Price of calves need to double!

[GDR]

Does anyone actually care besides those of us in the business? Sad, but I think that's reality, if the beef heard mostly disappeared in Canada what difference would it make. Government doesn't make much for tax dollars and helps solve the environmental wackos issues. Average consumer is happy with cheap Brazilian burgers at walmart, less people every day willing to buy an expensive steak. Only hit I can see is the lack of feed grains that would be needed would be hard on grain prices but not too many straight grain guys seem to understand that.

[The Don]

Fuel, fertilizer, drought, equipment prices and rising interest rates for overleveraged producers are going to be the perfect storm in 2022.

Be a lot of ag producers of all kinds exiting in the next year, not just cattle guys. Unless of course grain prices maintain and cattle increase 50% by fall. Even 50% might not be enough for some guys.

I'm going for a full double in price. I think COP this year will be a big step up.
Grain prices are already locked in for this year. Cattle futures prices are in also. The drought is already affecting the central states Oklahoma , Kansas and the rest. We will have an issue with runoff this spring (flooding) and a drought this summer.
Interest rates are set to rise. The Cattle Industry in Canada has been drinking their own Kool-Aid and believe their own numbers. So it's going to be a surprise for them.
What to do? De-populate to a core herd and wait this out? Will future prices offset the money you put in now?
What are your thoughts on how to survive?

[The Don]

Watching todays blizzard I'm trapped inside for a while .
In order for this to be sustainable there needs to be a pricing system that recognizes the real cost of producing a live healthy calf. The cow calf producer cannot support the entire industry.
Backgrounders and feeders take the increased cost of grains from the cow-calf producer. Double hit for the cow calf producer who is paying those same increased costs to sustain the productive herd and then suffering the drop in income. You would think the industry would recognize this and take steps to ensure the cow calf sector is taken care of. The current zero sum process of cow calf sector loses and all others can prosper won't last.
It appears that the cow herd needs to drop in size more than what the drought is forcing.
There is already a big difference in numbers that are currently in use by the Government and the Beef Industry Organizations. What are the real / actual producer and cattle quantities? The real numbers are what will count going forward
The backgrounder and feeder sectors will be challenged trying to under pay for calves that don't exist.

[15444]

I'm going for a full double in price. I think COP this year will be a big step up.
Grain prices are already locked in for this year. Cattle futures prices are in also. The drought is already affecting the central states Oklahoma , Kansas and the rest. We will have an issue with runoff this spring (flooding) and a drought this summer.
Interest rates are set to rise. The Cattle Industry in Canada has been drinking their own Kool-Aid and believe their own numbers. So it's going to be a surprise for them.
What to do? De-populate to a core herd and wait this out? Will future prices offset the money you put in now?
What are your thoughts on how to survive?

Staying out of debt, or getting out of debt as soon as possible should be at the top of every beef producer's mind. Keeping costs as low as possible and building equity while riding the next price curve upwards, might give guys a chance to survive long-term.

I know of a few new local people itching to get into cattle or expand after this past year. Personally I think their dreams are bigger than their bank accounts.

This winter, multiple cattle guys are losing rented pastures and fields to crop guys upping the rent. Also, you are seeing guys playing it too tight on the feed supply and shipping backgrounded calves earlier than expected to save hay for the cows. My calculations say at the current prices, those guys fed calves up to this point for a considerable loss, considering what feed is worth.

In the US, buddy in MN told me this past week he is seeing a lot of 100-150 cow dispersals. Guys ran out of feed (or money). These aren't old guys, buy young guys that would have had another 30 years in the industry. US eliminated 1.3 milion beef cows in 2021 alone. Waiting the see what Canada's numbers will be like. I would be very surprised if at least 20% of the beef cows are not gone from this country.

I would have to check, but I think January 2021 Canada beef cow numbers were around 3.5 million. I think we could shave at least 500,000 off that number and we might see something that resembles a respectable and profitable price.

[shtferbrains]

IMHO the problem is the beef cycle has been going into the high end of the price but the packers are able to keep all the increase.
Some advantage will swing to the producer as market ready supplies of live cattle fall but packers seem to be happy to run lower volume at much higher margin as there is little actual competion in the beef to retail supply.

A roast beef at Costco is $70 and burger meat is $5.50 on feature.

They are happy running the plants at lower volume.

Don't rock the boat?

[The Don]

Even if you have everything paid for the prices you are getting won't pay for repairs ,maintenance, depreciation, labour and a return on the investment. Current feed situation here requires bringing money to the operation. Is hanging on worth the investment or is it good money after bad? I've already downsized a bunch. Can't afford to lose more.
Guys who want to jump into the market are not using realistic numbers for their cash flow projections. They may have been drinking the Kool-aid. Current prices and the future prices into 2023 won't support
maintaining the herd not thinking of expansion. That's my opinion (without a long discussion of how every producer has a different COP).
The packers are not running slow they import subsidized cattle from the US. Last year they imported 300,000 cattle into Alberta feed lots. That's the numbers that the USDA had posted. I think that was close to all the calves and cows coming out of Manitoba (330,000). Cattle marketed at a discount because the feedlots were full and there was a "backlog" to get into the plants.
Manitoba Agriculture think a 2022 price for 8 weight steers @ $200 / hundred weight is wonderful money. But it's costing the cow calf guy $1600 to produce a 5 weight calf.
There needs to be a change in the Canadian market where the industry recognizes the real cost to produce a calf in Canada.

