Press Release

[grassfarmer]

I'd appreciate anyone taking this press release and sending it to media outlets in their areas. If the media get the same story from a number of sources they might just think its a hot topic and air it.
Thanks.

For Immediate Release December 9th 2009


BEEF PRODUCERS CALL FOR AN INQUIRY INTO PROCESSOR/ RETAILER PROFITEERING.

Rimbey, Alberta. Rancher Iain Aitken recently had a cull cow custom-processed to highlight the inequity of profit distribution in the beef production chain. The cow that would only have brought $340 at auction yielded $1233 of hamburger and stew meat when valued at local store prices. Although cull cows are older animals being removed from the breeding herd, they provide a crucial source of income for producers, and used to regularly bring $700 or more at auction.

“Producers are selling cull cows at record low prices yet retail stores claim they use the beef as a loss leader and the beef packers claim they lose money processing cows – we need an inquiry to discover the truth” stated Aitken. “The Canadian retail price of hamburger today is around $2.75/lb, up from the $1.75/lb it was ten years ago. In those ten years, however, the price of cull cows at auction has halved – clearly something is wrong” he continued.

Many producers believe the problem is corporate concentration and the lack of competition in the retailing and particularly the processing sector. The situation in Alberta got worse this summer when Nilsson Brothers Inc. bought the Tyson Foods Lakeside plant at Brooks, thereby reducing the two main buyers of cull cows to one.

Retiring National Farmers Union regional organizer Jan Slomp stated: “We need to have a Federal Government investigation into the profits made in the beef processing and retailing sectors to identify how much is being made and by whom. The previous Government investigation in 2004 was abandoned when the large beef packing companies refused to open their books to the auditors. In a democratic country we can not have these large corporations deciding they are above the law while the livelihoods of beef farmers are threatened due to their monopolistic practices”

After processing, the beef was donated to the Bissell Centre, Edmonton; and the Calgary and Rimbey Food Banks.


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For more information please contact; Iain Aitken (403) 843 0094
Jan Slomp (403) 843 2068

[kato]

The Manitoba Cooperator has already picked it up. It's on their website, so should be in the next paper.

http://www.manitobacooperator.ca/issues/ISArticle.asp?aid=1000350475&PC=FBC&issue=12092009

This paper has always been a good one, and the editor, Laura Rance is the agricultural writer for the Winnipeg Free Press. I wouldn't be surprised if it shows up there on the weekend. I'll keep an eye on it.

Way to go!

[per]

Good letter and work GF. I hear this on 2 radio stations this morning.

[wd40]

I can tell you from inside people that PRE BSE the typical profit lever for the packer was 33% after tax. Now with consolidation/lost "Price Discovery"/elimination of Free Enterprise, one can only guess.
However thee best solution is... if these packers are so profitable why wouldn't beef producers take control of their industry and build a major plant and reap the huge rewards themselves instead of always only griping?

[greybeard]

Good job GF. Thanks for the all the effort and the donation is a big deal, especially at this time of year.
At Costco yesterday they were selling whole tenderloins for $60 to $70 dollars or approximately $130 per animal. Tenderloin is harvested from all cows,with some being darker than others. Probably premium grass fed.They are always tender. Make sure you ask for yours when you take a cow in to be ground.

[perfecho]

GF, just a quick note, and although I agree that the monopoly isn't working, if you take 340 plus $500- $600 for processing, $100 for "trucking to slaughter plant and then to market, plus incidentals such as auction fees,ABP,brand inspections etc" and finally put a 20% markup for the retailer, you are getting close to the $1200.
I would have thought a cow would have yielded more than the $1200....or is the $1200 profit after slaughter?
Most likely the $500-600 for processing is a high price for the big guys, I am using the "local" processing price for this example.
I do remember pre BSE, you could get $1000 for a good cull cow and $1500 for a good yearling fat bull......and it seems to me prices at the retailer were lower than today! The Canadian $ was much lower.....but we also paid for our beef in Can $ at the retailer, so.....?
Thanks for getting the message out!

