By Richard Kamchen
The bulls are in the cattle market, but farmers hoping to cash in by expanding their cow herds need to protect themselves from unforeseen risks, say market experts.
After over a decade of depressed prices, the sun is once again shining on the cattle industry.
"It's been phenomenal," says Brian Perillat, manager and senior analyst at Canfax, a division of Canadian Cattlemen's Association. "I don't know many people who can say they expected this strong of a market by any means."
A recent report by TD Economics notes cattle prices rose steadily since mid-2013, and reached record highs this year on strong demand and tight supplies.
"Livestock prices are likely to remain quite elevated for some time, as supplies (in both Canada and the United States) are tight and will take time to rebuild," the report says.
Perillat also sees potential long-term strength in the cattle market.
"The consumers are paying, supply of cattle is going to be tight and could even get tighter in 2015, and with reasonable feed costs and a weaker dollar, hopefully we could see this last two, three, or more years," Perillat says.
But producers looking to expand herds can't count on guaranteed good times. Bruce Viney, risk management specialist with Alberta Agriculture, urges farmers to develop a five-year cash flow plan.
"Know where your cash is going to be: Can you make the payments on those cows if things go bad? What happens if demand doesn't turn out as good as it appears to be? What happens if the economies around the world go down and prices drop? You need that plan to be able to weather the storm if it was to come," Viney says.
Alberta Agriculture has a new tool for producers to use in calculating long-term returns to a beef cow or heifer investment.
Source: FCC