What are the Effects of a Drought on Perishable Goods at the Grocery Store?
Most people don’t think of cattle as a perishable good but they are. The problem with perishable goods is that you can’t just stock them. With perishable goods you either have to take it to market or bury it. You can’t keep it without it going bad. In the case of cattle you have to keep feeding it, but if there’s no food to feed it or the price of the feed is too high that you’ll never recuperate those costs when you sell, then you have to make a tough decision.
When your cattle go from 2-3 thousand dollars a cow to zero, it’s a pretty devastating moment.
Because of this year's drought, it is going to impact what producers are going to be able to do next year in terms of crop rotation, fertilizer and things like that, which will delay the production of goods.
A similar impact happens with the herd. It takes two years to go from calf to cow so it can take a number of years to recover from it. It’s not an easy process. The industry is in tough shape - but it will survive! It was always like that!
There is going to be a mass of liquidation resulting in the price of cattle dropping and of course packers will make the differences in terms of making the profit. Then, we’re going to see lower numbers of cattle. But, down the road this could be of value because the less cattle in Western Canada in the future means meat prices should rise.
The industry will take a few years to recover and farmers already know this but I am not sure if “Joe Consumer” is aware of this. This drought will impact grocery bills - the supply is there but it is going to be more expensive. And what they need to understand is that if the grocery bills go up it is not because farmers get more money.
For example, on the beef side farmers are getting more for their beef, but they don’t have the beef to sell because they needed to liquidate. On the grain side they get more money for the grain, but they don’t have enough grain to sell so they need to import to margin their grain levels.
And unfortunately, higher grain and meat prices don't always go back to the producers. So the grocery bills will be more expensive that is for sure and it will take time for inventories to balance out again. And, this drought, it is not just Western Canada, it is the whole free world facing the same problem.
Fortunately, similar to Covid, all the farming communities stuck together, because that is their job; they produce the food. Nobody went hungry. Everyone was able to go to the grocery stores and they were full of meat etc. They came through. I am very thankful that we have producers like that!
I look forward to next week when I'll be talking about Industries Impacted from the Drought
Fred Mertz
Fred@thevoiceofagriculture.ca