What will save this turn of cattle feeding?

[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

[grassfarmer]

Oh it's real simple vs the money is being made by the processors and retailers - it would take some forensic accounting to work out who gets what though. I just don't understand why so many people want to hide behind this issue rather than confront it.
If I can direct market my beef at 75% of average Canadian retail beef price after paying a processor $550 to cut n' wrap and still bank $400 ahead of commodity price it's clear there is a lot of lying going on amongst our hard up processing and retailing "partners". Time for an inquiry - and if they refuse to open their books this time they should be asked to leave the country - you cannot having corporations thinking they are above the law even if they have bought and paid for the politician and the rule makers.

[shaney]

At the time I supported the Nilsson's aquisition of
Lakeside fro a couple reasons:
-It was quite clear that Tyson was not very
interested in Canada in the long term and this was
very clear to many industry insiders and
stakeholders
-The plant being shut down and moth balled was
much worse for the industry than Nillsons
purchasing the plant.
-I firmly believe that Nillson;s is committed to
Canada and the Canadian marketplace in the long
term.

So if this makes me a packer lover then so be it but
I will tell you there were many ranchers and
feedyards that shared the same sentiment of the
deal and told me so.

I will say it again packer concentration is an issue
but not the issue that is killing this industry in the
immeadiate and long term. This industry was built
on a low candian dollar and we also have lack of
emand in the middle meats.

Your trying to die on the wrong mountain but so be
it, we agree to disagree.

[blackjack]

Well when the powers to be have had their run...they will see a change...the cows that are leaving the ranches now will be gone for good...there is no next generation on most these farms and ranches to take over...maybe big business can see into better than I...but without the grassroot producer there is no industry period.