I have been following a lot of discussions and reading many articles in recent weeks weighing up the long-term profit potential of the recent rise in feeder and fed cattle prices.
Everywhere you look, food prices are rising and up to now the only ones I have heard complaining are the TV talking heads sensationalizing about how vast numbers of Canadians will not be able to make ends meet. This is a laugh considering that “Food Freedom Day,” which is the average length of time a person, needs to work to cover their yearly food bill is February 10. The perpetuation of cheap food continues. We are still a society that values more what we drive and what we wear, than what we eat.
To this I say let them eat cake!
Of course, there are many in our business who worry beef will become too expensive for the average Canadian and that eventually prices will have to come down in order to maintain demand for our product. To this I say, Canadian beef trades in a global market so more people than just Canadians eat our product. They are willing to pay the price, hence prices rise. Second, beef requires the most time, the most land and provides the lowest meat yield to live weight of any protein product. It is expensive to produce and should be priced accordingly, not compared to chicken or pork. Finally, perhaps it is time the margin makers between the ranchers and the consumers, like the retailers, reconsider their runaway 40-point margins of the past at the retail counter and learn to work with 20 to 30 points.
On the other side are those who worry that the rapid rise in prices will be coupled with rapidly rising input costs, which of course would negate any gains in profitability. To a point I agree with this statement. Modern agriculture that used to rely on solar energy to convert one unit of energy into two units of output has become a business that consumes two units of nonrenewable energy to make one unit of food energy. In other words, mainstay agriculture in North America is a fossil fuel junkie. If your business is dependent upon lots of diesel for production, your profit potential from the upswing in food prices will be limited. Many will be spending more money than they ever did in order to make the same returns.
Where does that put ranching? I guess if you run an operation that believes in a five-star lifestyle for your cows and you have forgotten that cows are four-wheeled forage bio-digesters, you will be in the same boat as the rest of agriculture. Your price increases will get squeezed by input increases.
The beauty of the beef business is that you can create a ranch and business that is relatively independent of rising fossil fuel costs.
The opportunities are endless. But it starts by working with nature, not against it. Personally I believe more than ever that if someone calves in winter, which is anything before April, they have more money than marbles. Think about it. The cost of the facilities to calve, the bedding, the baling required to make the bedding, the manure that needs to be hauled and spread, the higher-quality feed that will be needed to maintain the cow’s condition during lactation until green-up, the cost of labour and most of all the diesel burnt doing all of that. Wait until the end of April and many of those costs can be eliminated or significantly reduced.
Then take the next step and realize that cows can access feed. Instead of the feeding for seven months and grazing for five, graze for seven and feed for five. If you get good at it you can probably get nine months of grazing and three months of feeding. While you switch your grazing-feeding philosophy, add some legumes like alfalfa to your pasture mix. Having 30 per cent-plus alfalfa stands eliminates the use of nitrogen fertilizer and another bill to pay at the end of the year. Highly productive pastures produce more beef on the same acres, so learn the art of rotational grazing. Not only will you gain in stocking capacity you might even lose a few pounds by moving those fences.
Start selecting for cattle that thrive under these low-input systems with minimal and/or no supplementation. Look for bulls raised under these conditions so they will do more with less and produce feeders that will convert better and get fat faster.
Stop selling calves and add valuable weight to them with your renewable forages so that the cattle are fed for shorter periods on expensive grains to put on gain.
The reality is profitability in the beef business is all about choices and too many people still have not made that paradigm switch. Producing beef takes time, but it is very flexible in how it can be produced, meaning you can make it more profitable than ever with these new price levels we are getting for our cattle today.
If, however, you do what you have always done you will always get what you have always got, even in times with higher prices.
Dr.ChristophE.WederisapurebredAngusbreederinthe PeaceregionofAlbertaandalsorunsSVRRanchConsulting. HeisalsoafoundingmemberofPrairieHeritage BeefProducers.Foradditionalinfocheckout www.spiritviewranch.com.
We are still a society that values more what we drive and what we wear, than what we eat