Western Feedlots

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Western Feedlots

Sep 21, 2016 | 20:02 1 Interesting press release from Western today. With capacity of 100,000 head, their shareholders have opted to clean out the cattle that are in their yard and suspend all cattle feeding activities. They will continue with farming activities but are not feeding cattle. This is a big development. With nearly all of their cattle contracted through Cargill HR it will be interesting to see what happens both up and down the chain as we go forward. Reply With Quote
Sep 21, 2016 | 20:30 2 Guess its a sign of the times with reduced cattle numbers combined with lots of red ink feeding cattle these last turns. Presumably there will still be plenty bunk space left in western Canada? Reply With Quote
Sep 21, 2016 | 21:25 3 Won't be the last. The few local guys that still background cattle to yearling are still holding onto their yearlings. They have never held them this late. No one is even making offers on them and they know a big hurt is coming when they sell them. Reply With Quote
Sep 22, 2016 | 00:07 4 This may be our year to retain everything that isn't a keeper and feed the $3.00 barley and hope the local market keeps growing..... Reply With Quote
Sep 22, 2016 | 10:05 5 It was bound to happen. Volatility like we've seen lately is bound to do damage. At least they gave some notice so others have the opportunity to step in. If the market started to turn around in a reasonable amount of time, it could happen.

That being said, personally I think it wouldn't be a bad thing if a hundred smaller feedlots each putting 1000 head a year through were to replace one huge lot. I'm old enough to remember when that was the norm. Spread the risk, spread the money spent on inputs across multiple areas, and benefit many more areas with economic activity.

The important thing is that someone steps in to replace them. Reply With Quote
Sep 22, 2016 | 11:09 6
Quote Originally Posted by kato View Post

The important thing is that someone steps in to replace them.
Why if the cattle #s aren't there? They had 7% of the AB/SK bunk space but the national herd has shrunk 25% from it's max. Reply With Quote
Sep 22, 2016 | 19:19 7
Quote Originally Posted by grassfarmer View Post
Why if the cattle #s aren't there? They had 7% of the AB/SK bunk space but the national herd has shrunk 25% from it's max.
True grass. I fear though this is a start to further closures. There certainly less cows kicking around. I just fear less feedlots means less guys making orders with order buyers or bidding on the electronic sales. Less buyers means less competition. Less guys buying feed barley. Sure it's all a symptom of a contracting herd but it also shrinks the demand. Not everyone is going to hawk beef out of the back of their station wagon or set up a table at the farmers market. Great concept by the way for somebody who wants to do the work but it isn't going to move 3 million calves. Where it could go and I've said this before but all the old guys quit and less young guys willing to take up the slack. The herd contracts to the point jbs and cargil start slowing the chain but then start bringing in U.S. Calves until that's uneconomical and then they shutter the plants and everything goes south and our beef comes from the U.S. Reply With Quote
Sep 22, 2016 | 20:20 8 Sure its a buyer less and that is never a positive thing but there are still plenty other feedlot buyers - things don't get real concentrated until the next rung in the ladder lol.
Way worse scenario, and always a possibility with declining herd size here, is that one of the two packers closes their door. Then you are faced with exporting feeders or fats across the border to maintain any semblance of competition and that's not a good position to be in. Reply With Quote
Sep 22, 2016 | 22:25 9 Perhaps Cargill will just buy it.

Discuss...... Reply With Quote
Sep 23, 2016 | 00:05 10 As I posted over on commodity...Cargill does own the packing too, so if one doesn't make money, the other likely will. But, how big do we need our purchasers....think we have too few processors already. Reply With Quote
Sep 23, 2016 | 11:07 11
Quote Originally Posted by kato View Post
Perhaps Cargill will just buy it.