[bucket]

28 quarters of pasture listed around here for 5 million+

I can't pencil it out to make sense of something that struggled to adequately handle a 250 cow calf operation.

The guy just did a major reduction to keep the base herd. Now its going to be retirement.

[blackjack]

What percentage is lease land bucket….is there potential for grain farming….that is 5 to 6 quarters worth here in the Red Deer area.Land is a hot commodity makes no sense one would think production wise.

[The Don]

I don't know where that land is and what it's worth. The one thing I can say is that the cattle won't pay for that.

[shtferbrains]

What percentage is lease land bucket….is there potential for grain farming….that is 5 to 6 quarters worth here in the Red Deer area.Land is a hot commodity makes no sense one would think production wise.

Wouldn't 6 quarters at Red Deer run more than 250 cows?

[blackjack]

Normal conditions right on the bubble if one was going to cover winter feed and summer pasture needs…summers like the last one no…our operation runs cows on marginal land in summer while the good producing land for winter feed and some cash crop….but Don is right in saying it doesn’t make much sense to ranch at current feeder prices….

[The Don]

It sounds like a lot of money. When you put a pencil to paper 28 quarters (4,480 acres) for $5million is around $1,100 / acre. That sounds like someone's lifetime of work to acquire that block of land. Hopefully they can get paid a reasonable return for their hard work.
How the next generation of cattle producer will pay for that is a real good off farm job and a desire to throw money away. Or...?

There was an article in the Western Producer where MBP top brass were restating how optimistic they were! Assuring producers that the prices were going to increase this year. Maybe as much as a dollar a pound! But feed prices need to come down for that to happen.
Wow! If I add a dollar to what I got paid last year I could get to around $1500 for a 5 weight calf. That's still a hundred dollars below the projected cost of production. Put that together with the money lost and interest I'm paying for carrying last years losses and I get right back to where the price needs to double.
Fertilizer price tripled. Herbicide tripled. Fuel prices are up in a big way. Grain prices are up and staying up (so forget the feeder's grain prices dropping). Interest rates are going up.
The idea that a dollar increase is a big deal is ridiculous.
Prices for the cow calf sector need to double!

[15444]

Talking to neighbor last night asking when he was going to ship his steers. 7-weights. Couple potloads. Winnipeg telling him they figure $1500 average on them. Realizing he just fed his own feed plus extra he bought for basically nothing. Would have been further off selling in fall and selling the feed.

Myself I'm planning on grassing the yearlings. Might sell the fall calves in spring as it looks like those 6 weights will be hot commodity in late April for grass guys.

At the price of all inputs, the days of $2.00 calves is over. $3.00 will have to become the norm or the exodus of producers will be massive in the next couple of years.

[The Don]

Yes the prices need to go up for the cow calf producers. Three dollars a pound may not be enough.
Just spit balling numbers. Those 7 weight animals probably cost a bunch of cash to get through the winter.
$1615 to get to 500 pounds and then around $550 to get them from October to March. Total cost roughly $2165. Getting paid $1500 translates to a $665 a head loss. The feed they put into those animals generated a negative value. I chose to loose my money in the fall in an effort to save myself a lot of labour and money (buying feed to help someone else make money). I did that (holding the calves over) last year and didn't want to repeat that mistake.
That story does not bring me any happiness. Somebody did a lot of work and invested a bunch of money to produce those calves. Then they got screwed over.
Looking at the futures numbers they don't support any better prices than what that example shows. So I'm less optimistic than the guys that run MBP. They get all excited about a $50 dollar price increase when you are losing $500. Price insurance for $2.30 a pound on a product that cost you $3.05 to produce is nothing to be happy about.
The cattle herd has shrunk according to statscan. They show that 1 January 2022 the beef cows on cow calf operations were 363,300 I think their number is way too optimistic I think the real number is probably 330,000 and it will drop to less than 300,000 this summer. ( that's a 10 % difference in the number) Last summer they thought there were 401,700 beef cows on Manitoba cow calf operations. The recent posting showed a corrected (different) number of 372,700 (that 29,000 head difference is +/- 10%) .
In February USDA said Canada imported 1300 tonnes of (US Government subsidized) beef. That's a lot of cattle.
Who do you call to complain?
Call them now!

[The Don]

I had to buy fuel... $1.51 / liter I ordered 500 gallons $3428.00 Current price of cows I need to sell 5 cows to pay for enough fuel to get me to grass time.
I need to buy some more feed probably $8000.00 should get me to grass I need to sell off 11 cows for that.
I can drop one bull and 20 cows that should get me to the expensive time of year.
I'll be out of cattle by the end of seeding time as this goes along. Save me a bunch of money for next year!