Are cow - calf producers making money ?

[The Don]

Canadian Cattleman's Association has an idea that cow-calf producers are making money. In fact the cow-calf producer has not missed making money even today. I discovered that by reading some of the published articles that CanFax (a division of the CCA) has issued.
I must be living in a parallel universe. I'm not making money with calf prices as they are. Other producers that I talk to are not. So who in the cow-calf sector is making money?

[DaneG]

It all depends on how much oil revenue is collected off of the land or how much debt there is to service.
Most years a break even is a win in the cow/calf business.
The CCA is usually comprised of cattle feeders and large multigenerational cow/calf people that don’t know or don’t care about the challenges and struggles of smaller or startup cow/calf operations!

[littledoggie]

We are a start-up cow/calf operation. Bought raw, cheap land in the mid 1980s. We worked off farm for another decade and used OUR OWN CAPITAL to fund the start-up development of the farm. It takes a lot of time. The development never ends, so we continue when we can. Used older machinery, never got in over our heads. Lots of blood, sweat and tears. Drought, BSE, too much moisture. Try living off of $500/head calves. Some years you just WORK FOR NOTHING. Are you determined or not? Do you actually love it, or not? Are you in it for the money or for the lifestyle? Do you love the cattle or not? Have you ever experienced 'running with the cattle', being in the middle of the herd as it mooves along? It is a profound feeling. I love and respect the cattle for what they give to us. They deserve our respect, and I guess that is the foundation of why we stayed with it for this long and why we do what we do and are willing to WORK FOR NOTHING sometimes.

[The Don]

Thanks for the replies.
The current situation makes me question the future of the cattle business in Canada.
I have watched the neighbors grain harvest with lots of new / newer equipment. They will have a very profitable year with grain prices at current levels. Going forward prices will drop but a year like this will pay a lot of bills and provide for a good future. This is a good thing.
The cattle business is not operating like that. I see high prices for the finished product in the store but see a drop in prices for the calves. The excuse that the backgrounders and feeders are having to pay extra for grain and feed is not a good excuse to under pay the cow - calf producer. The cow - calf producer has the same increase in feed costs for their herd.
The number of cow - calf operators is dropping quickly. I think that the number of cattle operations in Manitoba will drop to less than 2000 in the next 12 months. (my opinion)
Importing American cattle is not a good plan for food security in Canada. Governments and Beef organizations seem to think the current situation and beef prices are fine.
What event or series of events will make the cattle business start to pay attention to the producers that are origin of the cattle herd they need?

[Sheepwheat]

It’s always hard to make money if you have the latest and greatest iron. If you needlessly buy something expensive to avoid reasonable physical labor. If you rely on other people’s money to start a new venture, to maintain a new venture, to expand a new venture.

If you say well, I could make x dollars on this land growing a fifty bushel canola crop, versus using the same land for hay, or pasture. I hear that like a lot. While true, it is a false premise. Why compare potential opportunity costs, with doing what you want to do? Is this not a long term game?

Since we have transitioned into sheep, which yes this is a beef forum, but sheep are basically mini cows doing nearly the same thing, money has been far less tight, and the ride in agriculture, far less stressful. I no longer have huge bills outstanding that I hope to heck I can grow the crop to pay. I no longer need monstrous equipment payments, and the costs associated with that. My wife and I rest much easier than we did relying on grain.

Does it cost money to put up hay? Well of course it does, but it is a far cry from the cost of grain farming. I can use machinery that has been paid for since I started farming thirty years ago, and do an ok job. I can not do that grain farming and do an ok job. Immediately my costs are less.

As you know we market our lambs differently, none get sold live so that helps us be the middle man. That is much tougher with cows, not being a niche market, and relying on exports. But still, the actual cash going out for animals is hardly a thing, and I can control it to a huge extent. The cash going out to farm was staggering, and we hit those several tough years, and it nearly did us in. Had we had sheep in those years, we would have sailed through by comparison.

I’d like to see some concrete numbers, specifically in the cost department, because I may well be missing something? Are guys using the opportunity cost that you could gain selling the feed you put up? Are guys using the old “grain I could grow on that land” analogy?

