Alberta
Recent rain may not be enough to halt the shrinking of Canada’s cattle herd
CALGARY — Anxious Alberta ranchers praying for rain got their wish this week, but it may not be enough to stop the ongoing decline in Canadian cattle production.
The moisture that fell on parts of drought-parched Alberta came as a welcome reprieve to the hundreds of cattle farmers who have seen their pastures wither and their water supplies dry up this June.
But a few inches of rain won’t be enough to cut it in much of Canadian cattle country, which is still trying to dig its way out of a significant moisture deficit.
“I think this is the driest I’ve ever seen it,” said Bob Lowe, a rancher and feedlot operator from the Nanton area of southern Alberta.
“The grass started this spring, and came up a little bit, and then it just turned around and died. It’s supposed to be green this time of year, but it’s just grey-brown.”
According to Agriculture Canada’s Drought Monitor, 82 per cent of the agricultural regions of the three prairie provinces were either “abnormally dry” or in “moderate to extreme drought” as of the end of May.
Some ranchers have been spending hours every day this spring hauling water by truck or trailer to their cattle after their watering holes completely dried up, said Ryder Lee, general manager of the Canadian Cattle Association.
“Or they’re filling dugouts from other places with pipelines and pumps,” Lee said.
“There’s lots of creativity and ingenuity in the industry, but all of that takes a toll on people.”
It also takes a toll on an industry that has already been steadily shrinking for years. Last year, the size of the Canadian cattle herd fell to 12.3 million animals — the lowest level recorded since July 1, 1988.
The 2.8 per cent year-over-year reduction was in large part due to the after-effects of an extremely harsh drought on the prairies in 2021. As crops withered and feed prices skyrocketed, many ranchers sold their cattle for slaughter rather than holding onto them for breeding.
That could happen again this year, and at an even larger scale, said Rob Somerville, who has a cattle farm in east-central Alberta, near the town of Innisfail.
“There is a train of thought that people who may have hung on last time, this time, will sell,” Somerville said.
He added that some producers might have hesitated to sell in 2021 because cattle prices at the time were low. But as cattle numbers in North America have continued to shrink, prices have increased, hitting all-time records this spring.
“Just about everybody I’ve spoken to has already prepared a list of the cows they’re going to sell. These people won’t be leaving the industry, but they’re certainly planning a herd reduction.”
South of the border, U.S. cattle inventory is also down four per cent year-over-year due to increased heifer slaughter. According to a report by the U.S. Department of Agriculture, roughly 69 per cent of the U.S. cattle herd as of December 2022 was located in drought-stricken areas, leading to the largest contraction of the North American cattle herd in a decade.
Other catastrophes in the last two decades — including the BSE (mad cow) crisis and the 2009 financial crisis — also led ranchers to downsize their herds or exit the industry entirely.
As a result, according to Statistics Canada, there are 25 per cent fewer beef cows in Canada now than there were in 2005.
“After a while it’s not just an individual farm-by-farm thing, it’s an industry issue. And that has far wider implications,” Somerville said, adding that fewer cows could cause ripple effects all the way down the value chain — potentially leading to lost jobs at feedlots, at meat-packing plants and more.
“This is a big contributor to the economy that we’re talking about.”
Winnipeg-based cattle markets analyst Jerry Klassen said he believes one or two good rains could save the industry from wide-spread liquidation of herds this year.
“You can still get one good hay crop in Alberta if you get timely rains from now moving forward,” Klassen said.
“And you’ve got these high prices. If the farmer can maintain or increase his herd, he’s going to reap the rewards over the next two or three years.”
But Somerville said multiple years of dry conditions have left some ranchers feeling that they’re “running out of tricks they can pull out of the hat.”
“There’s a lot of producers who have been hanging on as long as they can and they may decide now is the time to get out of the industry,” he said.
“It’s just been too many struggles, for too long.”
This report by The Canadian Press was first published June 16, 2023.
Amanda Stephenson, The Canadian Press
Alberta
Alberta government should eliminate corporate welfare to generate benefits for Albertans
From the Fraser Institute
By Spencer Gudewill and Tegan Hill
Last November, Premier Danielle Smith announced that her government will give up to $1.8 billion in subsidies to Dow Chemicals, which plans to expand a petrochemical project northeast of Edmonton. In other words, $1.8 billion in corporate welfare.
And this is just one example of corporate welfare paid for by Albertans.
According to a recent study published by the Fraser Institute, from 2007 to 2021, the latest year of available data, the Alberta government spent $31.0 billion (inflation-adjusted) on subsidies (a.k.a. corporate welfare) to select firms and businesses, purportedly to help Albertans. And this number excludes other forms of government handouts such as loan guarantees, direct investment and regulatory or tax privileges for particular firms and industries. So the total cost of corporate welfare in Alberta is likely much higher.
Why should Albertans care?
First off, there’s little evidence that corporate welfare generates widespread economic growth or jobs. In fact, evidence suggests the contrary—that subsidies result in a net loss to the economy by shifting resources to less productive sectors or locations (what economists call the “substitution effect”) and/or by keeping businesses alive that are otherwise economically unviable (i.e. “zombie companies”). This misallocation of resources leads to a less efficient, less productive and less prosperous Alberta.
And there are other costs to corporate welfare.
For example, between 2007 and 2019 (the latest year of pre-COVID data), every year on average the Alberta government spent 35 cents (out of every dollar of business income tax revenue it collected) on corporate welfare. Given that workers bear the burden of more than half of any business income tax indirectly through lower wages, if the government reduced business income taxes rather than spend money on corporate welfare, workers could benefit.
Moreover, Premier Smith failed in last month’s provincial budget to provide promised personal income tax relief and create a lower tax bracket for incomes below $60,000 to provide $760 in annual savings for Albertans (on average). But in 2019, after adjusting for inflation, the Alberta government spent $2.4 billion on corporate welfare—equivalent to $1,034 per tax filer. Clearly, instead of subsidizing select businesses, the Smith government could have kept its promise to lower personal income taxes.
Finally, there’s the Heritage Fund, which the Alberta government created almost 50 years ago to save a share of the province’s resource wealth for the future.
In her 2024 budget, Premier Smith earmarked $2.0 billion for the Heritage Fund this fiscal year—almost the exact amount spent on corporate welfare each year (on average) between 2007 and 2019. Put another way, the Alberta government could save twice as much in the Heritage Fund in 2024/25 if it ended corporate welfare, which would help Premier Smith keep her promise to build up the Heritage Fund to between $250 billion and $400 billion by 2050.
By eliminating corporate welfare, the Smith government can create fiscal room to reduce personal and business income taxes, or save more in the Heritage Fund. Any of these options will benefit Albertans far more than wasteful billion-dollar subsidies to favoured firms.
Authors:
Alberta
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