<strong>By Will Verboven, Contributing Editor</strong>
Close to 60 percent of Canada’s beef production comes from our prairie provinces, with over 40 percent concentrated in Alberta. Readers who have traveled to the Great White North probably observed that production there resembles production in the northern border states.
However, there are some differences that make our beef more expensive to grow, process and market. Heck, the fact is if it wasn’t for our producers’ resilience, determination and entrepreneurship, one wonders if there would even be a cattle industry up here. The Great White Elephant in the room is always the long, cold winter. I guess it’s no worse than Montana or North Dakota winters, but it feels a lot worse!
For cow-calf producers, that fearsome reality has caused them to evolve a compact beef cow that’s able to scrape through ice and snow to find dried grass. Those tough cattle breeds were developed under specific, localized conditions. They were also selected for their thicker, longer hair, for obvious reasons. There are European beef breed genetics in Canadian cattle, but frankly, except under crossbreeding selection criteria, those breeds in their original state would starve and freeze to death during a Canadian winter. That’s why most range herds are predominately of Hereford or Angus influence. One positive side of the miserable winters is that many (not all) parasites, mosquitoes and diseases that have an outdoor lifecycle stage also freeze to death.
The Canadian feedlot sector is even more concentrated in southern Alberta, and compares favorably in size and efficiency with large, commercial American feedyards. Of the approximately 300 feedlot operators, production is mainly concentrated among 50 very large operators. What’s interesting is that significant feedlot production in western Canada didn’t start until the 1990s, with U.S. yards serving as a template. Prior to that, the vast majority of feeder calves and stockers were shipped to large feedlots located in the eastern province of Ontario. That movement is now virtually non-existent, and most feeder cattle now gravitate to southern Alberta. Depending on market conditions, some of those cattle will be exported south, brought in by large American feedyards or being custom feed by Canadians. American feeder cattle do move north, but it takes sophisticated hedging of currency, feed and marketing to make that work consistently.
A significant difference between the two countries is that Canadian feedlots primarily feed barley (grain and silage) to feeder cattle. Barley is the main feed-grain crop grown up here, and some Canadian beef promoters claim barley produces the nicer white fat the Japanese market prefers. That doesn’t stop large Canadian operators from importing literally trainloads of corn from the American Midwest whenever it’s cheaper than local barley.
Where Canadian feedlots have a disadvantage over their American counterparts is in fixed and, lately, nuisance costs. Labor costs are significantly higher in Canada because of competition with the energy sector. Taxes are generally higher at every level (our universal Medicare system comes out of general tax revenue paid for by everyone in Canada). This year, our feedlot operators and agriculture in general are being hit by a universal carbon tax of $10 per metric ton, increasing to $50 within a few years. It’s pervasive and cumulative through the entire system, from grass to plate. Analysts have suggested that this adds up to $20-$40 in extra costs per head not faced by American feedyard operators.
Beef processing in Canada is simple – it’s consolidated into two giant dogs, with 80 percent controlled by Cargill and JBS. Their combined capacity is around 10,000 head per day. I expect such concentration is nothing new in the American beef-processing industry. The difference is that, unlike the U.S., the Canadian cow-calf, feedlot and processing industries are highly centered in southern Alberta. They all tend to be in each others’ faces, forcing them to operate in a more cooperative way. They also found out from the 2003 BSE crisis when all sectors faced a near-death experience that they need each other to survive. It was a very sobering experience that the overall industry remembers to this day. More next time.
