Can small producers play successfully with the big boys

Source: Saskatchewan Agriculture and Food

Saskatchewan is home to nearly 30 per cent of Canada’s cow herd, but the province continues to be a smaller player in the cattle feeding industry.

“Saskatchewan has many natural advantages to offer the cattle feeding industry,” said Bill Kowalenko, Livestock Development Specialist with Saskatchewan Agriculture and Food (SAF). “We have lots of open space and abundant feed, to name just two of our advantages.”

One factor that has been considered a constraint to development is the notion of size. It is often assumed that cattle feeders cannot be competitive or efficient unless their operations are large – really large.

Economists refer to this concept as “economies of scale.” In the low margin business of cattle feeding, larger operations may have certain economic advantages over smaller feedlots. For instance, buyers of finished cattle look for uniformity when purchasing, and larger feedlots can more readily assemble liner loads of market-ready cattle. There are also opportunities to capture economic efficiencies associated with the purchase of feedstuffs and animal health supplies, and to more efficiently use human resources.

But what if the advantages of economies of scale could be realized without expanding your operation? If a number of smaller cattle feeders were willing to purchase feeder cattle of similar genetic background and adopt uniform processing, health and feeding protocols, could some of the benefits achieved by larger feedlots be captured?

Kowalenko feels this approach has potential for Saskatchewan’s cattle feeding industry.

“The animals might be located on a number of smaller feedlots, but the operation would ‘behave’ as if they were all placed in a single, larger unit,” he said.

Kowalenko notes that the concept could be expanded to include sharing the services and costs of nutritionists, veterinarians, marketing specialists or even a general manager.

“Using a common feeding protocol should ensure that enough of the animals reach market condition at any given time, allowing the producers to assemble liner loads of uniform cattle, much like any large feedlot.”

Minor adjustments to marketing programs may have to be made to make this concept feasible. If the distance between feedlots is not too great, the truck may have to load at more than one location, or producers may have to deliver to one feedlot to facilitate loading of the semi-trailer.

“Normally, cattle are pulled in preparation for shipment prior to the arrival of the truck, so the assembling of a load shouldn’t result in any significant time-delay in getting the animals on their way to market,” Kowalenko explained.

Kowalenko feels that there is nothing stopping Saskatchewan producers from pursuing the pooling concept more vigorously.

“We have seen recently where some cattle feeders are consolidating their cattle marketing efforts,” he noted. “Potentially, this could be expanded to include more areas of the operation.”

For more information, contact:

Bill Kowalenko, Livestock Development Specialist
Saskatchewan Agriculture and Food
Phone: (306) 867-5559
E-mail: bkowalenko@agr.gov.sk.ca