The 2020 pandemic has caused major disruptions in the Canadian beef industry, but with demand for their products remaining steady, producers are hopeful their businesses will survive through to the new year.
“A lot of producers are in a pretty tough situation,” says Chad Ross, president of the Saskatchewan Cattle Feeders Association and owner of L-7 Land and Cattle Incorporated, a 1,000-head operation just outside Estevan. Ross points out that beef producers in the best of times experience low margins, and events over the last couple of years have really hit hard.
For him, the Tyson meat plant fire in Kansas last fall was a blow. He had basis contracts on his cattle with slaughter dates, and he was bullish on the markets so didn’t lock in all his prices.
“That really hurt us,” he says.
Ross is a fourth-generation cow-calf producer who has a feedlot and had been backgrounding cattle to 1,000-pound weights. Over the last three years, he’s also been taking cattle — his and neighbours’ — through to finish.
Things were actually looking good early this year, with demand up, especially for all kinds of protein in China, which was going through a bout of African swine fever. He says there was lots of activity promoting beef sales both domestically and for export.
Then COVID-19 hit. Federally inspected meat plants in Alberta were closed or partially closed because workers had contracted the virus. There was a ripple effect through the supply chain resulting in a backlog of animals due to be slaughtered. This left feedlot operators like Ross with nowhere to ship their cattle.
While the plants are back up and running, industry experts say the backlog likely won’t be cleared up for months.
Ross had lost money last year, so for 2020, he had decided not to take his cattle right to finish. He was targeting May or June for marketing his steers, but with the pandemic, that would mean losing $300 a head — selling them was something he just could not afford.
Instead, he put them on a maintenance diet with high forage content and then put them out on grass.
“They’ll be hitting the 900- to 1,000-pound mark around August, so we’re hoping that the markets recover by then,” Ross says.
Brad Welter had a different initial experience but eventually faced the same problems.
Welter is president of Pound-Maker, a Saskatchewan company that owns a feedlot with capacity for 26,000 head of cattle and an ethanol production facility. It has been in operation since 1970, when a group of farmers got together because they were looking for a new market for their grain. Its shareholders are still local farmers.
The company was not doing too badly before COVID-19 struck and Welter says that March was a big month with a lot of cattle killed.
“We came into the pandemic as current as we could be, but April really put a wrench in things,” Welter says.
As of May 20, his company was feeding 20,000 cattle, and was able to move small amounts of cattle to slaughter. But he was bracing for the effects of the backlog.
“There were estimates of a 100,000-head backlog early in the month, going up to 150,000 or 180,000 by the end of May,” he says.
His strategy was to also source more oats and roughages to slow down the cattle’s weight gain.
“We’ll be feeding less calories — making them somewhat inefficient for 60 days,” he says.
Another option he mentioned was to apply to the federal government’s set-aside program to help producers, like Welter and Ross, who had to continue feeding their cattle longer than normal.
Early in May, Ottawa had announced $50 million in AgriRecovery funding for Canadian cattle producers and two weeks later Saskatchewan added $10 million to that province’s share. Alberta had already announced $17 million for the same program.
While he thinks it’s a good idea and plan, Welter says, “It’s not enough. We know what the backlog is and the cost of feed — this won’t even cover half of it.”
Still, he intended to apply, once details were released and the program got up and running.
Welter also had a warning about the coming months.
“We’ve got some time before cow-calf producers feed into the system,” he says. “But if the backlog isn’t cleared up by the fall, when they typically sell calves, it will be a real issue — we’ll have more supply than pen space.”
Looking to the future
Despite all the setbacks, Welter believes the beef industry is still viable in Canada.
“This is different than BSE — then, we had the capacity to kill, but no market, whereas now, there’s world demand, there’s a market, but capacity is the problem.”
In 2003, when BSE (bovine spongiform encephalopathy) was discovered in a Canadian beef herd, the U.S. and many other countries closed their borders to the nation’s beef trade.
At the centre of the current issue is the ability of meat plants to get back up and running with all the new procedures and equipment put in place to prevent another COVID-19 outbreak among workers.
“Before COVID they were killing 45,000 to 46,000 head a week,” Welter says. “By mid-May, that was down to 25,000 head, although they are ramping up again.”
He adds that he didn’t know if they’d ever get back to pre-COVID numbers, but was hoping that the backlog could be cleared up in 2020.
Having only two federally registered meat plants in Western Canada is a problem, according to Ross. Both plants are in Alberta and both the Cargill plant in High River and the JBS plant in Brooks were affected by COVID-19. According to the Canadian Cattlemen’s Association, they represent 70 per cent of Canada’s beef processing capabilities.
“We can’t be limited to two big processors — 20 or 30 years ago, farmers would finish their production and haul to Brandon, Moose Jaw or Saskatoon,” he says, adding that smaller plants would be beneficial for smaller producers who have to incur higher transportation costs per head.
He says that being able to add value to beef cattle right in Saskatchewan would help, but recognizes that meat packing is not an easy business either, and that the companies have to have economies of scale to make a living.
It’s a sentiment shared by Welter.
“It’s a tough business — you have to compete on price for the cattle as well as on price for the meat,” he says, adding that in order to compete for exports with big foreign companies, Canadian packers need to be big, too.
Welter thinks that plants might need to be expanded to accommodate worker safety and fit the supply of cattle. In addition, automating some parts of the process could help increase the space needed between workers.
“It comes down to processing — when they can ramp up, pricing won’t be an issue, There will be extra costs, but if we can get the plants running at some meaningful capacity, we can get this fixed.”