Is Feeding Cattle an Option?

Source: Saskatchewan Agriculture and Food

As agricultural producers weigh the issues surrounding their quest for prosperity, a number of them have been calling Saskatchewan Agriculture and Food (SAF) Livestock Development Specialist Bill Kowalenko in Outlook to ask him some pretty tough questions.

“Returns from grain crops over the past number of years have not been sufficient to cover the cost of production," explains Kowalenko. "Cattle producers have fared somewhat better, now that the BSE issue has become more settled. Markets are opening. Things are looking up, and they are wondering if more can be done.”

“Keep in mind the fact that cattle producers had to change the way they marketed cattle during the time the border was closed,” he says.

Many cattle producers found that the market was more selective. Some calves would bring good returns, while others were being discounted, particularly during the usual fall market run.

“Many producers opted to keep their lighter calves and background feed them until the market offered higher prices for the grown-out calves. We also saw that more cattle were finished in our province during this time. Several producers indicated that they were able to feed those cattle, either as backgrounded or finished cattle, and make a profit doing it," he says.

Kowalenko says he and his colleagues are being approached by producers who are considering seeding their cultivated land to forage crops to provide grazing for beef cattle.

“Some are looking to increase their cow herds; some are new entrants looking to invest in a cattle operation, while others are looking at either providing a custom grazing service or grassing their own cattle.”

Before embarking on any new venture, it is important to do a thorough and detailed analysis to see if it is a viable option, warns Kowalenko.

“The first step in changing a farm operation ought to be to develop a comprehensive business plan," he says. "If a feedlot or other cattle feeding operation is planned for the business, it is important to develop a formal, written plan. It should include a description of the feeding operation, the major operation—

either backgrounding or finishing—and its size, and it should include the results of a SWOT analysis—strengths, weaknesses, opportunities and threats—of the current enterprise.”

The business plan should include an operational plan, a financial plan, a human resources plan and a marketing plan.

“Assuming that an operator has determined he has the skills and appropriate financing in place to undertake some form of cattle feeding operation, the next most important aspect is marketing," says Kowalenko. "Marketing involves making decisions about where to sell, when to sell and what type of product to sell. Additionally, the purchase price of the cattle and the cost to feed the cattle need to be known and incorporated into the calculations to make an appropriate feeding decision.”

Before any cattle are purchased, Kowalenko recommends a breakeven analysis that would evaluate the purchase and sell decisions, compare different marketing options and reflect the current state of the market and projected market prices.

Another major factor is the cost of livestock feed. Will the feed be grown on the farm or will it be brought in? It is important to use realistic and accurate costs in establishing the cost per pound of feed used to background or finish the cattle. Yardage and a daily cost per head also need to be calculated and established.

“Yardage is the cost of the facilities and equipment," explains Kowalenko, "as well as those other costs such as electricity, natural gas, propane or heating fuel, equipment fuel, repairs on facilities and equipment, corral cleaning, hired and operator labour, insurance and interest. Veterinary and medical cost can be included or may be charged out as a separate item.”

Next, he says, a producer needs to carry out a projected breakeven analysis. This assists in estimating the profit potential and is used to calculate anticipated net returns to the feeding operation. This analysis only accounts for variable costs, and is used along with price projections.

Before a final price for those finished cattle can be projected, another adjustment needs to be made for the basis.

“The basis is the difference between the local cash price and the nearby futures price," he explains. "Basis risk refers to how closely the cash price and futures price track. Canadian cattle basis fluctuates more widely than U.S. cattle basis. The basis spread does not stay constant, and can fluctuate higher or lower during different times of the year. Knowing how to determine this finished market pricing will enable one to evaluate buying decisions that will indicate if there is potential to break even, make a profit or incur a loss.”

For more information, contact:

Bill Kowalenko
Livestock Development Specialist
Saskatchewan Agriculture and Food
(306) 867-5559

Renewed Interest in Faba Beans Prompts Industry Meeting

Source: Saskatchewan Agriculture and Food

As a crop, faba beans are looking more attractive than ever for the moist zones of the eastern side of the province, according to Saskatchewan Agriculture and Food (SAF) Provincial Specialized Crops Specialist Ray McVicar.

“This is why an industry development meeting will be held in Canora on March 15. There have been a significant number of acres of faba beans grown in the province in the past. It is the best annual legume for fixing nitrogen, and it has very high protein levels,” McVicar explains.

The faba bean (Vicia faba minor) is an ancient small-seeded relative of the Chinese broad bean (V. faba major). The oldest seeds of Vicia faba were found in Jericho and dated at 6250 B.C. The crop is grown in the Mediterranean region where it is a common food. In Europe, the faba bean is grown primarily as a livestock feed. Britain, where both winter and spring types are grown, is the largest European producer of faba bean.

“The renewed interest here can partially be attributed to the high cost of nitrogen fertilizer,” says McVicar. “Growers and researchers are increasingly looking to crops that are able to fix much of their own nitrogen requirements. The use of faba beans would, therefore, reduce fertilizer costs.”

Another factor that may influence outcomes, McVicar goes on, is the development of a new potential market class for faba bean.

“The development of small-seeded and low tannin (pigment) seed varieties with high protein content boosts market potential as livestock feed. Plus, smaller seed crops translate into savings on seeding costs because there are more seeds per pound.”

The crop would effectively provide a second pulse crop, in addition to field peas, for wetter black soils, and a third pulse option for irrigated areas, concludes McVicar.

The meeting promises to be full of insight. The meeting will be held at the Canora Activity Centre, located at the golf club, from 1:00 to 4:30 p.m.

