With cattle prices on the rise, many consumers are questioning the reasons behind this increase. Is it driven by factors like fuel costs, supply and demand dynamics, or are the executives of big grocery store chains aiming to boost their profits?
Roy Rutledge, General Manager of both the Weyburn Livestock Exchange and the Assiniboia Livestock Auction, goes on a deep dive into why cattle prices have increased anywhere from 35 to 40 percent in the last 12 to 18 months.
“Well, because number one, the cattle, the total cattle numbers in North America are the lowest they've been since 1952. Then the feedlot guys are scrambling to get enough cattle to feed, when the feedlot guys start getting a little bit short on supply, then the packers have to pay up to get the cattle.”
While these two scenarios are contributing to the stark increase, Rutledge explains there is another contributing factor.
“The great big stores, all the big names, they tell the packers how much they're going to pay, and if the packers can't supply with that, they say, well, we can get somewhere else, that don't happen anymore.”
As cattle producers find themselves in a seller's market, they are no longer dependent on big grocery chains. If these chains are unwilling to meet the market price, packing companies have the flexibility to sell to other consumers.
But the question remains, why is the cattle population the lowest since 1952? Rutledge explains that drought is a major cause of the decline.
“Drought all throughout the United States and Canada has caused a lot of it. There's not enough grass so people sell them off. You get a big area like Alberta and Western Saskatchewan, you don't see much in Weyburn, but you get west of Assiniboia, west of Highway #2, it's been dry there for three or four years. So those guys can't afford to buy hay at $200 to $250 a ton, so they sell their cattle.”
Rutledge explained that currently, a good 227-kilogram steer calf brings in approximately $9.48 per kilogram which equates to a total price of around $2,150, and a steer at a finished weight of 590 kgs to 635 kgs will run approximately $3500 to $4000 or around $8.39 per kilogram.
As it will take time to replenish the cattle population, Rutledge estimates the sellers' market will continue for the next five years.
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