I just want to see how it may compare. I am fine if I am not looking at this correctly. I am really curious is all.

[GDR]

Definately not needing an extra mattress to hide the excess profits these days. I agree with Sheepwheat that you cant look at the alternative of selling feed or growing grain or even your own labour comparing to a job. Your business us what it is, not what it could be. Value adding to the feed you produce is the cattle business. I have cows, sometimes wonder why, but is just part of my life so doubt they are going anywhere. For guys that buy the majority of their feed or rent the majority of their pasture it is not gonna be worthwhile I'm afraid. We have some marginal land that works for cows but not so well for grain, often have damaged crops or residue to use up so it all kinda works together. Right now the money is in grain farming but wasnt that long ago those guys were having trouble paying the bills, lots of cow herds pulled farms through. Next time that isnt gonna happen because the number of mixed farms is dropping all the time.

[GDR]

Time to amalgamate the herd and break out the winter feed. Thankfully had a few extra weeks of crop regrowth for some fall grazing. We've had some pretty hard frosts now suprised some places havent. Was down to -9C one night.

[littledoggie]

YOU CAN'T TAKE IT WITH YOU.

I wouldn't change a thing no matter how hard it can be. It has been a real privilege to live here and do what we do. Feet planted firmly on the ground, not on concrete. Tall trees, not skysc****rs. An actual view to the horizon, not just across the street. Cows! not people. Fresh air, not smog. Quiet, no traffic or traffic jams. No boss. We are independent entrepreneurs and you can bury my heart right here.

[Blaithin]

Brought mine home yesterday. Ah the melodious sounds of weaning. There’s only 10 of them but they still manage to sound like 100. I’m already watching the hay vanish 😵*💫

[The Don]

Well if your business is raising sheep and you enjoy that as a lifestyle then you are doing well. If you can pencil out a profit even better.
Where things become complicated is if your lifestyle changes. marital status, health issues or financial challenges can force you to make changes and have to accept the outcomes.
If you have a bunch of older equipment there is little retained value. If there is no money to repair or replace that equipment when needed then you have a problem. Current increases in parts and maintenance materials (including inflation) may make it impossible / impractical to repair some older equipment. Someday the manufacturer will stop supporting that old equipment.
If you haven't considered this or are unable to get adequate prices (profit) for the goods you sell then you have a problem. Eventually a key piece of equipment will fail and without adequate funds you will have a challenge.
I don't have specific accounting information especially for a sheep operation ... but. My idea of how this should work is that this is a business. You should be adequately paid so you have a proper wage and a return on the money that you have invested. If you have a need to sell off the business there should be enough value retained to have a buyer pay you properly for the business. That way you have not put in all the time, labour and money and get nothing in return.
If you have a few cattle around and they eat "off quality grains" / crop residue and you have someone to take care of things so you can have a vacation every once in a while. Then that's good. But that is not the business that I am referring to. Whatever you are feeding those animals has a cash value. Creep feeding calve those cheap oats may not pencil out so well with $7.50 oats.
I do enjoy country living but I don't want to go broke working hard and being taken advantage of.

[DaneG]

In the first or even second generation livestock operations there is the expense of land ,livestock ,machinery and living if anyone believes they can make payments on all of them they better have a really good off farm income.
I’ve been at it for 30+yrs and my newest tractor is 1978 but I keep them well maintained and I own them all and parts are as or more readily available than for the new ones. I do run newer haying equipment.
As far as having equity in the end hopefully the land and livestock will add up quite nicely.
I have never paid myself a wage maybe that is wrong but I just figured if everyone is decently fed a good roof over their heads and all the bills paid and some recreation time I couldn’t see use in over thinking the finances.

[The Don]

I see things differently.
Just getting by and supporting the farm with off farm income is not a good business plan. You may have made it to retirement but there will be no next generation taking over the operation. If they do they are taking a huge risk.
Backgrounders , feed lots and the packers make money on a margin. Calculate your costs, add a profit margin, lock in a price and you can make money (I know its not as easy as that). The Cow - calf operator is not so lucky. When feed costs for backgrounders and feeders go up they take the cost increase out of the Cow - calf operators wallet.
Considering the up front costs and continued investment the cow - calf sector should (needs to) pay a lot more than it is. We are selling cattle at the same price we got 20 years ago.
This is not sustainable.
There has been a steady drop in the number of cow -calf operators. I wonder if there is there a special number that once the number of Cow - calf producers drops below it then the "Canadian Cattle Industry" will start to think about a change.
We must be getting close...

