As I write this column, the dairy industry and some banking folks are ringing the alarm bells because some dairy farms are not able to cover even their interest charges on loans.
This is in spite of the fact that milk demand is high and costs of production have actually been reduced somewhat. Did some dairies get too big too fast or did they finance too much technology (expensive robotic milkers) or environmental controls or methane capture? The evidence is not in yet but it means that all of agriculture needs to heed the lessons being learned as innovation drives production. Of course, innovations are intended to make businesses better ie more competitive and profitable.
In a previous column, when it seems that beef cattle prices would be staying high, I said I hope that ranchers that felt flush with cash would put some cash away for when process dropped , or retirement beckoned. Farms in general in Canada have shown profitability largely because it is the cropping industry (grain and high protein “pulse” crops such as peas have high incomes.
Pulse crop stems make good cheap cattle feed, so it is a win- win for farms that have livestock grains and seeds. Now dairy farms are breeding most of their cows to Angus or other beef bulls because of the high prices for young beef stock. The other reason this is happening is because it has been in recent years that concern by animal care interests in the ethics of the veal slaughter and sometime the disposal of young male dairy animals because they brought next to nothing at sales when they were sold through the sale yards.
Perhaps because of environmental pressures (greenhouse gases from agriculture) and the competition from mega farms (particularly in the U.S. where there are huge subsidies from government) and the cost of innovation and scaling up production, the time has come for a hard look at our individual farms and what the future holds.
To say the least we need plans that will keep our cost down and minimize our external impacts such as ground water contamination. In ranching, we have to examine our livestock and ensure they are a good fit for the feed we have for winter, spring, summer and fall. It is not just the most production of pounds of meat, it is the bottom line or the margin after all costs are met, which includes long term debt which is critical. And, can a positive margin be sustained through the present and future challenges?
