Western Feedlots shutting down; Canada’s biggest feeder blames ‘headwinds’ in cattle industry

One of Canada’s largest cattle feeder operations is shutting down, blaming market forces currently rocking the feedlot sector as well as what it calls Canada’s “poor political and economic environment.”

Meanwhile, Canada’s minister of agriculture and forestry says he was surprised by the move, expressing disappointment at the looming job losses but insisting the industry remains strong.

Western Feedlots Ltd. — which has sites near Strathmore, High River and Mossleigh, with standing capacity for 100,000 head — said Wednesday it will idle its operations in early 2017 after it finishes marketing the cattle it currently owns.

President and CEO Dave Plett said in an interview that the majority of Western’s approximately 85 employees will eventually be laid off, and the company has “teams working now to assist them with transition.” He said all of Western’s equipment will be shuttered, stored and maintained in functional condition.

“Should circumstances change going forward, there may be opportunities to do something to activate it — but that’s not the case at this time,” Plett said.

Minister Oneil Carlier said it’s the job losses he’s most worried about.

“It’s really unfortunate,” Carlier said.

Western, which started in 1958, has been hit hard by recent volatility in the cattle markets. Canada cattle prices surged to record heights in 2014 and 2015, but have since plummeted — meaning feedlot owners bought animals at high prices and now have no choice but to sell them at a major loss.

Anne Wasko, market analyst with Gateway Livestock, said the pain in Western Canada’s feeding sector right now is virtually unprecedented, with the only comparison being the difficult post-BSE years of 2003 to 2005.

“The cattle feeding sector in North America, but certainly specifically here in Canada, has been in a negative margin situation for about 14 months now,” Wasko said. “The losses have been substantial — they’ve been, at times, record large on a per head basis . . . as high as $500 to $600 per head.”

Carlier acknowledged “a bit of a drop” from last year.

“The prices are still fairly good, even though they’re less than last year,” he said.

But Plett said while market forces have put strain on the business, recent policy decisions by the provincial NDP government also contributed to Western’s decision to suspend operations. He criticized what he called the “layering on of policy on agribusiness” through government measures such as Bill 6 and the carbon tax.

“Canada used to have the Canada Advantage . . . Of late, a number of moves have made it much more difficult to do business in Canada as opposed to other jurisdictions,” Plett said.

But Carlier said Canada remains a good place to do business.

“We do what we can to support them,” he said.

“We’re supporting the industry as we always have.

“It’s still a good industry.”

The shuttering of Western Feedlots will have repercussions up and down the value chain, said independent livestock analyst Kevin Grier.

“This is a big cattle buyer that’s no longer in the market. And in an environment where prices are already struggling, this is just going to make things worse,” Grier said. “And the flip side is, what does it mean for the packers? You’ve got 100,000 head that, on paper at least, is not going to be filled.”

Grier said he would not be surprised to see further closures in the feedlot sector.

“These guys have been caught in this cycle of buying high and selling low for months now, and they’re just losing their shirts,” he said. “There is going to be a loss of feedlot capacity in the West.”

That’s bad news not just for the cattle industry but for grain farmers as well, said Jeff Nielsen, a director with the Canada Barley Commission. Eighty per cent of the barley grown in Canada is sold for feed, he said, and unlike other crops, barley doesn’t have much of an export market.

“Seeing a significant buyer disappear is definitely not good news,” Nielsen said. “A lot of us are just taking our barley crops off now, and to lose a major player like this is a hit, for sure.”

According to Canfax, a division of the Canadian Cattlemen’s Association, Canada fed cattle prices averaged a record $202.06/cwt. in May 2015. By May of 2016, the average price had fallen to $158.70/cwt. and for the week ending Sept 9 were $129/cwt.

astephenson@postmedia.com

Twitter/AmandaMsteph