[GDR]

I agree there isn't enough return to cow calf producers but the answer isnt sending subsidy cheques in the mail. A marketing board/ quota system may work but not too many ranchers would like that idea. Only other way to fix this is more packer competition. You are right that they will suppress calf prices until there aren't any calves left to buy, not sure they have a long term strategy on the books. Just too many places in the world where you can raise cattle cheaper. Also dont think the feedlots dont get squeezed too, that is a feast or famine business.

Really I would like to see a day where the majority of the herd was finished on the farm they were born on. With more of a regional packer situation. Would solve a lot of the environmental, health (antibiotic use), industrial farming image etc. Again not sure that is a common view from most farmers and ranchers.

[Blaithin]

If you look at the UK, they don’t really have large scale finishing operations like feedlots. Mainly it’s farmers finishing a couple hundred head. The problem they run into is they finish them on whatever - potatoes, ad lib grain, carrots - and struggle with providing a consistent finished product. Meanwhile feedlots pump out all the same quality, consistently.

Then you look to the States where they seem to have an extreme shortage of butchers. Like, waiting for two years to get an animal in for slaughter, kind of shortage.

In Canada, we’re kind of in the middle. We have the ability and knowledge to pump out good, consistent quality even if individual farmers finished a few hundred head instead of feedlots doing thousands. While we don’t have enough small time butchers, we aren’t at extreme shortage levels of America.

There’s been some recent tweaks to legislation in Alberta which has opened up slaughtering a bit more. I’m not a butcher and can’t say I’ve ever really talked to one to for sure know their trials, but I can hazard a guess at some. Primarily I think there needs to be more changes in regulations and changes in the cost of following those regulations to help the small and mid level processors get a foot in the door. This could promote more people becoming butchers. (I’ve also heard we’re short on CFIA inspectors which would also need changed)

If these areas were addressed I think it would be a natural course of seeing more farmers finish some of their animals.

In today’s political and cultural focus is climate change and food miles, these types of changes only make sense in my mind. However too many are stuck on the rhetoric of less ruminants or in the payment scheme of big processors.

I really dislike those infographics that say 90% or whatever the number is, of Canadian farms are family owned. It’s misleading. I want to see the percent of Canadian cattle farms and finishers that are under 1000 head. I want to see the number of Canadian cattle farms that can take their product from start to finish in under 3 steps. Like farm - processing. Not farm - auction - feedlot - processing. Or more at times.

They say the average herd size in Canada is what, 63 head? So why is everything catering to the productions that manage massive numbers? There needs to be a realignment so that there is more accessible processing for the average instead of the minority.

[The Don]

Thanks for your comments.
I like the idea of more local processors but that is years away. There was a group in Manitoba that tried to bring a plant from Prasco Washington to the province (shortly after the BSE fiasco). I had put in the up front money they requested(as did many others) but interest in the project faded away. They returned the deposits but I was disappointed it would have been a good thing to have now.
There needs to be immediate action / change. There needs to be a floor price or a price based on the cost of production. A real cost of production, not one that the creative accountants that are providing the current information I have seen. The top of the industry is making lots of money, the cow - calf operators are losing lots.
In Manitoba they didn't give the drought assistance money directly to the producer (on a per animal basis). They think the only bill the producer has is for feed. That tractor repair bill doesn't matter / count.
I'm currently feeding bales that I could have sold for $150.00 knowing that I will only see a quarter of that as a return when I sell my cattle this fall. In this zero sum game they will win I will lose. There is no cooperation and no trickle down economics.
It takes 3 to 5 years to recover from a loss year if there is a reasonable profit margin going forward. I do not see a profit margin going forward. I will not be buying much for feed this year it is better to sell off cattle to suit the feed available. At current and dropping cattle prices that adds to the burden going forward.
I find it uncomfortable being in this bent over position all the time!