What will save this turn of cattle feeding?

[grassfarmer]

"if the Canadian meat packing business
is so lucrative why did Tyson sell Lakeside?"
a. because they were running under capacity both here and in the US.
b. because they could use their US capacity to kill Canadian cattle if they want to.
c. they are less likely to want to due to COOL.
d. they had a buyer.
I would put all these reasons ahead of lack of profitability.


If we had 10 packers now and were able to increase the producer sale of the retail dollar from 16% back to the 24% it was in 1999 it would raise fed cattle prices $550 per animal - money that could and should be spread between cow/calf and feedlot operators. Only by having competition could producers access this money. Reaching new export markets or marketing more beef using the existing processing channels will not help producers because there is no trickle down effect. That is the cost of having no competition.

[grassfarmer]

Perfecho - I don't remember Shirley's quote re the packers but I believe Minister Ritz told the NFU this summer that they were "exaggerating the problems of the beef sector - he had spoken to Brian Nilsson and things were OK"
You are mistaken on the Federal inquiry looking at the packers books though - they never did get to see those books. It's time we had that enquiry again though to find where the money goes.

I repeat our own experience - paying over $550 to get 600lb carcases cut, wrapped and delivered leaves us over $400 a head better off than selling commodity fed cattle. And we sell our beef for less than the Canadian average retail price of beef.

Where does the money go Shaney?

[perfecho]

GF: I remember the radio interview with Shirley…..it bugged me then, it bugs me now. Have included some links and quotes following……you reinforced my msg to Shaney about the margins on local….FOOL…..(Luv my Farm Of Origin Label)

http://cmte.parl.gc.ca/Content/HOC/committee/381/agri/reports/rp2146861/AGRI_Rpt10/AGRI_Rpt10-e.pdf

FINAL REPORT: FINANCIAL ANALYSIS RELATIVE TO MEAT PACKING COMPANIES IN THE CONTEXT OF THE BSE CRISIS OF 2003
Report of the Standing Committee on
Agriculture and Agri-Food

“On a year-over-year basis, the net profit in 2003 was 95% higher than 2002, and for the six months ended June 30, 2004, was 620% higher than the same period in 2002”
http://www.albertaviews.ab.ca/issues/2005/janfeb05/janfeb05slaughterhousedrive.pdf
It took months for the truth to emerge, but it turned out they were right. In April 2004, an all-party parliamentary committee in Ottawa investigating allegations of price gouging found Lakeside Packers, Cargill Foods and XL Foods—which together process more than 90 per cent of Alberta’s beef—in contempt of Parliament for refusing to open their books. The companies eventually showed the Alberta government their financial statements, and last July the province’s auditor general, Fred Dunn, released a report confirming that profit (before interest and taxes) at the three big packers jumped 281 per cent after May 2003. The big three made $79 a head before the mad cow crisis began and $216 a head afterward.
Packers also received much of the $402-million in BSE aid distributed in Alberta as of June 2004. Why? Because they had taken advantage of the buyer’s market created by BSE and now own most of the province’s cattle. Alberta’s agriculture minister at the time, Shirley McClellan, defended the results, saying “It’s ‘Gee you paid the big guys,’ and ‘Gee the little guy didn’t get much.’ But you know what? The little guy didn’t lose much, either.

http://lists.iatp.org/listarchive/archive.cfm?id=95298
(another link for perusal)

Forget which link, but you get the jist….....
March 3: Klein, pressed by reporters on why his government blocked Alberta's auditor general from investigating allegations of meat packer price gouging, storms out of his news conference, saying: "I've had enough of this crap."

[grassfarmer]

I think that article you posted rather blurs what really happened perfecho. The federal investigation that found the packers in contempt for not opening their books never did extract one cent from the said packers as an election came along and they were let off the hook. They never did open their books.

The Alberta inquiry was a different one based on different information and as far as I know the packers did not open their books to the AB inquiry either. The AB inquiry was a joke anyway - the Government basically handed the findings they wanted to hear to the inquirer and asked them to formulate appropriate questions and parameters to justify the favored conclusions.

I well remember the announcement of the AB inquiry though - Shirley sitting next to a smug Arno Doerksen. I see his quote from the article you posted - "Alberta Beef Producers chairman Arno Doerksen, whose organization represents the province’s ranchers, is reluctant to criticize the large packing companies."
And some people still want (now MLA) Doerksen to be the next AG minister?

