Originally published January 17, 2020 on The Western Producer
By Barbara Duckworth
The Alberta beef industry can compete within the North American market but there are some impediments on the horizon that could restrict future growth.
Commissioned by the Alberta Cattle Feeders Association and Alberta Beef Producers, the industry competitiveness study compared the province’s position to Texas, Nebraska and Kansas. Those are large beef-producing states with a similar environment to Alberta.
The result is a comprehensive overview of the value as well as the challenges. Higher taxes, a shrinking cow herd, labour issues and high land values all add costs that may not be experienced in other major beef-producing regions.
“We are being pretty competitive so it’s really not a bad news story. It is a good news story but it sheds a light on the fact that if some of these additive effects start piling on, we may not be in a competitive position,” said Janice Tranberg, president and chief executive officer of the cattle feeders association.
None of the issues outlined in the 100-page report are new, said Rich Smith, executive director of the beef producers.
“This provides additional support and valid information identifying where there are potential problems,” he said.
Written by Serecon Inc. and Kevin Grier Consulting, the report found the Alberta beef industry generates $18 billion in total economic activity and employs 57,000 people.
Some of the key issues it addressed are as follows:
A shrinking cow herd impairs the industry because there are not enough calves to fill feedlots or keep packing businesses operating at a profitable level. A profitable period from 2011-18 did not encourage expansion. The Alberta fed cattle price in 2017-18 was unusually strong compared to the United States price, even though Canada typically trades under the American market.
The report argued the fed price spread will likely return to its historic negative levels. As such the calf price spread will probably also return to historic norms.
Very dry weather for the last two years in the West has forced more females out of the herd than would otherwise be the case.
“Since the herd did not grow at a time with very positive signals, this likely means that the Alberta industry cannot expect to see the cow herd grow significantly for many years,” said the report.
Costs to rebuild may be more than many can handle.
The report estimates indicated the cash costs are about $800 per calf in Alberta. This does not include paying for the cow. In recent years, a rule of thumb for producers would be returns of $1,000 per cow. The return narrowly covers operating costs and amortization of the cow so restocking is expensive.
Land prices in the West have been dramatically increasing. Alberta farm land values increased faster than the Canadian average in 11 of the last 18 years. Southern Alberta has seen increases of 16 percent in 2018 alone.
Cropping has become more lucrative than cattle where prices for field crops have been higher since the mid 2000s. Therefore, more marginal land has gone into crop production and has been reasonably successful due economic opportunities and improved farming technology.
Cow-calf producers need continued access to land and water on public and private land, said Smith.
“We want to make sure we don’t end up with policies and regulations with respect to public and private land that restrict the ability of cow-calf producers to have access to the land and the water,” he said.
The report concluded higher labour costs and availability of workers has had a negative impact on the Canadian beef industry. Restrictions on using temporary foreign workers are key factors that have resulted in higher labour costs. Wages are also higher in Canada.
According to Statistics Canada, Canadian agriculture wages are just under $20 per hour. In the U.S., farm animal labour averaged just over US$13 per hour. Converted to American dollars the wage difference is about $2.60 per hour more for Canadians in 2018.
“This is probably one of the most serious impediments that we have in our industry,” Tranberg said.
The two beef groups have met with the provincial and federal governments to emphasize the pressing need that exists for more workers in primary agriculture and the processing sector.
“It is time to stop putting a Band-Aid on the issue. If the programs we have are not meeting the needs, it is time to look at how we are going to rectify this issue,” she said.
The report also noted Canadian employees are often better off than their American counterparts.
“Some of the things we do in Canada that are not done in the United States, are good things,” Smith said.
Traceability, higher wages and benefits, as well as sustainability initiatives work in Canada’s favour.
“All of those things from an industry standpoint, while they may have some added costs, actually can enhance our competitiveness. When we are going into export markets our traceability, our sustainability initiatives, food safety regulations and from a social licence perspective, the way our workers are treated can all be benefits to us in global trade,” he said.
However, the industry would prefer to manage these issues rather than being forced by government.
“We think we can operate quite well in the market environment, as long as we are not facing barriers that are created by regulations and policies,” he said.
The federal carbon levy, municipal taxes like the $4 per head business tax in Lethbridge County, as well as added restrictions on confined feeding operations add costs.
Other regulatory burdens include longer approval time for pharmaceutical products. Approvals are often two to five years behind so U.S. producers can adopt new management practices to improve animal performance or reduce incidents of illness or lameness.
Food safety practices like removal of specified risk materials to prevent the spread of BSE also add higher costs than the Americans have to bear.
The full report may be read at bit.ly/2QNk8ak.