To be perfectly honest with you, I think they were pushed.
Most all of you involved in the agricultural industry in Western Canada have seen, by now, the news coming from Western Feedlots in High River, Alberta. For those of you unfamiliar with what is going on, the following is a statement made by Western Feedlots on Wednesday, 21 September 2016:
Western Feedlots Ltd.’s shareholders have decided to voluntarily wind down cattle ownership and cattle feeding operations. Western will continue to feed and market the existing cattle and after they are marketed, Western will be suspending feedlot operations. Western will not be hiring employees, or purchasing feed grain or feeder cattle after that time. Western will continue farming operations for the foreseeable future. Western’s shareholders chose this course of action due to the current high risk/low return environment in cattle ownership, which is inconsistent with shareholder objectives. In addition to strong headwinds in the cattle industry, the poor political and economic environment in Alberta are also contributing factors to this decision. Western would like to thank all our employees, suppliers and customers for their years of dedication and support and their continued understanding and cooperation.-Western Feedlots, Inc.
Arial view of Western Feedlot’s High River, Ab location
Western Feedlots has been operating in the cattle feeding business since 1958. Largely, they are credited with being pioneers in the industry in Canada. At the time of their announcement on Wednesday, they operated on three locations (High River, Mossliegh, and Strathmore, Alberta) and had a one time capacity greater than 100,000 head. Over the last two years, operations at the Strathmore location have been wound down and the lot has been largely empty. CEO of the company, Dave Plett, has committed that farming operations for the company will continue for the foreseeable future, and commented that, if conditions should become more favourable, cattle feeding activities will be restarted.
The agricultural community is reeling from the loss of one of the single largest cattle feeding operations in Canada, and the effects of the closure of three large feedlots will only become more apparent as existing cattle are slowly sold over the next few months. Chief among these concerns as western Canada starts its fall weaning run is where ~100,000 head of freshly weaned cattle will go. Last year, Western Feedlots purchased cattle from across the country and fed them out for slaughter. That market has just completely and suddenly dried up. Second major issue coming down the pipeline concerns the availability of live cattle to supply two large slaughterplants in southern Alberta (High River, owned by Cargill, and Brooks, operated by JBS Foods Canada). Between the two plants, approximately 8,ooo head of cattle are killed every day, and the loss of Western Feedlots constitutes a major chunk of their supply chain. The ripple effect of the closure of these three feeding locations is somewhat frightening. This is not to mention, even, what new market cereal farmers will need to find for feed quality wheat and barley in the region. 100,000+ head of cattle consumed a lot of feed over the last few decades, and many farmers will be left without an apparent purchaser in the fall of next year.
The issue behind all of this is twofold and cited by interviews with Mr. Plett: The current conditions of the cattle markets in North America mean that cattle purchased as weaned calves have been losing as much as $600 per animal over the last year. Cattle are currently trading in a market which forces a “buy high, sell low” scenario. Hopefully, the bottom of the market has been found, and things will rebound, but how quickly and to what profit levels remains to be seen.
Second, and even more concerning than expected highs and lows in commodity prices, Mr. Plett mentioned the current economic and political environment in Alberta. Alberta used to be home to what was coined the “Alberta Advantage,” a set of policies set forth by the Progressive Conservative party in years past which served to attract businesses and investments from regions all over the world. Alberta has, until recent months, been viewed as an economic powerhouse, and frequently led Canada in terms of economic growth and attractiveness to investors.Then, in April 2015, the 40+ year dynasty of the PC’s was broken by the NDP, who have wasted no time in implementing an unending number of ideological policies designed to “fix” Canada’s “embarrassing cousin.” On January 1, 2016, the NDP party implemented Bill 6, which, according to Plett, has cost Western Feedlots an additional $1000 per employee, to pay for public, not private, employment insurance. To be clear, prior to January 1, 2016, all of Western’s employees were covered by private insurance. Bill 6 was rolled out with the best of intentions, to protect employees in agriculture, but it has had nothing but resistance and negative views since it was first proposed to Legislature. The government has been accused by many industry organizations of a failure to communicate with the industry, a failure to listen, and a failure to properly implement the bill. To further the pessimism in Alberta, the Notley regime has doggedly moved ahead with an expensive and ill advised tax on carbon, which, when implemented, will cost businesses dearly for such things as indoor heating and business vehicles. The NDP did not include a Carbon Tax in their 2015 election platform. Finally, the Province has recently recommitted to move ahead without delay on increasing the minimum wage to $15/hour, a price many business owners, large and small, have repeatedly stated is too high and will lead to reduced hours and job losses.
Markets for weaned calves will feel the pinch, as will packing plants in Alberta.
My view on this? The bigger they are, the harder they fall. Western Feedlots was perhaps too accustomed to being allowed to do it’s own business, they were too used to predictable government with a knack for doing what was best for business in Alberta. While cattle prices have certainly been a major factor in their decision to close, price fluctuations are a given in the cattle industry. We are talking about a company that has been lot-feeding beef cattle since lot-feeding beef cattle began, and has lived through successive market ups and downs, including the BSE crisis in the previous decade. Western Feedlots has always been prepared for market fluctuations. What Western was not prepared for was a socialist government hellbent on ideology and a consequences-be-damned approach to implementation. The perfect storm has brewed, and the largest companies are usually the least adaptable, the slowest to implement counter-measures, and can be the hardest to fall.
I currently live in Texas, where I am going to school. While I threaten my mother with staying here when I think it will get me something (love you, Mom!) my ultimate goal is to participate in the beef cattle industry in Alberta. This current government’s stranglehold on the economy of the province is extremely concerning for young people, in any industry. I am worried about what will be left for us to rescue in 2019 at the next provincial election? I wonder what the fallout will be from thousands and thousands of agricultural employees and oilsands workers fleeing the province like refugees, for places like Saskatchewan and Manitoba? The possibility that Alberta’s fiscal conservatives might not wake up and join forces to guarantee a replacement of the NDP in 2019 genuinely keeps me awake at night. I would use this opportunity to implore the Wildrose and the PC parties to lay aside their petty arguments and disagreements and realize that, on order to keep young business people in the province, we need to get rid of the NDP. In order to preserve the businesswe have, we need to get rid of the NDP. Markets in all commodities rise and fall, and the successful businesses can handle that. No business, anywhere, should need to shut down as a result of governmental ideology.