[perfecho]

The bottom line to all of this, and I guess my previous posts, is we have to be involved.......not at the end of a shoe string that everyone else is slinging. Producers need to speak, educate consumers, (they all think we get subsidy cheques monthly) and seal our own fate....some of us are with "FOOL"...;-)....but it does not take in the majority of production.

[kato]

"if the Canadian meat packing business
is so lucrative why did Tyson sell Lakeside?"

Good question. But another good question would be "if the Canadian meat packing business is not making money, how did Nilsson's afford to buy it?"

Don't worry, there's money out there.

[Sawbones]

Another question for you shaney...When it was found out that the packers were making in excess of $1million per day, they were not required to pay back their grants...When the feedlots were making $17/bu on Canola they planted on silage acres, they were not asked to pay back their grants but when cow/calf producers had cow prices increase, they were asked to pay back their advances. An equity payment was for the loss at a given point in time and cannot be extrapolated or manipulated at a later date. If it was not an equity loss paymnent as stated, we wouldn't be arguing about it.

[shaney]

Okay lets back up here.

My background: a family seed operation with a
feedyard. We have fed cattle for decades in
Southern Alberta. I am apart of the club of people
that has lost tonnes of money in the beef business
since 2003.

I greatly sympathize with the rancher in North
America and the lack of ability to make a profit. I
am not a packer lover like you seem to be inferring.
I just believe that this industry has significant
systemic issues that are deeper than packer
competition.

i think by saying if we had 10 packers in canada
you are trying to provide simple answers to a very
complex problem

Beef demand: due to things like the economy
hamburger is selling well in the US and Canada.
The problem is that the majority of value extracted
from the carcass is from middle meats which are
high value. Unfortunately demand for middle
meats has slowed and is resulting in the issues I
discussed earlier. This industry cannot survive on
grinding the calf or cow into hamburger.

[Sawbones]

Now we're getting somewhere..The industry can't survive on hamburger but the packers can and as long as they maintain their margins, they are happy and exporting hamburger to the US is easy and familiar but doesn't help the industry as a whole. Market access is not the major issue, but profitability for all sectors is the issue. Canadian beef needs to gain full dollars for their premium middle cuts and if they can't get it in the US, the industry has to look for alternative markets. The complaint against the packers is that they are not pulling their weight in developing those premium markets or passing the profits down the chain to producers. COOL in its present format has the same benefit for the packers as a closed border due to BSE.

[kato]

So what we need to do is make the way as easy as possible for someone who does want to develop those markets to do so. That's the way business is supposed to work. If one business does not want to go after a particular market, another one will see an opportunity and do it themselves. The trouble in this country is that on top of all other usual obstacles, we have a government that has heaped regulation upon regulation in the way, some of which seem designed toward keeping the status quo.

We need a total overhaul of our system, with a goal of encouraging new business, not just propping up the existing ones.

[greybeard]

Some very good points made here but it comes down to how soon can we be profitable.
Shaney says he’s $250 in the soup on this turn and the whole beef sector is in big trouble. He needs an extra 20 cents on fats, cheaper feeder prices, or lower operating costs.
Grass farmer says he is getting $300 extra by cutting out the retailer but paying the processor $550. There is $850 out there that we aren’t getting.
Sawbones says we need less government interference but we need new market access.
I think I need about that same $250 as shaney to supply the calves. That makes $500 or approx. $1.15 fat price. That is a new high value. Kato says its coming. I want to believe that, as I love this business, but I don’t see it as a good bet.
Blackjack points out that we have been burning equity to stay alive. That has been the biggest government involvement. They lend us the money so we keep going merrily along paying this year expenses with next years income. Not a good economic environment to raise money for a producer owned plant.
Sean points out we prospered when the dollar was at .67 cents. They are forecasting $1.05.
I think shaneys right. If we focus only on packer profits we are like Zombies. Stone cold dead.