Discuss......
If they could make more money owning it they already would. IMO the fact that they don't need to speaks volumes about the captive supply power they have over the feedlot sector. Reply With Quote
Sep 23, 2016 | 11:55 12 http://www.calgarysun.com/2016/09/22...-straw-for-ndp Reply With Quote
Sep 23, 2016 | 13:00 13 Looks like a cheap attempt by the WR to make some political capital. Western Feedlots took a beating feeding cattle, as did many others in the feedlot sector over the last 14 months. Carbon tax didn't cause it - it doesn't come in until January 1st next year and agriculture is exempted anyway from what I've read. If Western are truly thinking it is an unviable business environment under the NDP why plan to continue to farm the land? Why not sell out ahead of the curve if things are so bad or going to get so bad? Reply With Quote
Sep 25, 2016 | 22:05 14
Quote Originally Posted by grassfarmer View Post
Looks like a cheap attempt by the WR to make some political capital. Western Feedlots took a beating feeding cattle, as did many others in the feedlot sector over the last 14 months. Carbon tax didn't cause it - it doesn't come in until January 1st next year and agriculture is exempted anyway from what I've read. If Western are truly thinking it is an unviable business environment under the NDP why plan to continue to farm the land? Why not sell out ahead of the curve if things are so bad or going to get so bad?
Think the general mood in Alberta is the economy is the shits and the NDP is doing nothing to help but put loony regs in that isn't helping. Wether it's the oil patch, ag, or retail the NDP has done something to piss off the economic drivers. Guys are saying screw it lets idle things or shut em down until the climate is less hostile. Its every tree huggers' and lefties wet dream to see someone doing better than them suffer. Sad jealous people. Reply With Quote
Sep 26, 2016 | 00:10 15 Spoke to a fellow who was quite involved with western...says the writing was on the wall for a couple of years. Some of the stories he told, I can see why they would dislike bill 6....but why they needed it.
Find the biggest complainers in this down turn, are the ones who had it a little too easy to make money...they are now finding out how the rest of us lived. But, its always someone else's fault. Reply With Quote
Sep 26, 2016 | 12:10 16
Quote Originally Posted by perfecho View Post
Spoke to a fellow who was quite involved with western...says the writing was on the wall for a couple of years. Some of the stories he told, I can see why they would dislike bill 6....but why they needed it.
Find the biggest complainers in this down turn, are the ones who had it a little too easy to make money...they are now finding out how the rest of us lived. But, its always someone else's fault.
Money was quite easy to come by. Young guys 19 or 20 years old with high paying jobs and all the toys and payments to match. Easy come easy go. I know and share some of your angst but those peckerheads also paid a lot of the tax dollars that you and I are going to have to cough up. When oil was good they left us in ag alone now they'll find more ways to extract money from us. Maybe the NDP will go after your "welfare Cowboys" if they have nothing to lose. God if we in Saskatchewan got the oil lease revenue on our lease land life would be easier. How and why did and does that still happen? Reply With Quote
Blaithin's Avatar Sep 28, 2016 | 13:49 17
Quote Originally Posted by perfecho View Post
Spoke to a fellow who was quite involved with western...says the writing was on the wall for a couple of years. Some of the stories he told, I can see why they would dislike bill 6....but why they needed it.
Find the biggest complainers in this down turn, are the ones who had it a little too easy to make money...they are now finding out how the rest of us lived. But, its always someone else's fault.
I believe it's their High River feedlot that has done a lot of downsizing the last few years. Before the NDP got in for sure so that political article in the Sun is a bit off the mark IMO.

Also the Mossleigh lot did quite a bit of export into Washington although I couldn't say what percentage.

Plus the fact that feedlots are custom feeders and feed other people's cattle... well if the owners you have aren't buying cattle, custom feed someone else's. There's something going on there that the mainstream articles blaming it on Bill 6 and the Carbon Tax aren't mentioning. I can see if feed prices were through the roof and cattle prices in the tank then it would be a bigger issue but without that it's really the same old story. Reply With Quote
Sep 29, 2016 | 06:57 18
Quote Originally Posted by Blaithin View Post
I believe it's their High River feedlot that has done a lot of downsizing the last few years. Before the NDP got in for sure so that political article in the Sun is a bit off the mark IMO.

Also the Mossleigh lot did quite a bit of export into Washington although I couldn't say what percentage.

Plus the fact that feedlots are custom feeders and feed other people's cattle... well if the owners you have aren't buying cattle, custom feed someone else's. There's something going on there that the mainstream articles blaming it on Bill 6 and the Carbon Tax aren't mentioning. I can see if feed prices were through the roof and cattle prices in the tank then it would be a bigger issue but without that it's really the same old story.
I had custom feeding well explained to me by someone I quite respect and why it is the worst feeding business in the world. Firstly, when there is money to be made everyone wants to custom feed and your lot capacity is filled. Upside potential is the markup on the feed and yardage. When there is money to be lost there are limited people wanting to feed, so in order to maintain your bunk space you wind up buying low or no margin cattle. Basically limiting your upside potential and ensuring the downside. Makes sense to me why a lot of folks are getting out of the custom feeding business. Reply With Quote
Blaithin's Avatar Sep 29, 2016 | 22:44 19
Quote Originally Posted by smcgrath76 View Post
I had custom feeding well explained to me by someone I quite respect and why it is the worst feeding business in the world. Firstly, when there is money to be made everyone wants to custom feed and your lot capacity is filled. Upside potential is the markup on the feed and yardage. When there is money to be lost there are limited people wanting to feed, so in order to maintain your bunk space you wind up buying low or no margin cattle. Basically limiting your upside potential and ensuring the downside. Makes sense to me why a lot of folks are getting out of the custom feeding business.
It does yeah. The big buyers who own the majority in the lots are going to sit back and wait until they can make money for sure.

