feedlots

[cowman]

I was talking to a grain dealer yesterday and he told me three feedlots he used to deal with have discontinued operations in the last few weeks. They are in the process of cleaning out the cattle. He also told me two large hog barns that bought from him were in the process of shutting down production.
Apparently the three feedlots got the word from their respective bankers that the cupboard was bare!
Now these were mid sized lots 2500 head, 5000 head, 7000 head. So I guess things aren't all that rosy in the feeding sector after all? I wonder if these lots will ever have cattle in them again? I can see a disaster looming in the feed grain business?.

[amazed]

I sent a couple of B trains out through a broker we have used in the past that has given us very good service. It took 2 1/2 months from the time the contract was signed and then another 6 weeks after pickup before payment was recieved.

Yes I would say things are tight in feedlot alley.

Feed barley won't be high on my crop choices for 2004.

[charliep]

Just to highlight the concerns I would have as a cow calf producer about both empty lots and reduced feed barley production/resulting higher feed prices. Even the malt barley price signal to farmers isn't all that good this year ($176/t at port or $130/t at an Alberta elevator - $2.85/bu).

If acres come down and mother nature steps to reduce yields and/or require the livestock industry to use more annual pasture/silage/greenfeed, then Alberta/western Canada would be a US corn importer again. The price today of imported new crop (Sept. to Dec. delivery) woud be Cdn $170 to $175/t (southern Alberta).

Just to help me get a picture on the feed grain demand side, what is happening with heavier feeders (750 weight plus) that are being held on cow calf/backgrounder operations this winter? How many are going to get put on pasture? How many heifers that could be finished out are going to get a bull tossed out with them and have the replacement heifer game played with them?

[rodb]

Charlie

A good question. I was at a meeting the other morning, where we spent a good portion of it discussing the cattle/grain interface. It doesn't look good for feedgrain demand and I sure don't want to be held Ransom by the CWB for feed barley. Feed wheat will be another dog if we lose more feelots and hog feeders.

I have a neighbour who is winding down his feedlot and hopes to be empty by the end of March. I sold 20-30 thousand bushels a year to him and it leaves a big hole in my marketing program as he was one that I could get to set a basis and we both played the futures.

He is planning on buying a bunch of grass cattle to run on some of his land but if he does finish them he probably will be able to do it with his own grain.

Lots of our small hog guys are going out as the sows get to the end of their productive careers. I know of two that have or are in the process of winding down. Who knows how many others out there are doing the same thing.

Feed mill in Linden has lost a lot of major customers in the last six months and the long term viability of it is being questioned. The animal sector will only be the tip of this titanic iceberg.
Rod

[cowman]

Rod I have to agree about the hog barn thing. There has been a crisis going on in the hog business for quite some time. Doesn't get the flashy headlines but this industry is fast moving towards extinction! I know of three fairly good sized barns that have stopped breeding sows. Nothing is going to get these barns back in business. Around here the rotation relies on barley/canola...with barley as sort of a necessary evil...sometimes CPS wheat thrown into the mix. There used to always be a ready local demand for barley but that is fast drying up.
Charlie: You ask the million dollar questions! I suspect a lot of those yearlings will be heading to grass...if there is any grass! Every man and his dog is pretty well loaded up with cows, so don't know if the grass will be there for yearlings. If it comes in dry we could see a really ugly sell down.
I don't know about the bred heifer thing. Seems to me it is a fairly risky venture? I mean if the border opens and prices improve in a big way it might be very profitable but if the border stays closed until after the US election those bred heifer might be worth almost nothing. Whoever guesses right will be a good manager and those that guess wrong will be labeled poor managers! I'm starting to believe luck has a lot more to do with success than how you manage?

[johnboy555]

now maybe the cow calf sector will understand why their not gettind a dollar for their calves..........cowman

[bombay_43]

Johnboy, maybe you could explain that just a little clearer for me.

I realize I am just a bit slower than the average cow/calf producer, but I have real problems understanding it.

Not one cent received in government money here, yet we continue to hear about the tremendous amounts of dollars that tax payers have forked over to farmers. Beef prices in the stores remain on par or higher than prior to May 20.

Our operation is probably equivalent to "frustrated1". Cow/calf operation with canola and barley production to help our now failing cash crop. Doesn't look like CAIS is going to help here. Those who tried to not put all their eggs in one basket, seem to be penalized. We don't take off farm employment from anyone else, and don't qualify for the government aid! Who is getting this money we keep hearing about?

Seems to me the question was posed to you one other time Johnboy, what line of agriculture are you in?

[pandiana]

"Whoever guesses right will be a good manager and those that guess wrong will be labeled poor managers! I'm starting to believe luck has a lot more to do with success than how you manage? " Or if you sold steers and kept heifer or hedged in some other way, that must make you an average manager. I still feel my hackles rise when it some infer that if you are not make a pile of money in the cattle industry, you are a poor manager.

