Strong global demand for feed grains, COVID-19 shutdowns, supply chain disruptions, flooding and drought were just some of the major challenges livestock input suppliers and producers faced in 2021. The tight feed grain supply in western Canada combined with the smallest Canadian hay crop since 1950 has forced the livestock industry to get creative with rations, increasing demand for supplements and feed additives. Large increases in prices of lumber and metal have led to higher prices for building materials, causing producers to re-evaluate investments. Recent patterns in livestock input prices are indicative of future trends in profitability.
Higher feed costs lowering overall producer margins
Despite record corn yields in eastern Canada, the decline of 35% in overall Canadian barley production created major challenges for feed mills to source domestic feed grains. According to AAFC, in response, corn imports from the U.S. into western Canada are expected to reach a record level of four million tonnes for the 2021/22 crop year. Tight global feedstocks and elevated market uncertainty due to the ongoing war in Ukraine have generated questions about the availability and cost of feed grains moving forward. The net impact is that ration costs have risen over 50% since mid-2020, and western hay prices have increased 80%.
In response to the high feed costs and the challenge of lower feed quality, demand for feed supplements into rations has increased. According to Alberta farm input data, stronger demand led to a moderate average price increase for supplements of 3.5% in February 2022 (Figure 2). Supplements have allowed livestock operations to use lower quality feed, stretch feed supplies and budgets while maintaining livestock dietary requirements. Note that the YoY price increase does not fully capture the impact of dry conditions in the Prairies. Feedlot supplement prices rose 17% in August 2021 over the previous month as poor pasture conditions forced ranchers to move calves early.
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