[grassfarmer]

Good idea to summarize Greybeard but I think after stating the facts you come to the wrong conclusion.
Shaney needs $250 more on this round of fed cattle, you need $250 more on your feeder calves - the answer is right there under your nose. The $550 that I quoted as being the difference between the producers share of retail value in 1999 versus 2008. We need to reverse the trend that is eroding producers share of the margins. We are unlikely to be able to add $550 to the value of the average carcase industry wide by exporting to a different market or exporting into the US with a $1.05 Canadian dollar. Under the current structure producers simply cannot provide both you and Shaney with another $250 each. I agree with you that we should not only be focusing on packer profits - we need to focus on retailer profits too!! I firmly believe the answer to producer profitability lies in revealing and then changing the proportion of retail dollar the retailing and processing sectors are taking.

You say $115 would be a new high price - not by any means if you look at inflation adjusted prices. For 47 years from 1942 to 1989 fed cattle traded in the $130-$280 range when adjusted for inflation. The average was $174 and not once in those 47 years did the price fall below $130! Adjusted for inflation the prices we are receiving now for fed cattle (as well as feeders and cows) are depression era prices - no wonder we are hurting.
The highs we have seen since 1989 have only been equal to the lows of the 1947-1989 period. When you recognize that you begin to appreciate why we are struggling - it's not our fault, it's not the current recession, declining beef demand, the high dollar, high feed costs, market access - it's corporate concentration in the processing and retailing sectors that is bleeding farmers dry by capturing an ever increasing share of retail dollar.

[kato]

Pretty much every time inflation adds to the cost of beef in the store, a good portion of that has been kicked right back down the line to be absorbed by guess who? Us. The ones at the end of the line, who have no one below them to pass it on to.

I for one am fed up with working like we do in order that people who do not appreciate where their food comes from will have extra money in the budget for holidays and a nice lifestyle. Just read some of the comments posted to agriculture stories in the online versions of the city papers, and you will find those people very easily. They are disconnected from their food supply, and really don't have a clue.

Everyone gets paid but us. One person had the gall to say that it wasn't right that they had to pay so much for food, because why should they have to do without the fun things in life? OMG. This one could do with a little hunger.

If we sat down and added up what our income is, and really looked at it honestly, we'd probably be better off being the ones selling that burger at McDonalds, than at the auction mart. That is a crime.

I needed a rant today. Got blindsided by an unexpected loan payment that has blown my budget for this month... grrrr....

[grassfarmer]

Interesting to read that you aren't a packer backer shaney. I just read your newsletter article on the Nilsson takeover of the Brooks plant (http://www.haneyfarms.com/newsletters/Summer2008.pdf)
I find there to be some bizarre logic involved. You think that going down from 3 packers to 2 will increase competition?

"Cargill wins because they are now
facing stiffer competition domestically.
This will make Cargill sharper and create more competition in the marketplace for fat cattle."

How can you possibly conclude that having less competitors leads to more competition and even if that were true (which it can't be) how could it be a "win for Cargill"?

On Nilssons corporate concentration being exerted on nearly every sector of the cattle industry you say:

"The feedyard and cow calf producer
will benefit from the synergies
created and the increased scope of Nilsson’s business in relation to competitors."

So I take it you believe in the trickle down effect? Then why not allow Nilssons total control of all the cows, cattle on feed, auctions, money lending, packing plants (not far off getting there already)and then we could sit back and watch the money roll into OUR wallets due to THEIR amazing efficiency? yea right...

You sum your article up by concurring with a Cargill sources comment: “we need to quit focusing and fighting over the distribution of the pie, and focus on making the pie bigger so that there will be more for everyone."

While it may benefit Cargill to keep the distribution of the pie shrouded in mystery I do not believe it will benefit cow/calf producers or independent feedlot owners.

[vagabonddreamer]

lets look at it another way....if i were cargill or tyson or nilson...and i owned the end retail store....and i owned the processor and packer...i could pick and chose who would be making the profit at any given time...(including the producer)...because...i use Kato's land and her labour to hold a commodity that she thinks she owns..i pay her what i feel like paying at an open market auction (giving the illusion of free trade) because i am the only one (really) bidding...then...i put the steer in my feedlot...and move it to my packer...and then to my retail store...i decide which subsidiary of my company will make the profit...i can make the retail end look really good by running the packer end at a loss and asking for government money to stay in business...lol..

i still want someone to do the "higher" math and explain to me...who is making the difference between the steer i sell for 85$/hundred weight...and the T-Bone that sells at Save On foods at $22.00/lb or hamberger that sells at $3.00/lb...it isnt me...and if it isnt the packers...and the retail stores are whining...WHO is getting that difference??? vs