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The business of beef in Canada

There’s no such thing as commodity beef anymore, says Alberta feedlot producer Ryan Kasko. It’s an attitude that is transforming the heart of Canada’s beef country

Canada’s beef industry seems like it’s built on a contradiction. It’s a sector living right on the edge of the future. Every aspect of production is undergoing change. New technology is revolutionizing how herds are raised and managed, and new consumer preferences are raising the bar in their own way too, perhaps faster in beef than in any other sector. And there’s internal change as well. As business leaders, today’s cow-calf producers and feedlot owners are adopting amazingly sophisticated financial and HR management systems.

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Yet this is also an industry that values its traditions, and where, in many circles, a person’s word is as good as a contract.

Perhaps that sounds romanticized, or even a little nostalgic, but in this industry, the stereotypes ring true. If you want to see cowboys roping calves for an old-fashioned branding, you’ll have no trouble finding such a ranch in parts of Alberta or Saskatchewan. Except, you can be quite sure that those calves will also be getting a plethora of vaccinations, an RFID tag, and perhaps even a long-acting painkiller.

Plus, this industry has become incredibly diverse. There are myriad ways to raise a calf, market it, and make money on it, and all of them are happening simultaneously.

So what are the challenges the sector faces? And what are people in the industry doing to not only survive these challenges, but to thrive in the face of them? Country Guide spoke to players throughout the industry to find out.

Risks abound

On a blustery spring day at Round Rock Ranching, the McGrath family place south of Vermilion, Alta., Sean McGrath turned the tractor around to meet me when I pulled in the lane. Two farm dogs, trailing the tractor, rushed along too, tails wagging.

As I said, there’s a lot that’s still traditional about beef. In fact, Round Rock Ranching is a fifth-generation family venture, and today it includes McGrath and his wife Tanya, plus his parents, Fred and Anne.

"I always say you can’t teach a stick to fetch a dog. The consumers I worry about are the ones who have opinions and aren’t willing to go out to an agricultural operation anywhere.” – Sean McGrath, Round Rock Ranching
"I always say you can’t teach a stick to fetch a dog. The consumers I worry about are the ones who have opinions and aren’t willing to go out to an agricultural operation anywhere.” – Sean McGrath, Round Rock Ranching photo: Lisa Guenther

Their cow-calf operation runs 250 cows, with about 40 purebred Angus, and they sell Angus-Simmental replacement heifers. The cows graze pasture into December or January, and also graze bales, corn and swaths, and the family also has land near Meadow Lake, Sask., where they custom graze.

McGrath and I sit down at Anne and Fred’s kitchen table for the interview. Before we start, though, the four of us discuss the merits of a good ranch horse and a good farm dog.

I’m quickly reminded, however, that despite the homey setting, beef producers like the McGraths face a host of challenges and risks, including volatile cattle markets.

Alberta beef producers can protect themselves against price drops through the Western Livestock Price Insurance Program, and McGrath says they have used it in the past.

“We’re really struggling with it… the price premium versus the coverage is not economical right at the moment,” McGrath says.

That high premium is another symptom of the risk level in cattle. It’s a tough call, he says, and like others in the industry, he believes that ultimately the best way for cow-calf producers to manage risk is still to keep a tight rein on production costs.

Cow-calf producers aren’t the only ones who wrangle chaotic markets — so do cattle feeders like Ryan Kasko of Kasko Cattle Company.

“The market risk when you’re selling the cattle can be so volatile that there’s potential to lose $200 or $300 a head. And there’s sometimes potential to make that much,” he says. Kasko Cattle runs four feedlots in southern Alberta, with a total capacity of 44,000 cattle. They own their own cattle and also custom feed for others. They farm too, growing everything from corn silage to sunflowers.

Yet Kasko didn’t grow up on a farm. His father, Les, was a cattle buyer. After finishing university, Kasko went to work with his father, buying cattle and exporting them to the U.S. In 1997, the Kasko family bought their first feedlot, near Raymond, Alta.

The very next year, they got a taste of the political risk cattle feeders face. The U.S. imposed an anti-dumping duty, charging a tariff every time they sent cattle south. Add BSE and country-of-origin labelling, and you end up with a significant list of political challenges, Ryan says.

Currency swings are another risk. Cattle futures are traded on the Chicago Mercantile Exchange. Packers pay in Canadian dollars, but they base their pricing on the U.S. market.

Since Kasko got into the feeding business, the Canadian dollar has swung from $0.60 to $1.10. “That has a huge impact on how we market our cattle.”

Feeders can manage those risks through a variety of financial tools, including signing contracts with packers, using the futures market, enrolling in the Western Livestock Price Insurance Program, and by trading the Canadian dollar.

