Cold economics chills cattle feeding in Canada

A few years ago, Canadian cattlemen bravely moved forward with finishing fed cattle in feedlots in Canada, enticing Tyson to buy a packing plant in Alberta expand it, in light of all the fed cattle that would be available for it to slaughter.

Right.

The economic realities have settled in hard, and the high cost of weight gain on cattle in Canada have led to a steady stream of Canadian cattle moving back to the U.S. for feeding, according to people in the industry. There are currently about 890,000 head of cattle in Canadian feedlots that have the capacity to feed 1.2 million head.

This was to be expected, to any reasonably seasoned observer of the beef industry. After all, Canada is too far north to have enough growing season to raise corn, the main ingredient in finishing cattle in the feedlot. That means the corn must be moved from eastern Canada or imported, always a costly proposition. Particularly when corn sells locally in the U.S., with very little freight on it, for over $5 a bushel.

"These cattle float to the place where they're cheapest to feed," said Bryan Walton, chief executive of the Alberta Cattle Feeders Association. He said other factors, including the strong Canadian dollar and poor incentives to grow feed grains, were also limiting the potential of the domestic feedlot sector. Walton said his organization was working on initiatives to help create both increased demand for Canadian fed cattle and increased supplies.

They primarily feed barley in Canadian feedlots and high canola prices are taking acres out of barley production into canola. There also is less competition in Canada for finished cattle, keeping prices lower than in the U.S.

All these things were thoroughly predictable back when the Canadian government subsidized producers to move into cattle feeding. Despite all the hoopla, cold hard economic realities have triumped yet again.