Profitability of cattle unlikely to spur expansion

Previously unimaginable, 550 to 600-pound steer calves seem destined to fetch over $2,000 each during the fall calf run. Unfortunately, for a number of reasons, this newfound profitability in the beef sector is unlikely to reverse the steady erosion of cattle numbers in Western Canada.

Even with heifer calf prices somewhat lower than steers, selling 300 calves this fall is likely to gross around $600,000. Once calving percentage and retention of replacement heifers is factored in, that would require a significant herd of over 350 cows.

How does that compare to gross returns in the grain sector? Assuming a wheat and canola rotation and assuming modest yields of 35 bushels per acre for wheat and 32 bushels for canola with prices of $9.50 a bushel for wheat and $17 for canola, a gross return of $600,000 could be accomplished with 1,350 acres.

With a durum and lentil rotation, assuming 26 bushels per acre for durum at $14 a bushel and 920 pounds per acre for red lentils at 40 cents a pound, $600,000 in gross return would take 1,640 acres.

Net returns are much more subjective because of the wide range of cost structures on both grain and cattle farms, but machinery investment and input costs are typically lower on cow-calf operations.

This year, the feed shortage in southwestern Saskatchewan and southern Alberta is raising havoc with profitability. The freight to truck in feed adds tremendous expense. However, in regions where feed is in adequate supply, cow-calf producers are going to have a great year.

On the surface, the balance should be tipping in favour of cows. Instead, hay and pasture land continues to be converted to grain.

While high calf prices may convince some producers to expand, others see it as their opportunity to exit the cattle business, getting out while the getting is good. There are no guarantees this year’s record high price levels are the new norm. Sheep producers were getting tremendous returns on lambs a couple years ago, but that didn’t last.

If you compare the workload for a 350 head cow-calf operation with a 1,500-acre grain farm, the former is a year-round commitment requiring a lot of work that cannot be mechanized while the latter is largely accomplished over a six-month period without nearly as much manual labour.

The crop insurance safety net is much better in a dry year for grain than it is with cattle. Rainfall forage insurance paid out the best ever in Saskatchewan and some AgriRecovery money will flow to cattle producers, but the amounts will be nothing like those received by drought affected grain producers.

Labour is in short supply and the median age of owner operators continues to increase. In every community, you see grain farms that used to have cattle that have gone straight grain to reduce the workload. Hard to imagine them ever going back. Young farmers with no cattle experience are unlikely to diversify in that direction.

Grain and cattle farms could both benefit from increased collaboration. A lot of grainland has portions than can only be utilized by cows. When you see grain producers buying expensive combine attachments to pulverize weed seeds, you wonder why the chaff couldn’t being collected for cattle feed instead.

Even if record high cattle prices stick around for years to come, don’t expect much if any growth in the beef breeding herd. Money is easier to come by if you’re just growing crops.