However I see this as a good time for smaller guys to get back in. Cattle are low, feed is low, negotiate a rate accordingly for having them custom fed. Even if fats stay low, the profit margin isn't so negative as buying weaners at last years prices to sell at this years.

Of course the feeders are like contractors who bid out their rates. If they don't feel they can operate at current bidding rates then why not put everything into storage and wait for rates to come back up.

With weanlings averaging around $900 currently, fats estimated at $130 per hundred weight and that $2.80 feed barely it's a market to enter into if you're just starting. Not going to get rich but you'll get in the door. Reply With Quote
Sep 30, 2016 | 21:47 20
Quote Originally Posted by Blaithin View Post
It does yeah. The big buyers who own the majority in the lots are going to sit back and wait until they can make money for sure.

However I see this as a good time for smaller guys to get back in.
With weanlings averaging around $900 currently, fats estimated at $130 per hundred weight and that $2.80 feed barely it's a market to enter into if you're just starting. Not going to get rich but you'll get in the door.
Good point. It comes down to what you make per pound of gain. Cheap calves and a reasonable potential profit means less dollars out. High priced calves means more risk. I just wonder for my situation where I usually sell the majority of steers in November and keep over heifers and dink steers till February March. We haven't kept everything over for a number of years as there was no money in it. I need at least $0.85 per lb of gain to value add my grain and pay for yardage. I am cautious feeding into a down trend of the cycle but if some smaller guys can make it work then it may fill a void left by the feedlot closures. Back in the day barley was worth fuck all unless it was malt and a lot of grain farmers finished their own calves or bought weaners to finish and add value to their grain. At least that was how it was here in NW sask. Now everyone grows wheat and canola and stuffed barley. I always thought it's quite something that we raise cattle, grow feed grains, and ship it all out to southern Alberta to be fed by someone else. Economy of scale and efficiency I guess. Something to be said for expertise. Reply With Quote
Oct 2, 2016 | 10:17 21
Quote Originally Posted by WiltonRanch View Post
Good point. It comes down to what you make per pound of gain. Cheap calves and a reasonable potential profit means less dollars out. High priced calves means more risk. I just wonder for my situation where I usually sell the majority of steers in November and keep over heifers and dink steers till February March. We haven't kept everything over for a number of years as there was no money in it. I need at least $0.85 per lb of gain to value add my grain and pay for yardage. I am cautious feeding into a down trend of the cycle but if some smaller guys can make it work then it may fill a void left by the feedlot closures. Back in the day barley was worth fuck all unless it was malt and a lot of grain farmers finished their own calves or bought weaners to finish and add value to their grain. At least that was how it was here in NW sask. Now everyone grows wheat and canola and stuffed barley. I always thought it's quite something that we raise cattle, grow feed grains, and ship it all out to southern Alberta to be fed by someone else. Economy of scale and efficiency I guess. Something to be said for expertise.
I also think feeding into this downtrend is very worrisome, barring some good hedging strategy. I certainly wouldn't venture it without some price protection. As far as filling a void, we are still way overbuilt on feedlot capacity given the current cow herd size in this country. Reply With Quote
Oct 2, 2016 | 18:45 22
Quote Originally Posted by smcgrath76 View Post
I also think feeding into this downtrend is very worrisome, barring some good hedging strategy. I certainly wouldn't venture it without some price protection. As far as filling a void, we are still way overbuilt on feedlot capacity given the current cow herd size in this country.
Yes overbuilt. It's a wonder us feeders don't come north or is cog better down there still?
Looking at current prices I still don't want to celebrate all my calves birthday here. Unless things change a bunch I think we will market the heavier end steers off the cow, cut out breeding quality heifers, and background the rest for 120 days or as long as I can keep my lunch. Markets are gonna be volatile. Reply With Quote
Oct 5, 2016 | 09:42 23 I could live with the downturn....if my expenses downturned as well.....but that ain't happening! Reply With Quote
Oct 6, 2016 | 16:56 24 Cattle feed must be down on the year surely? what 30%, 50% down? That's got to play into our strategies surely? Reply With Quote
Oct 7, 2016 | 00:44 25 Some feed is...however I was alluding more to Insurance, taxes, fuel....and especially fuel, being pillaged right now...about %30-40 more than it should be....but people whine about the carbon tax.... Reply With Quote