One of Canada’s largest feedlots is winding down its cattle ownership and cattle feeding operations citing weak market conditions and a poor political and economic environment.
Western Feedlots Ltd. made the announcement on Wednesday saying that shareholders made the decision to shut down because of "strong headwinds" in the cattle industry and the "high risk/low return environment in cattle ownership.”
The Alberta-based company says the “poor political and economic environment in Alberta” also contributed to the decision.
CanFax looks at markets and trends in the North American Beef sector and senior analyst Brian Perillat say there have been some challenges in the industry.
“They went through a huge upswing and part of it, they’ve been through the brunt of the, sort of, the blow to the cattle prices, You know, a lot of the cattle they’re marketing, they probably paid near record high prices for and we’ve seen fed cattle prices drop 30 or 40 percent, there’s been a bit of a hit to the overall price and the people that own those cattle have lost a fair bit of equity. They gained a whole bunch, now they’ve given a lot of it back, which historically has happened, it’s just been the massive magnitude of these changes and they’ve maybe decided the risks versus the reward, maybe wasn’t really in it going forward,” he said.
Perillat says beef prices are relatively strong overall and cattle numbers should remain stable.
“The cattle numbers have shrunk over the last ten years but they’ve started to stabilize quite a bit over the last two to three years here so hopefully, you know, we always anticipated some consolidation, that’s been ongoing, but generally its sort of the smaller producers kind of fall aside or change their businesses and the large guys have gotten a lot bigger but in this case, it’s sort of a bit of a surprise, being one of the biggest feedlots to suddenly shut down, it’s a bit of a surprise there but we expect some more consolidation, but in the meantime, hopefully cattle numbers aren’t going to shrink too much more dramatically.”
Western Feedlots says it will suspend operations after existing cattle have been marketed.
The company says it will not be hiring employees or purchasing feed grain or feeder cattle after that time but that farming operations will continue for now.
