Paul Kuntz
The rising price of grain and oilseeds is causing an imbalance between livestock producers and grain growers.
My dad used to say that having both grain land and cows was a good way to balance out the revenue. If one was down, the other was usually up. The disparity in prices through 2021 and 2022 has been record setting. Using canola and wheat as an example, the prices went up 260 per cent in a matter of 12 months. Those commodities have also sustained a good portion of their gains. There is an argument that fertilizer, chemical and fuel went up as well, but there remains record profit on the grain side.
As an entrepreneurial capitalist, I am supportive of the grain and oilseed industry’s prosperity. I support the producers making record profits. The issue is that this prosperity is driving up the cost of land. I am not referring to purchasing land; I am concerned with rental prices. There are many other factors causing the purchase price of land to rise and that is a whole other conversation.
What I am concerned with is the farmland that has been seeded to pasture blends or seeded to hay land. This land can easily be converted back to grain land. If you are a livestock producer renting land for pasture and hay, you may be competing against other producers with the opportunity to make a lot more money growing grain on it.
In my area of East Central Saskatchewan, a quarter section of land – with sufficient rainfall – will sustain about 35 cow-calf pairs for the summer grazing season. Talking with clients, an average cost for that service would be $1.30 per day per pair. If the grass holds out, there should be 150 days of grazing, seeing the landowner earn $6,825.
If a landowner has a brome-alfalfa stand on a one-third share, it might look something like this: bale yield of 1.5 bales per acre totaling 210 bales with the owner’s share being 70 bales. On an average year, hay would be worth $80 per bale, earning the owner $5,600.
If there are 140 acres broke on that quarter section, the above pasture arrangement would equate to $48.75 per acre in revenue. The hay deal would earn the owner $40 per acre. Land in my area is renting for $60, some at $75. Driving a few miles from where I live, rent goes up to $90. No rancher can compete with that.
If you are the landowner, and you are using a quarter section to graze 35 cows, you are giving up a lot more revenue. If you grew a 45-bushel HRSW crop at $12, it would gross you $540 per acre. Average fertilizer-chemical seed this past year would cost $200 per acre and average fixed costs would be another $200 per acre, leaving you with a $140 per acre’s profit.
This new economic reality is already affecting producers in our area and I am sure it is happening all over. It will have an immediate impact on many producers.
We need a healthy, vibrant livestock industry. If the livestock are pushed off farmland, what will that do to the industry? We all see the grasslands in Southern Saskatchewan and Alberta that are used to raise livestock. Will those be the only areas that can support livestock going forward? We see the hog industry, even the lamb industry, that can be sustained solely using indoor production with very little land use. Can we raise beef that way?
The livestock industry is highly resourceful with many creative options. The grazing techniques are making much better use of the land with more efficient results. Rotational grazing and crowd grazing are just two techniques being used to make better use of the land. The pressure on farmland may end up being the catalyst for change.
The close of 2022 is seeing higher beef prices while grain prices are easing, so perhaps there will be balance met. Livestock producers who have already cut back or lost land may not wait around. Some will have less cattle, or, none at all. The herd in Canada is down so we know that some producers have already exited. Higher livestock prices in the future may not be enough to bring them back.
The livestock industry is demanding with unique challenges. The financial reward is not at the top of the list for these producers. They are driven by more than money, but farmers cannot operate at a loss or without a land base.
In my part of the world, the First Nations communities have been very supportive to the livestock industry. A good portion of their lands have been dedicated to livestock use. Most of the ranchers in this area that have larger herds – more than 300 cows – have a strong relationship with a First Nation community and rely upon their lands for pasture. I believe this will be a big part of the industry moving forward.
I am hopeful there will be a place for grain growers and livestock producers in all parts of Western Canada. Markets usually have a way of balancing out. But I do worry about the damage caused while this process is taking place.
It is not up to the grain growers to make sure the livestock industry thrives, but we all need to work together. When this year’s harvest wraps and we celebrate with a nice steak or prime rib roast, let’s give thanks for the livestock industry that produced that food.
