Increased feed costs drive changes in the cattle sector

Higher costs, especially for feed, are shrinking the average size of cattle herds in Alberta even though beef prices are strong.

That’s among insights in the 2018-22 Beef Cost of Production study. It details a multi-year summary of the economic, productive and financial performance of Alberta cow-calf producers who participated in the AgriProfit$ Business Analysis Program.

Feed costs are the biggest driver of changes in live- stock numbers, said Ian Ryan, senior livestock economist with Alberta Agriculture and Irrigation. Those costs have increased over the past four years, causing the average herd size in Alberta to shrink.

“Producers were reducing the size of their herds. They were culling more cows,” he said. “I think that is in relation towards increased costs and trying to reduce winter feed and wintering costs.”

Labour costs and higher fuel prices were additional components.

“They vary, but I think you’ve seen through these years more general upward increases in those prices,” said Ryan, noting the utility of cost studies for producers and for the agriculture ministry.

“As a producer, cost is a major driver of profitability. Producers don’t have a lot of options for increasing the price they’ve received for their product. You can do private branding and direct to consumer sales, but that’s difficult and not necessarily viable for all producers,” he said.

The benchmarking component of the AgriProfit$ cost of production study gives a breakdown of all costs and revenues. Producers who participate are based in all areas of the province and sign up voluntarily. Their information is aggregated so privacy is protected and individual figures are not tracked.

The study allows the ministry to see revenue sources for a given production system, as well as associated costs. “We take a ton of information from producers when

they sign up for the survey method,” said Ryan.

The data includes categories for opportunity, cost of labour and overhead for the entire farm that can be allocated to a specific enterprise, because many producers have cash crop or multi-livestock operations.

“We take overall farm overhead expenses that you might not be able to divide out, based off of how much is going to calf production and how much is going to feedlot,” said Ryan. “We tie that back to productivity, fertilizer inputs, insemination, the full kit and caboodle.”

The benchmark studies are published every year, and there is a four-year rotation for each published benchmark. In the most recent report, information is from 2022. Having a multi-year report allows producers to see how costs change. From 2018 to 2022, fuel and winter feed costs rose.

“These are major drivers of cost for cow-calf producers and something they’re very interested in. Seeing that year over year and seeing how it changes can help inform management decisions. There’s not always a lot you can do with some of these costs,” Ryan said.

The effects of recent years of drought are difficult to quantify, though Ryan said they are likely reflected in winter feed and pasture costs. He also noted several “black swan” events, like drought and the pandemic.

“Whether one of them is the driver or not, they’re all getting caught up in those numbers, and it’s definitely showing.”

He looks forward to seeing data from 2023.

“What story is it going to tell? How have producers managed to weather those drought conditions and grain market conditions as well?”

As data is analyzed for 2022 and 2023, “I think we’re generally seeing either net balance in terms of net return and margin or slightly improving conditions, but again, we’ll see what happens with the 2023 values.”

Good records are important in determining costs and profits, he added, and can highlight areas for potential improvement.

“There could be some low hanging fruit that you’re leaving on the table in terms of management deci- sions that could help increase profitability, but since you’re not keeping records of what you’re spending, you might not be able to pick that out as a place to improve.”

Alberta Agriculture and Irrigation also conducts cost of production studies on bees and field crops. Producers who want to volunteer for the beef cost of production study can apply at alberta.ca/agriprofits.