[kato]

A $340 start price may have been a little high, by Manitoba standards. We sold three old girls on Monday for 24cents a pound, which gave us a whopping $288 dollars for a 1200 pound cow.

If my memory serves me correctly, this is not much different than when the border was closed!

The difference now is that back in 2003, most of us had a bit of money in the bank, creditors who believed in us, some equity, and hope. All of those things are in short supply now.

What I don't get is, why does it seem that no one besides us cares? And why aren't cattle producers getting mad? I know I'm getting angrier every day.

This is what my Dad would call a crock of sh#t.

[jensend]

wd40 the problem is you kill the animal you still have to sell the beef. if xl and cargill have a lock on the market for the product as well as the cattle coming in to the plant. trying to get retail space is a real expensive fight and that is why all these producer plants never had a hope. if cargill decided to turn out the lights on any or all of these plants they could do it in real short order. i was told before xl bought brooks that cargill could have had xl on the ropes in seven business days just by taking over their markets for the product going out the door. it's kind of like telling grain farmers to start up their own fertilizer company because look at how much agrium makes. find somebody to sell you the product and then compete for price. the squeeze is on and that's why agrium owns most of the independents in alberta.

[wd40]

Jen - this is the common fear factor that the big packers would have you believe. You missed my point that beef producers need to take back control of our industry. That's done by realizing that the producer "UNITED" is in the drivers seat.
We have a product that the du-opoly WANTS. They have a market for it. Someone else wants to buy it from them. So.....
Therefore as long as we take great PRIDE in our independence, and short-sightedness we'll continue to fall farther into surfendom.
However, if enough raw product producers, (incl. purebreed breaders, grain producers, dairy industry) decided enough is enough, you could hold them hostage. It's a mater of the will. Again (other than the herd that Nielsons owns) the producer has the "TRUMP" cards.

Don't let anyone fool you. Marketing isn't the issue. It's being done. There is a home for every pound currently being born.

If there is enough mass, markets are available. If you have 10,000 tounges a week you'll find a market. Go figure, if someone else ran out of 10,000 tounges this week, and you had 10,000 tongues, guess what you'd have a market.

Nelson Mandella proved it.

[kato]

If there is one thing big agri business would consider a nightmare, it's the day that producers wake up and started to work together.

Division among producers has been the one thing they could rely on in the past. Divide and conquer. Get protectionist groups (guess who?) in one country to do your work and help close the border to exports. Get them scrapping amongst themselves while you quietly lock everything down nice and snug.

I think everyone's figured it out by now, so what do we do about it?

[grassfarmer]

Perfecho,
I disagree - the monopoly is working very well - for the Cargills and Nilssons of the world!!

On the cow value we had to go with a rather simplistic demonstration to catch the attention of the largely urban based media.
For sure the packers do not spend $5-600 boning out and grinding a cow and the trucking doesn't come to $100 a head.
The advantages the large packers have over the local custom kill guys are as follows;
1 Initial Government funding to attract them and build the plants.
2 Continued Government funding to update and modernise the plants.
3 Input in establishing regulations that favor their operations but make it difficult for small plants to operate.
4 Lower wages paid to less skilled employees.
5 Benefits and economies of scale.
6 Benefits of corporate concentration (the piracy effect)

