other province.

Canadian cattle prices are mostly affected by U.S. prices and the value of the Canadian dollar, although domestic conditions play a role, said livestock industry analyst Kevin Grier. Consumer meat prices are unlikely to be affected by one feedlot’s closure, he said.

“In principle, it’s going to depress the demand for feeder cattle,” he said. Western’s closure may result in ranchers selling more young cattle to U.S. feedlots, he said.

Despite Western’s plan to stop fattening cattle, Alberta is not likely to lose more feedlots, the province’s agriculture minister said. Agriculture Minister Oneil Carlier said he spoke with a feedlot industry group last week.

“No one indicated that to me,” Carlier said in an interview. “There is good news on the horizon and I’m hoping the decision taken by Western Feedlots was… not going to affect the rest of the industry.”

Carlier said his government, criticized by Western, has supported the cattle industry, including increasing a loan guarantee program for producers.

— Rod Nickel is a Reuters correspondent covering the agriculture and mining sectors from Winnipeg.