[charliep]

With apologies for asking a quick question, what is happening in Manitoba/Eastern Saskatchewan in terms of feeding out cattle/processing? Along of the lines of the early discussion (perhaps leaving out some climatic factors), it would seem there is some advantage to locating here both with regards to access to cheaper feed and lower cost to import US corn in western Canadian crop disaster years. It may also have a fit if the future industry moves away from the mega sized feedlot/processor business model.

[kato]

Manitoba is a good place to grow cattle, but not great for slaughtering them. Talked to a trucker this morning who said that when he takes a load of fats to Brooks, he can't unload until at least 10 p.m., after the Alberta cattle are done. We are not a priority out there.

The climate is not so bad here, if you have the facilities. The feed grain is cheaper, due to the greater freight costs to export grain. We were hurt much more badly by the loss of the Crow rate than Alberta was.

We don't often have total wipeouts in the grain sector either. The Red River valley seems to miss a lot of droughty stuff, at least, even though Southwest Manitoba and Southeast Sask. can be drier. Land is cheaper, relatively speaking.

We do grow some of the best mosquitoes in North America, though. LOL

[charliep]

I spent some time with valuechain on Friday night and he had an influence on me. So I have to ask the question why Manitoba wouldn't build slaughter facilities? Assuming the border opens for slaughter ready cattle, isn't there a choice of moving animals south to South Dakota/Nebraska versus Brooks?

[cowman]

Johnnyboy: I do understand why the cow/calf sector isn't getting a $1 for their calves. I do realize the money just isn't there. But consider also that in reality $1 will not pay the bills and give the cow guy a sustainable profit. Do you really think the cow/calf guy was rich with calves even at $1.40? So while you feedlot boys might think it is necessary to get that calf down to 80 cents(and it might be necessary) realize that down the road there just won't be enough calves to keep your pens full. Everyone needs to make a buck to make this business work! Now you can bring in US calves and buy cheap subsidized US corn when the farmers refuse to grow a crop that returns them nothing(barley), but if that is the future why bother feeding in Canada at all? Why not just do everything in the US?
What are the costs to wean a calf? Winter feed and bedding about $230? Pasture about $120. Breeding cost about $25? Vet costs about $20? Salt and mineral about $15? Fence/corrals/waters about $20. Cow depreciation about $85? Death loss about $15? Running the tractor/truck about $75? Interest on cow/feed/machinery $40? Maybe a bit of wages to yourself? Say $50? Selling costs? checkoff/insurance/brand inspection/commission/trucking? Say $25?
Now we are up to $720 without any profit! Or for a 600 lb. calf about $1.20! Considering the heifer calves routinelly sell for 10-12 cents less we need in that $1.26 range for a steer calf to break even!
I realize many people figure they can do this a lot cheaper by various methods and by not counting their home produced pasture and feed, but the fact is they could sell that pasture and feed at those prices, so that is the cost.
These guys who are selling 800 lb. feeders into that 80 cent market are taking a bath...make no mistake! More of a bath than the feedlot?
And I haven't even mentioned the absolute disaster of a return on land! That one would make any business person shudder!

[pandiana]

I applaud you, cowman, for telling it like it is.

[rsomer]

charliep: We were one of those who retained our weaned calves last fall and now have 750 weight plus backgrounded calves.
Normally they would be sold this week. We do not have the spare grass to keep our calves as grassers so eventually they must be sold. When they must be sold is the million dollar question. The concern is not the cost of feeding the calf rather what the prices are going to do and how to cash flow the operation without the calf cheque that we are used to receiving in March.
The price of feeder calves is better than it was a month ago. Certainly there is hope that the border will open sooner rather than later but when figuring out when that happens is where the profit is and where the risk is because it might not. I have to decide how much risk I can stand if I want to try and capture the higher calves prices that will be there if the border opens.
If I had a better CAIS margin for 2004 I could just let the calves go at today’s prices and wait for my CAIS cheque which I might not see until late 2005, early 2006. CAIS only protects you from 4 bad years out of five and that is my situation, I think there are a lot of people like that. In 2004 the olympic average is going to drop my one good year leaving me out of the safety net picture so I am left at the mercy of the marketplace. We will be assessing when to sell our calves week by week, but they are not selling this week.
If there is a dry spring we could be looking at a wreck as I believe the market needs a lot of these calves to go out on grass, grass that may or may not be there. How many replacements we can keep may end up being influenced by cash flow as much as anything, the bills need to get paid. That is the one thing I can see for sure, cash flow is going to be super tight no matter what decision is made. My loss will be someone else’s gain.

[johnboy555]

cowman........you say cowcalf man taking more of a bath then the feedlots......By your figures of 800 lbs. at 80 cents equals 640 dollars. and your costs are 720........you just lost 80 dollars per head...........I am talking about feedlots losing 500, what do u call that(a shower) perhaps.

Just read the threads at who whine the most.........i have never seen a bigger bunch of whinners then the cowboys. The feedlot guys have been pretty quite.