“As time has progressed, I think there are probably better tools. And people are more savvy to help manage their risks when it comes to the financial side,” says Kasko.

Feeders also face production risks. The input cost of buying cattle is huge, says Kasko, and then feeders need those animals to gain and stay healthy. Kasko Cattle has its own full-time nutritionist, and works closely with veterinarians to keep animals in good shape.

At the same time, Kasko is well aware of his production costs. Over the last 10 years, the average annual profit was $18 per head for feedlots, he says. Now, new workplace rules in Alberta will add costs, and Lethbridge County is imposing a new $3 per cow levy to raise funds for aging infrastructure.

Northeast of Kasko, Jaylyn Ettinger knows all about production risks too. She and her husband, Grant Marchand, raise Highlands in east-central Alberta at Willow Glen Farm. When I first contact Ettinger in mid-April, she has six calves on the ground, and another 28 to go. She plans to calve out 44 cows in 2017, as they slowly build their herd.

Ettinger says the things that are outside of their control are the biggest risks. Drought and grasshoppers are top of mind after Alberta’s tough 2015. Right now they don’t grow their own feed, she says, so they took a big hit last year.

But, Ettinger says, “you ride the highs and the lows.”

"People need to realize there’s plenty of room in the sandbox, and that there’s more than one right way to raise beef.” – Jaylyn Ettinger, Willow Glen Farm
"People need to realize there’s plenty of room in the sandbox, and that there’s more than one right way to raise beef.” – Jaylyn Ettinger, Willow Glen Farm photo: Marsha Peacock

One way they manage their risk is by setting their own prices for beef they sell directly to customers. Ettinger says they try to keep prices consistent year to year to build loyalty so customers will stick with them when beef prices drop in grocery stores.

People are willing to pay more for specialty beef, but it still comes down to their pocketbooks, says Ettinger.

“And if you can’t afford it, you can’t afford it,” she says. “We really struggle with that because you don’t want to make your beef unaffordable.”

Willow Glen Farm is fortunate to have an excellent provincially inspected abattoir within a 30-minute drive, Ettinger says. Bouma Meats of Provost is willing to work with horned animals. They skin carefully, so Ettinger can keep the heads and hides, which have a niche market of their own.

Like all good butchers, Bouma Meats is busy, so Willow Glen must book well in advance, which puts pressure on finishing.

Still, Ettinger isn’t complaining. If they didn’t have a good butcher nearby, they would have to rethink everything, she says. “That butcher is probably the single most important thing.”

It’s not just direct marketers such as Ettinger who rely on a good butcher. The bulk of Western Canada’s beef is processed at one of two Alberta packers — the JBS plant in Brooks or Cargill in High River. Harmony Beef, a family-owned plant near Balzac, Alta., is expected to open soon and start exporting to the European Union. However, it has been held up by concerns from the nearby city of Calgary.

There are already some doubts, however, whether cow herd numbers are high enough to support two packers. McGrath is even concerned if they can support feedlots.

“How many people are going to exit?” McGrath wonders. “What’s going to happen to that infrastructure?”

McGrath thinks the industry could double cow herd numbers by better managing grazing. But it’s difficult for cow-calf producers to scale up gradually, he says. And while producers are better at managing larger herds more efficiently than they used to be, there aren’t a lot of new entrants to the industry.

From the Cargill desk

Supply constraints are among the biggest risks Cargill faces, Connie Tomato, communications and community relations manager for the company, confirms via email.

Cargill faces a litany of other risks, and many are the same ones faced by the entire supply chain. Tomato lists trade barriers, regulation, potential disease outbreaks, currency fluctuations, competition from other proteins, and misinformation spread by anti-meat NGOs and activists. As in many other businesses, labour is a key issue as well. And their supply can be affected by the same production challenges cow-calf producers face, such as drought.

Yet Cargill sees opportunities as well. It sees growth both for exports and for the domestic market, which includes food processors, retailers, and food service, Tomato says. Cargill for instance is focusing on “case-ready” products, with meat packaged in trays, boxed, and shipped to retailers.

High-quality beef is Canada’s strength, Kasko agrees, and he also sees global and domestic opportunities.

“We’re not going to be the cheapest product in market, but I think we can really show that we’re the best,” Kasko says. “If you want a good eating experience, we can help deliver that to you.”

Kasko obviously takes pride in the beef he produces. When I comment on “commodity beef,” in an effort to differentiate it from more specialized beef, he politely takes exception. He produces conventional beef, he says, but he doesn’t see it as a commodity.

“We’re using the best technologies that we can use to produce the beef as efficiently as we can. And it’s high quality.”