Yes, my cow value was low - as someone else said there were the tenderloins - I forgot to calculate that in until I picked up the beef. There is another $120 right there.
More than that we didn't calculate any of the value added ways our beef is retailed we just priced it as simple ground and stew. As a value added example look at the little individual micro-wave beef and vegetable pies they sell. You get about 4 small squares of stew meat in one if you're lucky plus a few cheap vegetables, some pastry and some MSG. The beef will be by far the dearest ingredient but even so the mark up is huge. Also how much extra beef is recovered mechanically in the big plants, then water can be injected into some of the cuts, steaks sold off the cull cows into the "steak sandwich" market. I didn't value organs, hide, bones etc etc.
Bottom line I'm not feeling sorry for the processor or retailer - their margins must be considerable. But you answered that yourself by quoting prices pre-BSE. Just remember the statistic that in 1999 24% of the retail beef dollar found it's way back to the producer - in 2008 it was 16%. No-one argues this statistic - it is proven from Canfax etc data and it proves absolutely how processor /retailer share has soared in the last decade. If producers were to restore their share of retail dollar to 1999 levels with the processor/retailers keeping their margins where they are now the fed cattle price would have to rise 50%!! There is absolutely no way these guys are not making a pile of money - it's time to find out who makes what and then we would be in a position to start formulating beef policy in a sensible manner.

[wd40]

GF - I couldn't have said it better myself. "I disagree - the monopoly is working very well - for the Cargills and Nilssons of the world!!"

I couldn't have said it better!

I'm glad you see the light! As I said before - producers can with the right WILL creat their own monopoly, and REAP benefits they do. Put it back in our pockets.

Take the supply chain right off the radar screen, out of the system.

One thing we would have to understand and believe. WE DON'T KNOW WHAT WE DON'T KNOW! There is 10,000 opinions out there, but unless you've worked on the inside office/board room of a major packing plant we DON'T know the truth. Plus you won't find anyone here in Canada that will help us put a strategic plan together.
Therefore we go to the US and find some ex-CEO's and CFO's and COO's (and they are available) to help us do the strategic/business plan.

Funding
There's atleast 40,000 farms in Western Canada. So $1000 per share x 2 per farm x 40,000 and you have $80M or 2/3 of a plant for 2000 hd. per 8hr. shift.

Then a portion of the remaining 1/3 sell shares to the owner of Overweightie Foods/ Federated Co-Op, and McCain Meats to secure the Canadian market. I said a portion of the remaining 1/3 because you want the packing house staff to be share holders in their own work so there is sweat equity.
And guess what if you got part way to the 80,000 shares the current govts. would be begging you to take money from them for infrastructure. Gag

[grassfarmer]

That sounds like a good plan and I would support it - however it seems that most beef producers would not. Looking at past efforts it seems obvious that apart from about 10% of engaged producers the rest don't believe/ won't work with other producers/risk their dollars until it's proven. I find this sad and frustrating but it seems to be the nature of the producers in Western Canada. Until that changes such grand schemes are pie in the sky and the commodity industry will continue to be dominated by 2 players.

[wd40]

Your right GF. It's all ab out plan. I still believe that plan is the answer and never saw anyother pllans that I thought (ther I go again with opinion) had much chance.
However I believe that the right plan would begin to gather momentem and woul prevail.
The root foundations has to be (and in this order)

1 or 2) Cow Calf commercial producers/ the Pure Breed industry.
3) just a few feedlots committed to information sharring with prodducers
4) the rest of industry be it grain producers, Farm Equipment dealers (the service industry) or anyone who might want to participate.
I know my plan above was over siplified a bit to make a point in summary.
Actually (in perenthises) the pure bred breeders would sell slaughter capacity with their bulls to the commercial breeder. Thus developing a closed loop supply chain of the radar screan.

[rkaiser]

Awesome points folks. Don't give up on the masses GF. Every person I talk with seems to crave that tidbit of good news. Peak Dot Angus in SW Sask. had one of the best purebred sales they have ever had. The Charolais story about exports to Russia. Awesome for them. Hamburger prices as high as they are. Whoopee. What an opportunity for those who see it as such.

WD's idea of a TRUE value chain is the answer and somehow communicating the complete story to the masses is the key. I'm going to put something together for the spring Farm Show in Edmonton in April. Maybe I'll run it past this board of Agriville directors -- haha -- before I let er rip.