Bert Vandenberg, CDC Saskatoon, will discuss recent developments in faba bean research; Yvan Bruneau of Roy Legumex in Manitoba will give an update on the human consumption market; Pascal Leterme from the Prairie Swine Centre in Saskatoon will speak about feed values of faba beans; Glenn O'Hara of Parrheim Foods of Saskatoon will talk about the potential in human markets for the processed product. Rod Fisher, a seed grower from Dauphin, Hugh Campbell, a seed grower from Qu'Appelle, Kim Stonehouse from the Canora Agri-ARM site and Terry Hogg from the Irrigation Research Centre at Outlook will comprised the growers' panel.

More information about faba beans can be obtained from the SAF website, www.agr.gov.sk.ca, under the Crops/Pulses/Production sections.

For more information, contact:

Ray McVicar
Provincial Special Crops Specialist
Saskatchewan Agriculture and Food
(306) 787-4665

New Organic Cleaning and Processing Mill in Northwest Saskatchewan

Source: Saskatchewan Agriculture and Food

What started out as a discussion around the kitchen table in 2002 finally became a reality in February 2003 when a group of organic producers joined together to form the Northwest Organic Community Mills Co-operative Limited.

This new generation co-operative was established to get more value out of grain production and to allow the producer to have more control over the process. The group wanted to get away from just selling grain to the “big guys” and knew that they must be able to get more for their grain by adding value through processing. So, the co-operative was established, and a facility was purchased at Maymont.

Plant and Marketing Manager Brian Reiley explains that the mill was built with "sweat equity" from members with minimal debt, and that they were able to use refurbished equipment to keep costs at a minimum. To try out the cleaning equipment, the group cleaned seed for planting in May 2004. From there, they decided what needed to be changed, and spent the summer putting the final touches on the plant. In November, they got started cleaning.

Over the past year, the plant has cleaned in excess of 350,000 bushels of organic grain, but it has the capacity to clean up to 700,000 bushels annually, given a steady supply of good quality grain.

In addition to cleaning, the co-operative also offers services such as bagging, and container, intermodal and rail car loading. Not only do they provide these services for producers, they also clean and bag grain for other brokers who deal in organics, and have shipped products to the United Kingdom, Italy, Japan and the United States. The co-operative offers marketing services not only to its producer-members, but to any organic producer, as well.

Just recently, the co-operative added processing to its list of services. With the addition of a stone flour mill, the co-operative now has the capacity to produce 1.3 million pounds of organic flour annually. The flour types include whole wheat, buckwheat, barley and rye. They also collect the byproducts from making flour, such as bran and wheatlets, which are also saleable products. Taking it one step further, they have developed multigrain cereal products and muffin and pancake mixes that Reiley hopes will be in stores in early 2006.

The co-operative will be selling products under the name of “Old School Organics,” as the facility is situated in what was once the old school in Maymont. They are currently selling some products at the plant and in some local stores in northwest Saskatchewan. These include small packages of whole grains such as flax and cereal grains, as well as 10 kg packages of flour. The mill is looking at expanding its product line, and is currently trying to source dehydrated organic fruit.

The co-operative is made up of 59 producer members and approximately 100 investor members. There are nine directors on the board, which meets monthly. Organic growers may buy memberships at anytime for $500, and delivery obligation shares at $300 per 30-tonne allotment. The allotments are guaranteed for life, but the co-operative does realize that there can be extenuating circumstances, such as frost, whereby delivery is impossible because the production and quality just aren’t there. Within the next year or so, there may be an investment opportunity for the public, as the co-operative is planning to open a new share offering of preferred shares at some point in time.

Northwest Organic Community Mills Co-operative Limited has viewed the development of value-added organic products, marketing and market development as key components of the organization’s long-term success. To this end, the co-operative has purchased and maintained a membership in the Saskatchewan Trade and Export Partnership (STEP).

From an international perspective, the co-operative has received a lot of interest from overseas buyers. In fact, they had a number of European buyers and members of trade missions from Canadian consulates in Europe visit the mill in September of 2004. In addition, there have been a number of visits from a variety of international firms interested in doing business with the co-operative.

This past November, with funding from the Saskatchewan Agriculture and Food Agri-Value Program, a small group of representatives from the co-operative set off to Europe to return the international visits and to meet with new potential buyers. They also hoped to gain insight into the organic industry overseas in order to see what products would meet the needs of potential foreign customers.

Dayton Funk, an organic producer and director on the board, commented that they learned a lot in terms of the overseas markets they can tap into and the products they need to focus on.

“The overseas markets are looking for grains that can’t be produced there," he says. "There's no sense in trying to sell them low-protein wheat, when they can grow it locally. The grains they are interested in are high-protein wheat, flax and lentils. The buyers prefer to buy whole grains versus processed products, as they feel more confident in the quality if they see the whole grain.” Dayton also commented that, although there is a great potential for tapping into the European market, there is a lot Canadian producers can do at home. Just getting product on the store shelves locally and into the larger centres, such as Toronto, would be a huge step forward.

The co-operative will be meeting during the winter months to do strategic planning, which will allow it to set some firm directions in terms of the markets and products they will be looking at in the future. Things to watch for from this co-operative in 2006 include new products under the “Old School” brand, new markets overseas, HACCP certification and, potentially, a new share offering.

To find out more about the Northwest Organic Community Mills Co-operative Limited, contact Brian Reiley or Judy Sherman at (306) 389-2118 or visit their website at www.northwestorganicmills.com.

For more information, contact:

Sherrilyn Phelps, PAg, CCA
Crop Development Specialist
Saskatchewan Agriculture and Food
(306) 446-7475