As the industry rebuilds the cowherd, it’s also a good time to develop even better genetics, Kasko adds. This will build up more feed-efficient cattle with the marbling traits that consumers want.

McGrath also sees a huge opportunity in improved genetics. The industry does it well, he says, but they’re poised to do it even better.

Genomics can jump-start selection for more feed-efficient cattle, and cows with longevity and fertility, McGrath says. Those traits help pay your bills, he adds.

McGrath recently helped find bulls to test for a Genome Canada research project. All the McGrath’s purebred cows and bulls get high-density DNA testing. The McGraths also use DNA tests to verify the sires and dams of commercial heifers.

“It’s cheaper for us to do that than it is for us to tag them when they’re born. We can run multiple bulls, get improved conception rates,” says McGrath. Even that basic knowledge for commercial producers is huge, he adds.

It’s all in the records

Round Rock Ranching has sold calves directly into specific feedlots, and also taken them to auction. Usually they background them, but last year they sold them in the fall, due to the markets. Whatever route they go each year, the McGraths market them ahead of time with information on the animals’ genetics and the ranch’s health protocols.

A growing need for paperwork runs through the entire supply chain. Kasko Cattle says much of the record-keeping is linked to food safety, such as withdrawal times for medicated products.

They have chute-side software programs to track treatments and they double-check withdrawal times for every animal they ship. They’re also audited several times a year. A micro-ingredient machine allows them to track exactly what they’re feeding each animal.

But animal welfare and environmental sustainability are wrapped into the feedlots’ records, too. Much of the record-keeping is daily. It’s kind of endless, Kasko says.

One of the buyers driving that change is McDonald’s. Both McGrath and Kasko participated in McDonald’s earlier sustainability initiative. That pilot project has since morphed into the Canadian Roundtable for Sustainable Beef, which is run by a council with representatives from across the supply chain. Cargill has a seat at that table, as do people representing McDonald’s, JBS, environmental groups, food retail, the cattle feeders and the cow-calf sector.

Ettinger is also attuned to what her customers want — grassfed beef. “I know most of my customers are very insistent that they have no grain,” she says.

Though Ettinger is selling directly to her customers, she hasn’t escaped the paperwork burden. When she sells livestock, the new owner gets detailed health records for each animal. Beef customers can also get health details on the animal they’ve purchased.

Willow Glen has gone through Verified Beef Production to ensure food safety. Generally her customers don’t know about the program before touring the farm, but it gives her a framework for explaining production practices such as antibiotics for sick animals.

The Ettingers expect their record-keep­ing will serve Willow Glen well as they expand their customer base, especially as they increase sales to commercial customers, such as restaurants.

Yet most cow-calf producers don’t sell directly to consumers, and Kasko has mixed feelings about sharing data up and down the supply chain. His company has its own database that tracks information such as carcass grades. It’s valuable to their business. But cow-calf producers aren’t likely to get much value out of that kind of information unless they’re already doing basic record-keeping.

Kasko does see value in industry organizations connecting different segments in the supply chain at conferences and other events, so they can have those conversations. People need to focus on what’s important to their customers in the supply chain, he says.

His advice to cow-calf producers is simple: “Drive to a feedlot and ask if you can get a tour, and understand what’s important. What are feedlots wanting?”

Connecting consumers to the farm

Although not all of Willow Glen Farm’s customers want a connection with the farm, most do. They want to know exactly how the animals were raised. They ask tough questions, Ettinger says.

Ettinger loves her animals and her farm, but she confesses she doesn’t quite understand why what she does is so interesting to other people. She has complete strangers calling her, asking if they can come out for a visit. She even gets hugs from her customers.

“It’s difficult at first when you’re direct marketing to put yourself out there, especially if you’re a more private person. So that is daunting,” she says. “But in the end, you meet some really, really cool people.”

It’s not just direct marketers opening their doors to visitors. Both McGrath and Kasko have welcomed visitors. In fact, Kasko says they plan to be more proactive this year, and to invite school and youth groups for tours.

McGrath says they have nothing to hide, and welcomes both ag supporters and critics. Not everyone who visits Round Rock Ranching is going to get their mind changed about agriculture, McGrath says, but at least they’re willing to come out and have a look.

“I always say you can’t teach a stick to fetch a dog. The consumers I worry about are the ones who have opinions and aren’t willing to go out to an agricultural operation anywhere,” he says.

More and more, livestock producers are using social media to connect with people. Ettinger says the people who are doing it best are using it to tell a story. Direct marketers can’t afford to be too argumentative or preachy, she says.

“Your customers know what they want. And all you can really do is be open and honest and say what you do. And they’ll decide whether they want to buy your product or not.”

She’s a fan of using pictures to tell stories, but she thinks it’s important to show the less picturesque side of farming, such as using IVOMEC to control parasites.

Shared values

Ettinger and McGrath are equally critical of marketing that pits one type of beef operation against another.

“I think people need to realize there is plenty of room in the sandbox, and that there’s more than one right way to raise beef,” says Ettinger.

Many ranchers are familiar with both sides of the fence anyway. Ettinger grew up on a commercial ranch herself, and her parents still raise cattle just down the road from Willow Glen Farm. McGrath also sells some direct beef.

The reality is that today’s customers can order specific things on their iPhone, McGrath says. “What individual people want is what we will need to deliver going forward. That’s my sense of it.”

Ettinger says people throughout the industry share the same core values around environmental stewardship and animal welfare, no matter their production methods. She thinks the new sustainability modules the Verified Beef Production program is about to roll out will be helpful. She’s a fan of the Beef Research Council’s website too, which includes webinars and other resources.

“And I think the industry is doing a great job at research and having that science to back you up,” she says.

Ettinger’s praise for science-based animal welfare and environmental stewardship echoed through the other interviews. Like Ettinger, both Kasko and McGrath are part of the Verified Beef Production program. Kasko says the industry is raising the bar on animal welfare, food safety, and employee health and safety.

Cargill’s High River plant has interesting technology to raise that bar, too. A hide-on carcass washer targets food safety. A third-party remote video auditing system monitors animal welfare.

After we finish the interview, McGrath takes me on a tour of the ranch. We check out a bale gazing site, where he’s collaborating with federal government researchers. Game cameras track whether cattle prefer to graze where the bales sat. Sensors in the ground measure soil temperature and moisture. Researchers collect water samples from wells to look at nutrient levels.

Meanwhile, the landscape next to the field slopes into a coulee, with shrubs, poplar and native grasses that green up with the spring. The view is a reminder that although the industry is changing, the land itself is a constant.

Other things remain constant, too. It’s an industry with high integrity, Kasko says, and that’s part of the attraction of the business.

“I implicitly trust most people that I’m dealing with until they’ve proven me wrong. And that doesn’t happen very often.”

(For more on Sean McGrath explaining how they market their cattle, watch Lisa Guenther’s video interview)

Case 19 versus BSE

For Canada’s beef industry, the first case of BSE in 2003 was nearly a ruinous event. In 2002, cattle exports to the U.S. topped 1.6 million. The next year, exports tumbled to about 500,000, and in 2004, they had virtually dried up, according to Statistics Canada.

The industry is still climbing out of the BSE crater. Taiwan has slammed the door on Canada’s high-value cuts. Meanwhile, the meat and bone-meal markets in the U.S. and Indonesia are shuttered to Canada.

“There’s two things going on. There’s the BSE, going way back to 2003,” says Ron Davidson, director of international trade, government and media relations with the Canadian Meat Council.

“And there’s Case 19. And Indonesia is Case 19. Taiwan is Case 19. But the U.S. is a longer-standing issue.”

Case 19 is Canada’s latest animal confirmed to have BSE. The Angus cow, born in 2009, was euthanized in 2015 after her owner reported her as a downer cow. That report triggered a test under the BSE surveillance program.

She was the first BSE-infected cow to be born after an enhanced feed plan was implemented.

The bone and blood meal market might not sound like much to people outside the industry. But there’s more to marketing beef than selling steaks and burgers. To get the most value out of a carcass, you need access to the best markets in the world for each particular piece, Davidson says. It’s one of the reasons they’re “fighting very hard for the TPP (the TransPacific Partnership agreement) right now,” he adds.

The industry is making strides internationally. Canada’s global beef and veal exports have grown in value from over $1.3 billion in 2011 to over $2.2 billion in 2015, according to Stats Canada numbers provided by the Canadian Meat Council.

Our biggest export market remains the United States, in both volume and value. Last year Canada exported over $1.5 billion in beef and veal.

But other markets are growing. China’s imports of Canadian beef and veal jumped dramatically. In 2011, we exported no beef or veal to China. Last year, our exports to China jumped from just over $40 million in 2014 to over $255 million in 2015. Interestingly, imports in neighbouring South Korea, Taiwan and Hong Kong dropped drastically the same year.

Once a country has reopened its borders to Canadian beef, that doesn’t guarantee they’ll remain open. For example, importers in South Korea are nervous that the market “could go out again,” says Davidson.

Each market is different, he says. “It takes a lot of work.”

About the author

Field Editor

Lisa Guenther

Lisa Guenther is a field editor for Country Guide.

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